Anthony O. Miller
A STORM is brewing over whether to cut the price of coffee locally roasted and ground, to bring it closer to current world prices, Commerce and Industry Ministry sources indicated yesterday.
Andreas Galatariotis, Industrial and Commercial Officer at the Ministry, said he favoured a price cut. He declined to say by how much, lest revealing that figure prompt local stores to stop buying from wholesalers until a new, reduced, price took effect.
George Mitides, the Advisory Price Commission’s director, however, says he questions the wisdom of lowering the coffee price, despite the fact the government fixed the current price in 1996, when green coffee beans cost more than they do today.
Between the two extremes is the answer to whether, by the time the Commission meets and votes before the end of this month, the price of coffee is allowed to drop, and if so, by how much.
Alithia yesterday reported that the two major local roaster-grinders, who dominate 92 per cent of the market, and the dozen or so smaller ones serving the remainder, have been overcharging by 30 cents per kilo of coffee over the last year.
The paper claimed a Commerce Ministry study showed the overcharging warranted a Commission-ordered price cut of 35 cents per kilo on the wholesale product. But it noted that, since Brazilian green coffee prices have risen recently, the Ministry now thinks a wholesale price cut of 25 cents per kilo is enough.
Galatariotis was furious at this published assertion, which laid the leak of this information at his door. He denied leaking any data regarding possible price cuts, adding: “The two main coffee buyers are very very angry with me over this news,” as it could kill their wholesale sales until a lower price is agreed.
For this reason, he declined even to suggest by what percentage, or amount, the Committee should cut the wholesale coffee price. Nonetheless, he insisted the price should be cut.
“You cannot have a controlled item which does not come down in price when that price cut is merited,” he said.
He said he had been cautious in his research in the last half of 1998, before proposing the price cut, in confidence, to the Commission, and that his research showed a cut was warranted.
Mitides was less certain, noting that – despite the fact the Ministry still fixes the prices of six items – the Treaty of Rome, foundation of the European Union, prohibits the practice.
“The fixing of prices violates Article 30 of the Treaty of Rome, which means that no restrictions or other equivalent effects should be imposed” on a commodity, Mitides asserted.
Despite this, the Commerce Ministry still fixes the prices of cement, petroleum products, wood produced by the Cyprus forest industries, pasteurised milk, locally processed coffee, and ‘common bread’, Mitides said.
This last, he added, “is non-existent. Nobody calls it ‘common bread’. When you go to buy bread, they say it’s not ‘common bread’, it’s white, it’s village bread.”
“By fixing a price,” he continued, “we restricted the free movement of goods,” which is barred by EU law, along with any impeding of the free flow of capital or labour across EU borders.
Though Cyprus is not yet an EU member, and though the price fixing is local and does not affect a product crossing borders, Mitides insisted: “I’m afraid it is in violation of Article 30 of the Treaty of Rome.” That, for him, appeared to be determinative.
“I wonder if it’s good to fix maximum prices for coffee. Is it good for the consumer?” Mitides asked. “I wonder if we are protecting the economic interest of consumers by reducing each packet of coffee by four or five cents – 35 cents per kilo?”
“I think fixing the price of any product, where there is competition, leads to higher prices for the consumer,” he said. “We don’t protect the economic interests of the consumer by fixing prices in those cases where there is free competition.”
Asked if he will vote to cut the coffee price, Mitides replied: “This is the opinion of some of my colleagues. I think that the economic interests of the consumers will be served better if the price is liberalised.”
Whatever the ultimate vote later this month, Galatariotis said he would closely watch the world price of coffee beans, following the earthquake that recently ravaged Colombia, and Hurricane Mitch, which devastated much of Central America – both major sources of the world’s premium coffees.
If by May, these disasters have caused world coffee prices to rise, Galatariotis said he would revisit the question, with a view to raising the local wholesale price again.
Besides coffee, the Price Committee will also decide this month whether to grant a request by the island’s dairies to raise by 1.5 cents per litre the wholesale price of pasteurised cows milk, Mitides added.
