Were Ponzi schemes to blame for Colombia’s coffee leaf rust epidemic?

coffee leaf rust epidemic
  • Between 2008 and 2013, a coffee leaf rust epidemic tore through Latin America
  • Average coffee production in Colombia plummeted by 31%
  • Ponzi schemes diverted farmers’ money away from resources used to control the disease

BETWEEN 2008 and 2013, a coffee leaf rust outbreak ravaged production in Latin America.

The deadly fungus – known colloquially as la roya – affected coffee plants from Mexico to Costa Rica, putting the livelihoods of millions of farmers at risk.

Coffee production in Central America alone fell by as much as 17%, bringing estimated costs of more than $610 million, according to the International Coffee Organization.

While the impact varied wildly from one region to the next, few countries were more adversely affected than Colombia. After experiencing historical highs in 2007, national production fell to its lowest level since the 1970s, spelling ruin for many of the country’s 500,000 coffee farmers.

“Basically, everything was a succession of events,” says Alejandro Cadena, CEO of Caravela Coffee. “The 2007-08 season delivered excellent quality – it was one of the best in my 22 years of working in coffee. Production reached 12 million bags and while prices were not too high, productivity compensated, and farmers were excited for the year ahead.”

However, in May 2008, farmers started to notice a light, orange dust forming on the leaves of their plants. Just three years later, average production had plummeted by nearly a third.

Rising global temperatures and higher than average rainfall were largely blamed for the scale of destruction in Colombia. But shortly after the outbreak, some pointed the finger at a more unusual cause: Ponzi schemes.


In late 2008, the Colombian government issued the closure of two companies: DMG (David Murcia Guzman) and DRFE (Dinero Rapido, Fácil y Efectivo).

Following an investigation by several government agencies, both were accused of operating pirámides or Ponzi schemes – a fraudulent investing scam which generates returns for earlier investors with money taken from later investors.

By the time the two schemes had been put out of business, they had generated the equivalent of 1.2% of Colombia’s GDP from more than half a million people. Among them were Colombia’s coffee farmers.

Their promise of quick returns on investments successfully drew in agricultural workers on low incomes, but also farm owners, who waited in queues for hours to invest.

“Everyone was investing in pyramid schemes,” Alejandro says, “from Huila to Cauca to Nariño. I saw many people investing their entire savings and selling everything, even their farms, just so they could get into them.”

Yet when the truth of the schemes was laid bare and investors realised they’d been scammed, there was nothing they could do. For farmers who were already dealing with falling profitability from low coffee prices and rising fertiliser costs, the consequences were shattering.

“When you talked to coffee growers at the time, they were all putting their money into pyramid schemes instead of buying fertilisers or fungicides,” Alejandro explains. “This left trees in poor shape, which created ‘perfect storm’ conditions where coffee leaf rust easily spread.”

Diverting money away from crop management had essentially increased the coffee plants’ vulnerability to pests and diseases. This, according to Alejandro, was what allowed the fungus to spread more aggressively compared to other countries in Latin America.

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Ponzi, pickers, and high altitude farms

Much like a virus among humans, coffee leaf rust is notoriously difficult to control once there has been an outbreak. The most common cause of spreading is when wind and rain disperse the spores of the affected plant, causing the majority of those within the vicinity to also become infected.

This was certainly the case during Colombia’s outbreak between 2008 and 2011. And while Ponzi schemes left farmers under-equipped to deal with it, Alejandro suggests the country’s itinerant workforce may also have been indirectly responsible.

“Coffee pickers are seasonal workers who migrate constantly,” Alejandro explains. “They moved in the central mountain range between Cauca, Huila, and Nariño – which are very high areas – and carried the spores.”

This view is supported by the unexpected spread of the disease into high-altitude regions. When Colombia suffered from an outbreak in 1987, the worst-affected areas were below 900 m.a.s.l, with subsequent studies confirming that regions at low altitudes were more susceptible due to the higher temperatures and agro-ecological conditions.

As a result, farmers at higher altitudes were generally confident that the disease would not reach their farms. So when the average altitudes in the affected areas between 2008 and 2011 were above 1200 m.a.s.l, it inevitably caught many off-guard and left them under prepared when it came to controlling the outbreak.

In the aftermath of the epidemic, the Colombian government responded with several measures to support coffee farmers in their efforts to recoup what they had lost and prevent a similar outbreak in the future.

Since 2009, for example, more than 300,000 hectares of the 600,000 hectares planted with susceptible cultivars have been replaced by new resistant varieties, such as Castillo, while local governments have also implemented economic assistance for the renewal of plantations.

However, for the majority of those who lost their money through Ponzi schemes and whose farms suffered as a result, the impact of the coffee leaf rust will no doubt continue to hurt. One can only hope that copycat schemes are shutdown before they cause similar damage.