Wilting dollar hurts Colombian flower growers on Valentine's Day

CHIA, Colombia Thu Feb 7, 2008 7:01am EST

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CHIA, Colombia Feb 7 (Reuters) - Colombian flower exporters face a loveless Valentine's Day, hurt by rising labor costs, income received in wilting U.S. dollars, and customers too worried about a recession to buy roses.

In the United States, which accounts for about 80 percent of Colombia's flowers exports, residents are battening down for an economic slump.

But Valentine's on Feb. 14 is the biggest day of the year for Colombian flower producers who employ almost 200,000 people, mostly women who might otherwise be caught in the violence and poverty caused by the country's four-decade-old guerrilla war.

Colombian plantations, which sell about $1 billion worth of flowers annually, have had to lay off 20,000 workers over the last several years. They are pinched between the weak U.S. dollar, which dilutes export revenue, and higher costs driven by inflation and oil prices.

"We now have the same revenue we had in 1999 and 2000, the last time the dollar was this weak, but our costs are 68 percent higher," said Felipe Arango, a flower industry consultant trying to help the MG farm in the Bogota suburb of Chia find ways to cut costs.

Two out of every three flowers sold in the United States come from this Andean country, but as the U.S. economy slows American buyers are in no mood to help out by paying more for roses and carnations, Colombia's two biggest sellers.

The weakening U.S. dollar, which has fallen about 14 percent against the Colombian peso over the last year, means that exports to the United States are worth less when the sales are translated back into pesos, the currency in which farms pay their rising bills.

Labor is the biggest cost for flower producers. Wages are linked to inflation which rose to 5.7 percent in Colombia last year as high oil prices pushed up transportation costs.

"We have increased productivity. That is the only thing that has kept us from having to lay people off," said a manager at the MG plantation, which has 1,000 employees.

As he spoke men wearing rubber suits, respirators and elbow-length gloves dipped bunches of roses into vats of disinfectants, the last step before the three-hour flight to Miami where the flowers are put into refrigerated trucks and distributed throughout the United States.

But they are headed into a thorny market this year.

"Flowers are high on the list of things that U.S. households will cut if the United States goes into a recession," Arango said. "So, here we are, squeezed by increasing costs and the inability to raise prices."

A BUFFER AGAINST VIOLENCE

Colombia is in an armed conflict, fed for the last 20 years by the drug trade, as a mosaic of armed groups fight over lucrative cocaine-producing land.

Flower farms clustered around the main cities of Medellin and Bogota offer jobs to people displaced by the war, enabling them to live in safe suburbs rather than slums that serve as makeshift refugee camps preyed upon by crime gangs.

Alex Monsalve, 31, fled his hometown of Puerto Nare, Antioquia province, after right-wing paramilitaries tried to recruit him at gunpoint three years ago.

Now he works at La Plazoleta flower farm near Bogota. His job as a flower packer gives him health and social security benefits as well as other perks that are generous by Colombian standards.

"I don't like to think about where I would be without this job -- probably displaced, fighting for the paramilitaries or dead," said the father of two.

Colombian flower farms are clamoring for the U.S. Congress to enact a free trade deal. Capitol Hill Democrats object, saying Colombia's conservative leader, Alvaro Uribe, has not done enough to prosecute paramilitaries who have killed labor union leaders as part of a dirty war against leftist rebels.

The growers fret that the U.S. economic slowdown will make Democrats even more reluctant to vote for trade pacts that could put American jobs at risk.

Colombia gets duty free access to the U.S. flower market under a preference program that expires at the end of February this year. The White House wants to replace that program with a trade pact that would make those benefits permanent.

"Investors need to know those benefits are locked in," said Augusto Solano, president of the Colombian Association of Flower Exporters.

The Bush administration is lobbying for the trade deal as a way to fortify Colombia, an ally bordered by leftist governments in Venezuela and Ecuador that are critical of Washington.

Colombia has a "window of opportunity" until May to persuade Congress to pass the trade deal before U.S. presidential election campaigning complicates a vote, Colombian Trade Minister Luis Guillermo Plata said last week.

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