Latinnews Archive
Latin American Weekly Report - 12 April 1974
Central America: unzip a banana agreement
The 'banana republics' have shown an impressive degree of cohesion in their attempts to raise the selling price of their crop and to form a producers' association, but the transnational companies still have a number of cards to play.
The decision of Ecuador to backpedal on its early enthusiasm for the embryonic Union de Paises Exportadores de Banano (UPEB), coupled with the unremitting hostility of Standard Fruit of Canada, has threatened to torpedo a most promising Central American initiative, frequently headlined last month as 'the revolt of the banana republics'. These countries -- principally Panama, Costa Rica and Hondoras -- have all claimed credit for the idea of creating a banana producers' and exporters' association, dreamt up largely as a result of the recent successes scored by OPEC -- the oil exporter' organization. Chief responsibility lies with Jose Figueres of Costa Rica in the waning months of his presidency, and with General Omar Torrijos of Panama.
Good progress was made at a ministerial conference at the beginning of March in Panama, attended by the seven exporting countries of Central and South America that are responsible for nearly 250 of the 350 million crates of bananas exported globally each year -- Ecuador (72 million crates), Costa Rica (53 million), Honduras (45 million), Panama (32 million), Guatemala (12 million), Colombia (10 million), and Nicaragua (2 million). (These are the figures available for 1972. There are 40.8 lbs in a crate, and bananas have been selling in the United States at 16 cents a pound.)
The structure of the banana industry in Central America has changed considerably since the days when the republics were the unique preserve of the United Fruit Company, which has now turned into United Brands of Boston. Fyffes is its British subsidiary, and Chiquita Brands of Canada the controller of its Central American interests. United Brands now disputes the field with its offspring, Del Monte, which it was forced to procreate as a result of anti-trust actions in the 1930's, and with the Standard Fruit and Steamship Corporation of Canada, which itself is a subsidiary of Castle and Cook of Hawaii. The existence of more companies in the banana field has meant more competition, with notable benefit to the consumer (the price of bananas has not risen for 20 years) but little to the producer -- in many cases a relatively small figure who sells his harvest to one of the big exporting companies, and who accounts for one third of production in Panama, and an even higher percentage in Costa Rica and Honduras. These small independent producers have been trying to get a price increase to offset the steep rise in their costs, notably of fertilizer, insecticides and packaging.
Even before the Panama meeting Fernando Manfredo, the Panamanian minsiter of trade and industry, and Claudio alpizar, the Costa Rican minister of finance, had taken soundings in Quito to see if Ecuadorean support would be forthcoming for a scheme to raise the miserably low price, to break the transnational control of the market, and to protect their natural resources. Having secured Ecuadorean interest and participation, the Central American organizers of the Panama meeting then discussed the formation of UPEB. It was agreed that its principal objective should be to secure remunerative export prices and to coordinate production and export policies. The first concrete proposal was the imposition of an export tax of one dollar a crate. From the very beginning the negotiators from Central America realized that they might have trouble with Ecuador, which for various reasons -- including the fact that nearly a third of its export market is across the Pacific in Japan -- would have to be treated somewhat differently. But as the biggest exporter, Ecuador could hardly be left out. (There are other significant banana exporting countries, but they have exclusive contracts with Britain, France and Spain.) The exception agreed on in Panama was that Ecuador's existing 21 cents a crate export tax would be raised to 40 cents. But Ecuador then announced that it would compensate its exporters to the value of 50 per cent of the tax -- bringing it down to 20 cents, or one cent less than had been paid before.
If the news from Ecuador was discouraging, the reaction of at least one of the major companies gave cause for hope. The head of the Latin American operations of Del Monte, Jack Loeb, let it be known during the Panama meeting that his company thought the existing prices was too low. It looked 'with sympathy and understanding' on the efforts of the producer countries to improve the situation. Asked by Fernando Manfredo whether it was the competition between Standard Fruit and United Brands that was holding the price down, Loeb agreed, and pointed out that Del Monte had also been a victim of this competition. Loeb requested that supply should be rationalized to stimulate demand, and urged that the putative UPEB should be endowed with 'strength and authority'.
