Globalization

An increase of firms trading and investing in the coffee industry means that producers had to adapt to the processes of deregulation, privatization, and liberalization (Cleland, 2010). All these processes have negative implications on the producers. For example, liberalization allows corporations to gain a greater share of coffee’s global export revenues which implies less profit and power for producers (Cleland, 2010). These changes to the market have social and political impacts on the producers. On the extreme side of the scale, some producers change their way of life whether it be abandoning their crops, exporting other crops or working at plantations as a means to get a larger wage. Further, the increase in firms politically influenced producers. In Brazil, the change to a liberalized market meant that the government cut taxes on exports as well as subsidies and research and development programs (Cleland, 2010). These reductions meant that Brazilian producers were no longer provided any safeguards to give them a competitive advantage and lost control over the production in their country. This lack of control means that the producers are subject to the inequality gap (Cleland, 2010).

However, an increase of firms has different social and political impacts in their headquartered region. Competitors such as Starbucks and Nescafe have taken on a modern role. Being introduced to new technologies such as Information and Communications Technology allows corporations to become disconnected with producers as they are more focused on meeting the demands of the consumers, being efficient and having economies of scale (Venkatachalam, n.d). Further, headquartered regions are politically impacted by the increase in firms as they face risk with meeting supply demands. For example, during the coffee crisis in 1989 most producers could not meet their quotas, which lead to the price of coffee decreasing (Cleland, 2010). Previous to the crisis there was a trade agreement, the International Coffee Agreement which had the goal of stabilizing 99 percent of the coffee market through quotas and price controls. The failing of this agreement because of the coffee crisis demonstrates the risk suppliers are subject to a lack of supply (Cleland, 2010).

Images (Venkatachalam, n.d).

News article on the current coffee crisis in Brazil: https://www.bbc.com/news/world-us-canada-48631129

References

Cleland, D. (2010). The impacts of coffee production on local producers. Retrieved from https://digitalcommons.calpoly.edu/cgi/viewcontent.cgi?article=1013&context=socssp

Venkatachalam, L. (n.d.). Perspectives on sustainability and globalization and challenges for the coffee sector. Retrieved from http://www.ico.org/event_pdfs/wcc2/presentations/venkatachalam.pdf