Banana Wars by Andrew Bounds
an abstract from a longer article in Latin Trade, June 2001
From the corporate corridors of Chiquita Brands International’s Ohio headquarters to its steamy Central American plantations, banana war wounds are ripening. Even though a US.-European agreement was reached in April 2001, fruit giants Chiquita Brands International, Dole Food Co. and Del Monte are revamping the way they do business. That is hurting small farms in Central America. In Changuinola, western Panama, the 368 worker-owners of the Atlantic Banana Cooperative were among the first hit. In December, they celebrated the final payment of a US$7.2 million loan they used to buy a failing state company in 1992. But the celebration was dampened by news that Chiquita, which exports the cooperative's fruit, would no longer pay $3.11 for a 42-pound box of fruit. It was dropping its rate to $2.86.
The European Union, which represents a 15-nation market, dropped its 25% tariff on Central American bananas after it was ruled illegal by the World Trade Organization. But, until the April deal, European countries favored their former banana-producing colonies like Jamaica, the Canary Islands, Madeira and French West Indies over those of Central America. The idea behind the preferential treatment was to protect African and Caribbean farmers unable to compete with large plantations managed by U.S. multinationals in Latin America. The European Union has agreed to modify quotes through 2006, when it will lift them all together.
Chiquita, Dole and Del Monte for now are cutting their losses by reducing costs and slashing the prices at which they buy from independent producers like the Changuinola cooperative. Along with Chiquita and Del Monte, Dole has failed to renew many agreements with independent producers. It has also fired 4,000 workers, and then rehired them on less attractive contracts that delete bonus payments. And Dole has begun buying greater volumes of cheaper bananas from Ecuador, where production costs are around half those in Costa Rica and Panama. Ecuador exported more than 250 million boxes of bananas in 2000—as much as the Central American countries combined—sparking accusations of dumping.
Ecuador is selling below cost, at around $1.50 for a 42-pound box. Costa Rican bananas, by comparison, cost $4.40 a box to produce and sell for about a dollar more. But the case of Costa Rica, the world's second-biggest exporter of bananas behind Ecuador, is unusual in Latin America. Costa Rican banana workers typically earn up to $18 a day — double the minimum wage — and are covered by social benefit programs as well as subsidized housing, health care and electricity. Small-scale plantations handle about 58% of Costa Rica’s banana production.