There he was, standing in his undershorts and shirt, in a small, private office at the Miami airport that seemed, under the circumstances, as big and as public as Grand Central Station.
Joe Tenhagen, a Miami gem dealer who specializes in emerald, had just returned from a routine buying trip to Colombia, the world’s leading producer of emerald.
But emerald wasn’t what the six customs agents were looking for in the linings of his luggage and clothes that spring day in 1981. They were looking for cocaine, the estimated $16-billion-a-year cash crop that is Colombia’s No. 1 export. After a fruitless 90-minute search, the agents told Tenhagen to get dressed and go home. To this day, he still doesn’t know why he was detained, but Tenhagen suspects that a competitor accused him.
Such are the hazards of life for Americans nowadays in the Colombian emerald trade, a trade closely linked in the minds of many to that country’s drug trade. Ever since the United States and Colombia began their historic joint campaign against drug trafficking in 1983, these hazards have increased. Indeed, reported The Economist, Colombia’s powerful cocaine community recently offered to deposit $5 billion with the country’s central bank to boost its sagging foreign-exchange reserves—in return for immunity from extradition. When the government declined, the drug dealers declared open season on U.S. officials and businessmen—even kidnapping and killing gem dealers.
No wonder American gem dealers feel a distinct sense of gangland menace these days in Colombia. “The mines were already dangerous, but now Bogota’s no longer safe either,” says Jerry Levy, Gemdeck Inc., New York. Even Tenhagen, a fearless and frequent traveler to Colombia, postpones trips there until they are absolutely necessary.
More recently, American dealers have had other reasons to put off their presence in Colombia. The free fall of the U.S. dollar against the Japanese yen since September 1985 has given the Japanese—inveterate lovers of Colombian emerald—their greatest buying leverage since the 1970s. Dealers from Tokyo have flocked to Bogota, driving up emerald prices, in U.S. dollar terms, as much as 75% in less than two years.
The Rival Greens
Remorseless dollar depreciation is being felt in far-off New York where emerald prices are said to lag behind those in Bogota. Among Fifth Avenue dealers, a very fine 1-carat Colombian emerald fetches $10,000 to $12,000 per carat. The same excellence in a 4-carat stone can command $40,000 per carat. No emerald from any other present-day source brings that kind of money. Why?
Put a row of fine Colombian emeralds next to rival-grade stones from its most important competitor, Zambia, and dealers will invariably choose the Colombian stones as the finest. Partly because of their venerated content, the Zambian stones seem to possess black or gray which the Colombian stones, colored instead by chromium, lack.
But just because fine Colombian emerald enjoys supremacy among connoisseurs doesn’t mean this variety enjoys the same market leadership in the market’s middle and low end. In America, Colombia’s superior green is no longer enough to command the manufacturer and retailer loyalty it did a decade ago. Cutting, clarity and cost are equally important factors now. And it is in these three areas that Colombian emerald took a beating during the early and mid-1980s, largely due to Colombia’s hide-bound refusal to meet the challenge of new competition from Zambia and, lately, Brazil.
Actually, the challenge from Zambia and Brazil really comes from Israel and India, two super-pros at gem marketing. In 1976, Israel jolted the emerald world by introducing superbly cut, often breathtakingly clean African emerald in unheard-of calibrated sizes and fancy shapes.
By 1982, Zambian emerald had stolen the top-commercial and medium-quality sectors ($800-$5,000 per carat) away from Colombia. Then supplies of African emerald temporarily dried up. During the lull in Zambian production, Colombia responded to Israeli savvy with some savvy of its own.
First, it began to cut its prices. This move wasn’t entirely altruistic, however, having much to do with over-production and the strength of the U.S. dollar between 1981 and 1985. So between 1982 and 1985, Colombian emerald prices were slashed at least 30%. Second, Colombians realized that the highly included emerald common in years past was no longer salable in the United States. So they offered far cleaner goods, some of it as brilliant and clean as that from Zambia. Third, cutters in Bogota began to improve their cutting by importing Brazilians to teach them better makes and new shapes.
The Enemy Within
Once, if ever, cutting in Bogota is on a par with that in Tel Aviv, U.S. dealers will have only one other beef with Colombian: the country itself. While red tape, corruption and greed are norms of doing business in nearly any Third World gem-producing country, dealers say they are especially pronounced in Colombia.
Around 1975, the government leased emerald deposits lands for five years to private entrepreneurs who proceeded to rape the land. It took nearly a decade to get rid of the ensuing glut. To prevent such surfeit again, the government has closely regulated mining, even halting production entirely for months at a time. “There is a growing amount of bureaucracy in Colombia that makes doing business there needlessly complex and unpleasant,” Levy says.
But in a country with more than one-third of its 28 million people unemployed, bureaucracy itself becomes a major form of employment. Since most of these bureaucrats are peasants who come from backgrounds of extreme poverty, relations between them and affluent American dealers are often touchy and temperamental.
Ultimately, both Tenhagen and Levy hope, the Colombian emerald market will normalize, especially as farm commodity prices, so important to Colombia, pull out of their current deflationary tailspin. “Then peasants can return to agriculture and get out of the emerald business,” Levy says. But with emerald the No. 1 seller among traditional gems worldwide, and better-to-fine Colombian emerald the choice of connoisseurs everywhere, it will be harder than ever to keep the country’s peasants down on the farm.
Please note: this profile was originally published in 1988 in Modern Jeweler’s ‘Gem Profiles: The First 60’, written by David Federman with photographs by Tino Hammid.
The 1.05-carat Muzo emerald shown in the header image is courtesy of Equatorial Imports Inc., Dallas.