Uncertain as to the viability of the Panama agreement -- and alarmed by the problems with Ecuador -- Torrijos, Figueres and President Oswaldo Lopez Arellano of Honduras got together in Tegucigalpa on 14 March to discuss the possibility of 'going it alone'. Immediately a rumour spread of a 'new progressive axis' in Central America which, though objectively true, did not help its cause. General Anastasio Somoza of Nicaragua, already worried by what he calls the 'Communist' land reform in Hondoras (see Vol. VIII, No. 10), joined the other Presidents in Tegucigalpa and told them bluntly that Nicaragua, with its existing low production, would reserve the right to increase it regardless of any UPEB agreements. At the same time a powerful incentive to unity came from an unexpected source. Alone of the major companies, Standard Fruit chose this moment to spell out its opposition to the Panama agreement, and the immediate reaction of the exporting countries was to close ranks. Standard Fruit has replaced United Brands as the largest operator in Honduras and Costa Rica, and has recently gone into Nicaragua on a big scale. It also has considerable interests in Ecuador -- but none in Panama. Using aggressive production and marketing techniques, it has cut heavily into the United States market of United Brands. It appears to have felt that the proposed export tax, involving a rise in the retail price, would affect its competitive position most adversely.
Donald Kirchoff, president of Standard Fruit, assisted by Charles Wayte, general manager, began travelling through Central America, backing up the manager of their Honduras subsidiary, Michael Rotullo, who said the price increase would mean the end of the banana industry in Central America. The man most infuriated by this development was Jose Figueres, and there has been a powerful rumour that President Carlos Andres Perez of Venezuela offered to provide him with the necessary funds to expropriate Standard Fruit lock, stock and barrel. This would certainly explain why the representative of Standard Fruit's operations in Costa Rica came out with a swift declaration after the Tegucigalpa meeting (at which Figueres's annoyance with Standard was well attested) restating the company's adhesion to the 'laws and government' of Costa Rica, while at the same time Wayte was declaring in California that he would not pay a cent of the dollar tax agreed on by UPEB. Foiled in Costa Rica, Standard then threatened to cut off production in Honduras -- regarding it as the weakest link. Indeed General Lopez was faced in late March with a lorry owners' strike, a combative peasantry worried by apparent sloth and backsliding on the issue of land reform, and the possibility of a clash with the banana companies -- the one sector he and his advisers had been desperately trying not to antagonize. This caused grave concern in Panama, where the lorry owners' union sent a message to their Honduran colleagues urging them 'not to play the game of the imperialists'. The possibility of an anti-Lopez coup seemed for a while a real threat.
At the same time Standard Fruit was turning its attention to Ecuador. It actually succeeded in securing the withdrawal of the Quito delegate from the Bogota conference on 28 March designed to formalize the creation of UPEB. This withdrawal reportedly on the instructions of President Guillermo Rodriguez himself, was the first major nail in UPEB's coffin. A flying visit to Quito by President Figueres does not seem to have caused the Ecuadorean President to change his mind. This was followed rapidly by the announcement on 31 March by Rotullo that Standard Fruit was going ahead with its threatened production and export cutback in Honduras. He said there would be a wage cut both for plantation and white collar workers, and announced that the company was willing to continue with profitable operations. At the end of last week the Chiriqui Land Company, the subsidiary in Panama of the rival United Brands, followed suit, announcing an indefinite suspension of production and export.
With the companies presenting a united front against the divided ranks of the producer countries, UPEB's future looks gloomy. Standard Fruit argues that an increase in price would ruin the industry. But Abraham Bennaton Ramos, Honduran economy minister, maintained that 'the increase is based on an exhaustive and conscientious study, and we believe that the additional sum will not cause an upset in international markets'. A United States survey has suggested that consumers there do not even know the price of bananas. It seems likely, therefore, that the companies are not really objecting to the immediate demands put forward. What they dislike is the erosion of their power, carefully built up and husbanded over decades, and now for the first time being seriously challenged.
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