International Coffee Organization Director Visits

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E.O. 12958: N/A
TAGS: AORC ETRD EAID EAGR PGOV HO
SUBJECT: International Coffee Organization Director Visits
Honduras


1. SUMMARY: Nestor Osorio, Executive Director of the
International Coffee Organization (ICO),visited Honduras
and spoke publicly about the goals of the ICO. While he
defended the interventionist role that the ICO has played in
the past, he stressed the organization's current focus is on
promotion of new markets, greater demand, and improved
coffee quality. He also spoke of his hope that the U.S.
would rejoin the ICO, to promote greater political co-
operation and dialogue concerning the ongoing coffee crisis.
President Maduro's willingness to raise this issue in public
fora and with the highest levels of the USG is winning him
strong praise among members of the Honduran coffee sector.
END SUMMARY.


2. Nestor Osorio, a Colombian national who is Executive
Director of the International Coffee Organization (ICO),
visited Honduras on December 2 and 3. After meetings with
President Ricardo Maduro and the Minister of Agriculture, he
hosted a three-hour open meeting with members of the
Honduran coffee sector, which EconOff attended. After
several leading figures in the Honduran coffee industry gave
opening remarks, Osorio spoke for about thirty minutes, then
took questions from the audience, which also included coffee
farmers and leaders of coffee co-operatives.

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Osorio: Promotion, not Price Controls
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3. Osorio began with an overview of the history of the ICO,
and gave a strong defense of the quota system that was in
place until 1989. However, he clearly stated on several
occasions that the ICO will not return to such a system, and
that instead, coffee-producing countries must find other
means to address the current crisis. In particular, he
spoke of promotion of new markets (especially Russia and
China),and of campaigns to increase coffee consumption in
countries which already consume coffee, including Honduras.
Said Osorio, "We're not trying to interfere in the market,
but we are trying to influence the behavior of consumers."


4. Osorio also spoke of training and technical assistance
to coffee producers to improve the quality of their product,
and briefly touched on diversification. However, for
Osorio, the purpose of diversification is not to have coffee
farmers stop producing coffee, but rather to complement
coffee farmers' income. Conspicuous by its absence was any
suggestion that the world is producing too much coffee.
Nowhere in his remarks did Osorio address the issue of
global oversupply, except implicitly by his focus on the
need for greater global demand.


5. Several of the Hondurans at the meeting appealed to the
ICO to take a more activist role. During the question and
answer period, one Honduran coffee producer asked Osorio's
opinion of the proposal that a portion of the world's coffee
stocks be destroyed in order to boost the world price.
Osorio declared flatly that it would never happen, as it
would be completely impractical politically, and there would
be no way to force the destruction of coffee stocks.
Instead of such ideas, said Osorio, the ICO countries need
to "think creatively" about ways to promote coffee in new
markets.

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The U.S. in the ICO
--------------


6. Osorio also spoke of the possibility of the U.S.
rejoining the ICO, saying that a major diplomatic effort has
been underway since September on behalf of ICO members to
encourage U.S. membership. Several times he stated that
"the coffee crisis is not purely a commercial issue, but
also a political issue," and that it would therefore be
beneficial to have the U.S. "sitting at the table" to
discuss ICO initiatives with the other member countries.


7. This theme was echoed by some of the Hondurans present.
Eduardo Kafati, owner of Honduras' largest coffee company,
Liberal Party member of Congress and member of the National
Coffee Council, spoke optimistically of the U.S. return to
the ICO in his introductory remarks. Privately, he
acknowledged that of course U.S. membership would not
magically solve any problems or have any immediate effect on
world coffee prices. However, he maintained that the U.S.
would add considerable clout to the ICO, and would send a
valuable signal that, as a major coffee consumer and the
world's most powerful country, the U.S. takes the coffee
crisis seriously and is willing to engage multilaterally in
efforts to address the crisis.


8. Comment: Osorio was clear that the ICO's days as a price-
fixing organization are over, even though it was apparent
that many in the audience (and perhaps even Osorio himself)
were sympathetic to the old methods of managed supply and
price control.


9. Several Honduran speakers also mentioned the fact that
President Maduro raised the issue of U.S. ICO membership
with President Bush in May. It was clear that many
Hondurans regard Maduro as an international champion of this
issue, and if the USG does indeed rejoin the ICO, there will
be much congratulatory praise among Maduro's supporters here
in Honduras. End Comment.

Pierce