The Bitter Taste of Brazil’s Temporary Import Ban on Robusta Coffee

Brazil, one of the world's largest producers and exporters of Robusta coffee can experience droughts and poor harvest and becomes a temporary importer of Robusta. The 2016-17 drought lowered Brazilian Robusta production and depleted stocks. Imports of one million 60-kg bags of Robusta coffee were temporarily allowed in the spring of 2017. An import ban was set before imports occurred, due to rent-seeking pressures of coffee farmers. We analyze the welfare and trade implications of this drought episode and coffee import ban for various actors in the Robusta bean and soluble markets. The ban increased Brazilian Robusta producers’ welfare between $174 and $277 million nearly offsetting the impact of the drought. The ban hurt Brazilian soluble processors by raising their cost by 10% and lowered final consumers’ surplus in Brazil between $109 and $173 million. Deadweight losses were small as these markets are price inelastic. Major Robusta exporters lost 32 to 69 thousand metric tons (tmt) of exports to Brazil and faced up to 9 % lower prices on their total exports of Robusta. Foreign consumers of Brazilian soluble coffee lost between $62 and $107 million of consumer welfare because of higher prices. The world price in the absence of the ban would have been 12$/bag higher for these stakeholders. The import ban benefited Robusta buyers in the rest-of-the-world (RoW). The drought itself created large rents for the RoW net exporters of Robusta but at the cost of net importers of Robusta beans and soluble coffee, globally.