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Production Overview

ECONOMIC AND SOCIAL IMPACTS OF CHANGE IN BANANA-PRODUCING REGIONS

Governments in the major banana exporting countries did little to regulate or control banana plantations during their early history. Indeed, they often gave considerable assistance to the companies in acquiring land, assembling large labour forces and levying very low taxes on their operations. As a result, Central American countries became dependent on banana exports to earn foreign exchange with which to buy imports and reduce foreign debt. Hence, these governments found they had declining room to bargain with the agribusiness giants controlling their exports in an attempt to raise returns or improve conditions for plantation workers. By the mid 1970s, bananas comprised 40 per cent of the total value of exports from Panama and Honduras, one-third of exports from Costa Rica and one-quarter of exports from Ecuador. These are very high levels of dependence on a single commodity.

This dependence also made major banana-exporting countries vulnerable to periods of low prices and cut-throat competition from other banana producers for markets in industrialised countries. For the last thirty years, TNCs and independent growers have virtually flooded global markets with bananas which has kept prices down and reduced returns to both small farmers and governments. One solution might have been for governments to regulate banana production, encouraging small farmers to turn their lands back to other kinds of agriculture such as grain production for local consumption. Finding alternative products to generate export income always provided the major barrier to this policy.

In the early 1970s, developing countries facing these problems became particularly interested in the example set by the Organisation of Petroleum Exporting Countries (OPEC) which had formed a cartel (an association of major producing countries) to act as one voice in negotiating with TNCs over oil prices and production levels. Dominated by large Middle Eastern producers, OPEC was able to raise oil prices dramatically after 1973 bringing about the so-called oil crisis. Encouraged by this success, the Union of Banana Exporting Countries (UPEB) was set up in 1974 and, by the 1980s, had eight members -- Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama and Venezuela. They tried to achieve greater returns from banana exporting by raising taxes on each case of bananas shipped and by setting the same tax in all UPEB members.

The Costa Rican Minister for Agriculture, Senor Morales, said in 1984: "People are demanding lands, education and health and if we don't get the resources to pay for these things we face a future of violence". Yet global banana markets are highly sensitive to increased prices which would result from higher taxes and regulated production. In addition, the TNCs can supply their core markets from alternative sources outside the UPEB for example the Philippines, Thailand, some African countries and even Indonesia. Hence, UPEB was not able to operate as a powerful cartel and only small increases in taxes were achieved.

At the end of the banana production and exporting chain, therefore, stand plantation workers and small farmers supplying bananas on contract to the TNCs. Labour relations on plantations in Central America have not been good, wages are low by the standards of other global export industries, and accommodation provided by the companies has often been of low standard. The companies argued that conditions in the export sector were better than those in other local agricultural industries and that raising wages would make the fruit uncompetitive with bananas which could be obtained in other developing countries.

It is important to stress, however, that local impacts of the banana export industry have not been determined completely by TNCs. In all countries, governments and wealthy business people have often cooperated with agribusiness firms to establish the industries and working conditions. The detailed impacts of the banana industry, therefore, have been different in each of the main exporting countries depending on specific local factors, the nature of their governments and the presence of alternative export industries in the national economies.

The world's largest banana exporter, Ecuador, has always had a different relationship with the TNCs, passed laws to prevent foreign companies owning plantations and sought to intervene in the industry to secure markets independently in Eastern Europe and Japan. The industry was controlled by local farmers who had developed earlier experience with exporting agricultural commodities such as pineapples. Finally, areas of land planted to bananas for export are much greater in Ecuador than in the other Latin American exporters. TNCs often purchased bananas from Ecuadorian producers to meet any difficulties in supplying particular markets from their dependent producers. Yet the TNC's operations in the Philippines had virtually squeezed Ecuadorian bananas out of the Japanese market by 1980.