About 80 per cent of the investment in opening new coffee haciendas took place between 1880 and 1895 in Cundinamarca, and between 1890 and 1900 in Antioquia. Although there were coffee-producing peasants, who responded favourably to the opportunities opened by organized buying, the merchants were in the forefront of development, and their participation was decisive for the future of coffee.

Two central aspects that turned the merchant into large-scale coffeegrower and -exporter are analysed in this chapter. In the first part, the social environment and political ties of the merchant families of Bogatá and Medellín are discussed in general terms. There is also an analysis of their tendency to diversify assets, given their fear of excessive specialization.

In the second part of the chapter, the incentives and obstacles facing the merchant-turned-planter are examined. The advantages offered by investment in coffee can be summarized as follows: the high profitability of coffee production when it was linked to exports; the relative security of this investment in an inflationary period; access to external credit with interest rates 50 per cent lower than any available in Bogatá or Medellín; and, finally, the abundance of good lands and the availability of labour. The obstacles to profit must also be recorded: the necessity to invest considerable sums of capital; the slow initial rate of return on investment; the risks of expropriation and disruption of production in periods of political instability; the risk of contracting debts in gold when the rate of devaluation was increasing; and the fact of being subject to an uncontrollable cycle of international prices.

The coffee hacienda was the result of the entry of urban merchants into rural society. On a yet more general plane, it was the product of emphasis on agricultural exporting, of the urge and the need to form links with the world market and ‘bring to the country the civilization that is overflowing in Europe’. Investment in coffee did not penetrate the rural world in order to create new types of social or productive relations. By the end of the century, for all its dynamism, commercial capital had only scratched the rude surface of the older social formations. The traditions, habits, and customs of the little worlds of a few square kilometres in which most lived out their lives showed a persistent rigour, despite the expectation that the old patterns would dissolve in contact with the new economy which the coffee entrepreneur wished to impose. In part it was a problem of quantity: coffee investment was heavily concentrated in relatively few areas. Even there, the phenomenon of specialization that occurred with tobacco in Ambalema was not repeated. Within the old haciendas of colonial origin there was a peasant stratum accustomed to the degree of independence that came from producing its own food. The coffee hacienda of Santander, Cundinamarca, Tolima, and Antioquia was founded within an existing social structure, to which it had to adapt itself, while at the same time it introduced new elements of the monetary economy which, simple and weak at first, would produce effects that disturbed the old order. In Cundinamarca, for example, the coffee municipios were old centres of colonial production and commerce.

Antioquen̄o colonization deserves the attention it has received as a decisive episode in Colombian history. The society which emerged from it on the hillsides, river banks, and valley slopes situated between the Cauca river basin and the peaks of the central cordillera found integration and economic progress in the early years of the twentieth century through the cultivation, processing, packing, and transport of coffee.

Naturally enough, a slow-maturing crop such as coffee did not appeal to colonists who had set themselves, days and even weeks away from the nearest outpost of civilization, the task of carving a living out of the monte. Coffee had to wait until communities had been established, supported by a subsistence agriculture of maize, beans, yuca, and bananas, and until improvements had been made to the bridle-paths used to transport the pigs which were fattened for the distant towns of Medellín and Bogotá. Before the frontier provided a stable economy it offered only the chance of survival to a population which in its land of origin was growing more rapidly than any other in the Republic, in a poor environment of waste lands and steep and eroded terrain. At the same time adventurers arrived to seek buried treasure from previous indigenous civilizations, and search the forests for wild rubber.

The frontier protected its inhabitants from the vicissitudes of politics, and from wars, recruiters, requisitions, and similar outrages, while the struggle against nature and isolation bred unpolished but comradely habits.

The way towards ‘civilization’

Judging from its limited participation in international trade, Colombia during the nineteenth century was one of the poorest countries of Latin America, with a backward and stagnating economy. Nevertheless, the size of Colombia's exports has never really given an indication of the extent of economic activity in the country. Historically, a large section of the economy has been relatively isolated from the international trade and its accompanying cycles of booms and busts. For example, the sharp fall in gold exports between 1600 and 1650 did not lead to a similar depression of the internal market. The latter, on the contrary, showed signs of dynamism. Again, in 1884 during a marked contraction in the export market, Salvador Camacho Roldán (one of the most distinguished economists of the time) calculated that the value of the agricultural produce sold for internal consumption – excluding subsistence agriculture – was 120 million pesos, over twelve times the value of agricultural exports, which then amounted to 10 million pesos. Even adding the figures for gold exports, the coefficient of total Colombian exports was rarely over 10 percent. The one period which seems to have been an exception to the rule was the first half of the 1870s, when the export economy began to expand.

The low export coefficient was certainly the result of the Colombian economy's isolation from the flow of capital, manpower, and technology from Europe to the temperate zones of the world. A straightforward quantitative history of Colombia's exports is still not possible.

