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Gomez is facing was originated by past decisions. The drought of 1974 caused changes with the purchases, prices and commercialization of the bean stock. The Board set a guaranteed price below the market, which gave to farmers a huge incentive to sell their production to INA because it paid a higher price than the market (See Exhibit 1 for detailed prices and differences between INA and the market). This, combined with Government's incentives to farmers increased Tanama's bean production, and then, produced excess of supply at INA.
The guaranteed price was above the selling price to the consumers, causing a negative margin for INA; but the market was producing positive margins to wholesalers and retailers...
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