Financial Times
January 16, 2001
By Andrew Bounds

The new year has brought the best present in eight years to the workers of the Atlantic Banana Co-operative in Panama: a wages rise as they paid off the last penny of their start-up bank loan.

The 378 partners have repaid the Dollars 7.2m they needed to buy out a failing state company in 1992. But the next year will be tough. Chiquita, the US-based multinational that exports the co-op's fruit, has just dropped its price 8 per cent from Dollars 3.11 to Dollars 2.86 for a 42lb (19kg) box.

"We can survive at that level, but we cannot prosper," said Bolivar Aguirre, the co-op's president.

The workers are not blaming Chiquita, however, but the European Union.

Brussels has proposed continuing restrictions on the access of Latin American bananas until at least 2006 in favour of former European colonies in Asia, the Pacific and the Caribbean.

By abolishing quotas and calling for a "first come, first served" system of market access the EU has also made it harder for producers to plan long-term.

Latin American banana production -- concentrated in Central America, Colombia, Venezuela and Ecuador -- has traditionally been dominated by three US giants, Chiquita, Dole and Del Monte.

They have reacted to the European decision by reducing costs in their own operations and the price at which they buy from independent producers.

"There are no clear rules of the game. They change all the time," said Ricardo Pinzon, president of the independent producers' association in Panama, which sells almost all its fruit to Europe. "We expect to sell 1m boxes next year, against 1.2m this year," said Mr Aguirre.

Dole has shifted some buying from Costa Rica, where workers earn reasonable wages and enjoy social benefits, to Ecuador, where wages are typically Dollars 2 a day and there are few labour rights. Production costs are around half those in Costa Rica and Panama.

Chiquita has so far refused to do the same. "We do not wish to join the race to the bottom," said David McLaughlin, an environmental director at Chiquita. "But we do have to reduce costs."

"We have to get down from Dollars 5.20 to below Dollars 5 a box to compete with Ecuador," said Cameron Forsyth, general manager of the Puerto Armuelles Fruit Company, Chiquita's subsidiary on Panama's Pacific coast.

The division suffered a damaging strike in 1998 from which it has yet to recover. Productivity and worker morale has slumped and more than 25 per cent of fruit is damaged during harvest and packing.

Unions are refusing work practice changes that would reduce the figure to the industry standard of less than 10 per cent, and the company is losing money.

Last year it closed most of its main administration building, a banana box manufacturer and the railway it used to carry fruit from field to dock. It switched shipping from the Pacific to the Atlantic coast, taking away almost all of Puerto Armuelles' livelihood.

The company pumps Dollars 180m a year into the local economy and employs 7,000 people directly. It is seeking to cut 500 more jobs.

The story is the same across the region. Most banana plantations are in remote areas and the companies often provide housing, healthcare, schools and even electricity for the whole community.

Some producers are looking to reduce their dependency on the US multinationals.

Costa Rica's producers' association is negotiating with Fyffes of the UK and its congress has passed a law that would create a Costa Rican banana, stressing its environmentally and socially responsible production relative to other Latin American countries.

The Central American Fruit Company has already created the Panabana, which it sells directly to Europe but after several years of success, the weakness of the euro has hit profits. It has seen the price it receives drop from Dollars 6.30 to Dollars 5 over the year.