Most Colombian historians agree that between 1880 and 1886 changes in economic policy and in the constitution bring the Radical period to an end. Monetary policies – the creation of the national bank, the ending of the right of the commercial banks to issue currency, and finally the imposition of the curso forzoso (the forced acceptance of paper money) – are seen by these historians as mechanisms for redirecting investment towards production, reviving the economy, and promoting coffee exports. Political centralism and the new extended Presidential powers and term are seen as essential to national unity, gravely threatened by the federalist anarchy of the free-trade era.

I do not intend to give a full account of all these complexities, crucial as their interaction was in the formation of the contemporary Colombian state and in maintaining its legitimacy. I must concentrate on one part of the Regeneration's economic ‘programme’ and its impact specifically on the expansion of coffee.

I hope to show that economic policy did not have as its objective promoting coffee exports or channelling savings to investment in coffee. Nor did it have a long-term coincidental effect of encouraging the sector, and it is therefore not possible to attribute to it a positive role in the first cycle of expansion. In this chapter I shall show that the opposition to the new policies that came from bankers, importers, and exporters was not derived just from their being now relatively isolated from political power, whereas they had previously been the beneficiaries of official favour. This opposition was much more widely based, and it went far beyond what one would expect if it were just a matter of the mere immediate economic interests of these groups.

Nothing could have been more discouraging than the political and economic state of the country when it emerged from the last civil war. The separation of Panama was to reproach the consciences of a whole generation. Once the links between the interior and the ports had been reopened, accumulated stocks proved so high that freight rates shot upwards. The coffee-growers, now the leading exporters, could not wait for better days, as they had to export to pay their debts. They seemed to understand that good prices had disappeared with the previous century. The government looked for pacts and compromises, between parties, between factions, between principles. The tariffs of 1903 and 1905 followed the protectionist pattern of the Regeneration. Attempts to return to the gold standard, suppress export taxes, and welcome what little foreign investment came near seemed to follow old free-trade dogmas. Coffee was the only export of importance, but the international market was very depressed, and there were serious doubts about whether it would expand again, or shrink everywhere as it was shrinking already in some districts. Perhaps a rubber or banana boom was coming. Nevertheless, the Brazilian valorization policy of 1906, and the recovery of prices after 1910, opened up a better future for coffee. The First World War closed European markets and increased dependence on the North American buyer, but the expansion of that market enabled it to absorb growing Colombian production without any trouble. In the second decade of the century there was some revival of the old haciendas, once again showing a profit.

The continuous growth of the production of coffee between 1910 and 1960 is the most decisive phenomenon in the recent economic history of Colombia. The country became the second most important world supplier of coffee, and the most important supplier of mild coffees. The impact of coffee expansion on economic growth, on the diversification of the productive and occupational structure, and on the distribution of income among classes, groups, and regions is therefore central to contemporary historical analysis. Given the present state of research, it is impossible to give a full and precise account of this impact and of the multiple relationships between the coffee sector and the rest of the sectors of the Colombian economy. Many themes still remain unstudied and require the slow construction of time-series and the systemization of basic document sources. Even then, it would be odd to write about coffee in Colombia without making ample reference to the external parameters by which it is circumscribed.

During the First World War, Colombia became a first-order coffee exporting country. The annual average of production between 1915 and 1917 was 800,000 bags of 60 kg. The annual rate of growth of Colombian production from 1915-17 to 1970-2 was 4.2 per cent, against an annual growth of world consumption averaging 2.2 per cent for the same period. It was logical that the highest rates of growth should have been reached in the earlier periods.

The hacendado is a man of progress, which for him is synonymous with unrestricted access to a ‘free’ labour supply, better roads, cheap railways, and free exports. He is Europe-centric. His desire is to impose civilization in the hollows of the Andes, through growing coffee. He was once a capitalist entrepreneur, but he became an ‘oligarch’ – in the Colombian social meaning, not the wider political meaning of the term. He got land and credit, and did business on the bases of trust and honour, business in which family and social relationships and political contacts were often all-important. The family, the politico-social connection, sends out its pioneers. Once the haciendas are founded, the commission agents of foreign houses appear and offer funds at low interest and secure market for the product. If he is a Liberal, he emphasizes his faith in the common cause of international capitalism, rebaptizing his properties with names like Java, Ceilán, Costa Rica, Brasil, Liberia, Arabia, remote countries which had also ascended, or were ascending, through coffee in the scale of a universal civilization.

But the internal structure of the hacienda was far from capitalist. It rested on colonial origins. The coffee hacienda as an economic and social construct, as the concrete expression of relations between the hacendado – urban in his origins and vocation – and the peasant, is the subject of this chapter. The background is a country which at the same time is developing two defining characteristics: it is gradually becoming a monoexporting economy, and outside the coffee sector the latifundio – in cattle, sugar, and bananas – is expanding and consolidating.