VZCZCXYZ0001
RR RUEHWEB

DE RUEHBO #0239/01 0261657
ZNR UUUUU ZZH
R 261657Z JAN 09
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 6665
INFO RUEHBR/AMEMBASSY BRASILIA 8596
RUEHCV/AMEMBASSY CARACAS 1562
RUEHLP/AMEMBASSY LA PAZ JAN LIMA 6927
RUEHZP/AMEMBASSY PANAMA 2913
RUEHQT/AMEMBASSY QUITO 7625
RUEHOT/AMEMBASSY OTTAWA 2579
RUEHME/AMEMBASSY MEXICO 9642
RUEHSG/AMEMBASSY SANTIAGO 2477
RUEHMU/AMEMBASSY MANAGUA 2458
RUEHSJ/AMEMBASSY SAN JOSE 5297
RUEHTG/AMEMBASSY TEGUCIGALPA 1878
RUEHSN/AMEMBASSY SAN SALVADOR 2348
RUEHGT/AMEMBASSY GUATEMALA 2939
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS BOGOTA 000239 
 
SENSITIVE 
SIPDIS 
 
WHA/EPSC ROONEY 
STATE PASS USTR M. CARRILLO 
 
E.O. 12958: N/A 
TAGS: ECON ETRD CO
SUBJECT: COLOMBIAN COFFEE, TEXTILES AND FLOWERS BRACE FOR 
ECONOMIC DOWNTURN 
 
REF: A. BOGOTA 15 
     ¶B. BOGOTA 7 
     ¶C. 08 BOGOTA 3076 
 
¶1. (U) SUMMARY.  Four and a half million Colombian jobs 
depend directly or indirectly on the coffee, textile/apparel 
and flower sectors.  The three combine for 15 percent of 
Colombia's exports and trail only oil and coal as Colombia's 
most significant export products.  With unemployment rising 
and industrial production falling, the success of these 
sectors will have a significant impact on how Colombians 
weather the global economic downturn.  While particulars of 
each industry color its outlook, there is substantial concern 
emanating from all three sectors on prospects for 2009, 
despite the expectation for a much more favorable exchange 
rate than Colombia enjoyed for most of 2008.  END SUMMARY. 
 
COFFEE: A CHEAPER CUP OF JOE STILL REQUIRES COFFEE BEANS 
--------------------------------------------- ----------- 
 
¶2. (SBU) Of the three sectors, coffee seems the most 
sanguine.  Coffee is responsible for 32 percent of rural 
employment in Colombia, which exports 90 percent (USD two 
billion) of its coffee production.  Some 85 percent of 
exports go to North America and Europe, in equal proportions. 
 National Coffee Federation (Fedecafe) President Gabriel 
Silva said he expects world demand for coffee to continue to 
grow at an annual rate of 2 percent, arguing that in economic 
downturns, consumers will simply switch to cheaper coffee 
rather than abandon their caffeine conduit altogether. 
According to Silva, global supply will be down in 2009 due to 
floods in major coffee-producing countries.  He expects 
prices to remain relatively stable. 
 
¶3. (SBU) Silva confirmed that Fedecafe is taking advantage of 
the economic downturn's negative impact on Starbucks' share 
price to pursue an interest in the company.  Fedecafe's goal 
would be to attain sufficient shares to have board 
representation.  Despite this move, he characterized 2009 as 
a year of survival mode for the industry, noting that 
Fedecafe had shelved plans to open Juan Valdez coffee shops 
in Asia.  Silva said he expected employment in the sector to 
remain constant.  Colombia has two million acres under coffee 
cultivation, including 300,000 which are being renovated to 
replace older, less productive bushes with younger, 
higher-yielding ones.  Fedecafe's goal is to increase exports 
from 12 million sacks in 2009 to 17 million in 2014. 
 
TEXTILES: AN INDUSTRY HANGING BY A THREAD 
----------------------------------------- 
 
¶4. (SBU) The textile/apparel sector has a much greater 
domestic consumer base than the other two industries, but 
nonetheless exports 30 percent of textile production and 65 
percent of apparel.  Ivan Amaya, President of the Association 
of Colombian Textile Producers (Ascoltex) painted a bleak 
picture for 2009.  Production fell by 6 percent in 2008, 
including contractions in October and November despite the 
more favorable peso-dollar exchange rate.  Amaya ticked off 
five challenges facing the industry: 1) legal imports from 
China; 2) contraband imports of textiles that have become the 
method of choice for money launderers; 3) recurring 
uncertainty over ATPDEA extensions in an industry with three- 
to six-month lead times for orders; 4) the declining 
purchasing power of it's number one export destination 
(Venezuela) due to lower oil prices; and 5) Ecuador's promise 
to erect barriers to imports of a host of goods, including 
textiles/apparel.  Amaya noted that the sector shed 24,000 
jobs in 2008, principally in small factories that were forced 
to close, reducing the labor force to 220,000, .  He did not 
exclude the possibility of further job cuts for 2009. 
 
 
FLOWERS: FEB 14 DETERMINES WHETHER THEY FLOURISH 
--------------------------------------------- --- 
 
¶5. (SBU) Cut flowers is big business for Colombia, which 
exported 1.1 billion dollars worth in 2007.  Richard 
Franklin, Deputy Director of the Colombian Association of 
Flower Exporters Asocoflores admitted that the organization 
did not even keep statistics on overall flower production 
since more than 95 percent of Colombian flowers are exported. 
 Of these, 80 percent go to the United States.  While future 
free trade agreements with Canada and the EU (Ref A) offer 
the potential for more flower exports on the margins, the 
U.S. will remain the dominant market for Colombian flowers. 
 
¶6. (SBU) Franklin underscored the importance of Valentine's 
Day, which accounts for 20 percent of annual sales of 
Colombian flowers exported to the U.S.  All eyes will be on 
the results of this Valentine's Day season to get a sense of 
what kind of demand the sector can expect in 2009.  Franklin 
noted the sector's apprehension about Valentine's Day falling 
on a weekend for the first time in five years, likely meaning 
more flower purchases from grocery stores than from florists, 
which in turn may mean more bouquets and fewer roses, which 
could translate into decreased revenue. 
 
¶7. (SBU) Asocoflores Economics and Logistics Director Andrea 
Gonzalez pointed out that the peso's appreciation from 2003 
to mid-2008 (Ref C) had taken a toll on the sector in the 
form of some 13,000 lost jobs.  The flower industry currently 
is responsible directly and indirectly for just under 200,000 
jobs.  Gonzalez acknowledged the welcome respite a weaker 
peso had provided over the past several months, adding that 
in addition to U.S. demand, the exchange rate is the main 
variable that will determine the sector's success in 2009. 
Asocoflores is working with its counterparts in the U.S. on 
marketing campaigns highlighting flowers as an "inexpensive 
luxury" appropriate for tough economic times when more costly 
indulgences seem imprudent.  As Franklin put it, "Our 
competition is not Ecuadorian flowers; our competition is 
jewelry and chocolates that people would give instead of 
flowers." 
 
COMMENT: NO ILLUSIONS AMONG COLOMBIAN EXPORTERS 
--------------------------------------------- -- 
 
¶8. (U) Industrial production fell 13.3 percent in November 
(compared with the previous November), and Colombia lost 
600,000 jobs in 2008.  November unemployment reached 10.8 
percent.  Economic growth forecasts for 2009 continue to be 
revised downward (Ref B).  Add to this bleak backdrop the 
economically troubled times in Colombia's top three export 
destinations (the U.S., Venezuela and Ecuador), and Colombian 
exporters (and, by extension, their employees) are bracing 
for a tough 2009. 
BROWNFIELD