The Situation Of Banana Production In Nicaragua
THE WITHDRAWAL OF STANDARD. “There is a song that says, ‘A course in extreme misery made me a doctor’. Misery has made us all technicians in our work. Production continues. Our morale remains high”. Luis, local union leader on Nicaragua’s banana plantations, went on to tell IHCA how production is moving forward despite Standard Fruit’s recent withdrawal from Nicaragua.
One month after Standard pulled out, Nicaragua is now exporting bananas directly to the Pacific coast of the United States. On the plantations, workers, volunteers and recently trained technicians are investing extra time and care into ensuring a high quality export crop. In recent weeks, production on the plantations has taken on the characteristic of a campaign which, like the literacy or health campaigns, fosters a sense of unity, hard work and pride.
Standard Pulls Out from NicaraguaOn October 25, Marcos Castillo, president of Nicaragua’s National Banana company, received a call from California. Standard Fruit was calling to say they were pulling out from Nicaragua, thereby breaking the agreement they had signed with the Nicaraguan government on January 11, 1981.
The San Francisco agreement established a five-year transition period in which Standard would hand over company assets and the administration of the plantations to EMBANOC, the recently created national Nicaraguan banana company. (EMBANOC forms part of the People’s Property Area (APP) and is administered by the Ministry of Agriculture and Agrarian Reform).
In return, the government recognized the debt that the associated producers had with Standard and the investments that Standard had made. Standard agreed to pay US$ 4.30 per box which was considered a good price at that time. Nicaragua would pay Standard 50 cents per box in payments on the debt and Standard’s investment. (At that time the debt was approximately US$ 7 million. To date, the government has paid approximately US$ 4 million on this debt). Standard committed itself to commercializing Nicaragua’s fruit for a five-year period. There would also be a transfer of technology from Standard to EMBANOC.
Standard broke this agreement without any prior warning or discussion with the Nicaraguan government. In the middle of the harvest, Nicaragua was left without a way to commercialize the fruit. Three thousand workers and their more than 20,000 dependents risked losing their means of survival. The majority of Standard’s technicians left the country overnight.
While Standard cited economic losses as its reason for shutting down its operations in Nicaragua, the Nicaraguan government has responded that Standard’s decision to pull out at this moment also has a political character. Government spokespersons point to the fact that Standard continues to operate in countries where the banana is of a lesser quality and losses are greater.
Nicaragua Exports Directly to the U.S.Representatives from the Sandinista Workers Central, EMBANOC, INRA and the Ministry of Foreign Commerce met to look for solutions. The local unions were informed immediately of the situation. On October 28, the Minister of Agriculture, Jaime Wheelock, visited the plantations to talk with the workers and inform them that production would continue at its normal rate; that civil defense measures would be strengthened to protect against sabotage; and that a portion of the fruit would be commercialized domestically at regulated prices. Foreign Commerce Minister, Alejandro Martínez, traveled to the United States to negotiate the commercialization of the fruit.
Jorge, agricultural worker on the plantation El Lisa, explained to IHCA: “The first shipment had to be really good. We knew that both the new company and the quality of our fruit would be reflected there. It was a joint effort; the banana workers, young people from the Sandinista Youth Association, the new technicians and supervisor, and the government. We had to give our all. It was the food for our children, our salary, our income.”
On November 9, Nicaragua began to export directly, with the shipment of 83,000 boxes of fruit, to the U.S Pacific Coast. Seventeen companies bought the fruit, qualifying it as excellent. In statements to the local press, Nicaragua’s Minister of Agriculture stated that the three large banana companies, United Fruit, Standard Fruit and Del Monte tried to block Nicaragua’s entrance by flooding the market. At the same time that Nicaragua’s fruit arrived United Fruit arrived with 235,000 boxes from Costa Rica, Panama and Ecuador, Del Monte with 170,000 boxes from Ecuador and Standard with 190,000 boxes from Ecuador. Yet while Nicaragua sold its product for an average of five dollars a box, on the third day the multinationals were selling fruit for less than three dollars.
On November 22 and 23, EMBANOC began to load the second shipment, this time aboard the Reefer Express Lines. Nicaragua has signed a one-year contract with this firm which will enable the country to ship an average of 120,000 boxes per week.
Panama’s Vice-President Accuses Multinationals of Conducting War of Prices Against Central America.
United Fruit, Standard Fruit and Del Monte have all reported heavy losses in the last few months due to a saturation of the market. In its last quarterly report, Standard recorded U.S. $63 million in losses, with an estimated 40 to 50% of this in banana production. Informed sources state that Standard now plans to get back to a profitable operation, which will imply a cut back in operations.
Daniel Slutzky, head of the OAS advisors to MID-INRA and historian in the role of the banana multinationals in Central America, states that the current lowering of prices appears to be cyclical. Every year between June and November, prices for bananas drop as apples and pears enter the U.S. market. He adds that the multinationals made significant profits in the first half of the year, when the price of bananas was at 15 dollars a box. Standard is now attempting to reduce the supply so that prices will rise more quickly.
In the ninth meeting of banana-exporting countries last week, Panama’s Vice-President Jorge Illueca accused the banana multinationals of conducting a war of prices, “dumping” and economic pressures against Central America. United Fruit has threatened to reduce operations in Panama. Panama has notified the company that it will not permit it to take a unilateral action of this nature. Mr. Illueca qualified Standard’s decision to pull out from Nicaragua as aggressive, irrational and unjust.
Implications of Standard’s Pullout from NicaraguaBanana production in Nicaragua is important insofar as it provides employment and generates foreign exchange. Located in Chinandega, the banana plantations represent a source of income for approximately 20% of the population in that province. Bananas are one of the very few agricultural crops that are harvested throughout the year and provide steady employment. The pullout of Standard comes at a time when Chinandega is hit by unemployment due to the drought and May rains. Cotton production has been reduced from 180,000 to 112,000 manzanas, and the crops which have replaced cotton do not provide the same amount of employment.
Bananas produce considerable foreign exchange per acre. In relation to cotton, bananas generate 20% of the foreign exchange while using 3% of the area. INRA estimates that banana production could bring in U.S. $24 million a year now that Nicaragua is exporting directly.
Standard has stated that the international prices received for bananas do not cover the cost of production and commercialization. Francisco Lacayo, regional director of INRA in Chinandega, stated that it is difficult to calculate what production costs will be, since supplies and equipment were previously bought through Standard.
Standard’s abrupt pullout from Nicaragua cuts short the transfer of technology. It also means that Nicaragua will no longer receive a guaranteed price per box of bananas and will have to compete directly with the multinational in the U.S. market. EMBANOC functionaries feel confident that they can take over the administration of the farms. Nicaragua’s success in exporting bananas directly will depend both on the quality of its fruit and what has been termed the “banana war”. Standard Fruit has already announced its intentions to push Nicaragua out of the market.
The Ministries of Agriculture and Foreign Commerce are now studying various possibilities in response to the situation. These include: diversifying the market to include Europe and Japan, limiting plantain imports to encourage domestic banana consumption, industrializing processing, or substituting bananas for other crops. Tobacco is now being considered in that it provides roughly the same amount of employment and foreign exchange.
History of the Banana Companies in NicaraguaThe first banana enclaves in Central America were established in the 1880s and represented the first major U.S. agricultural investment in the region. By 1914, the U.S. had 60% of direct foreign investment in Central America, mainly in the banana enclaves of Honduras, Costa Rica, Guatemala and Panama.
These four countries were incorporated into the international market through the production of bananas. The multinational banana companies had significant influence on the economic, political and social formations that were developed in these countries.
In Nicaragua, the banana companies had less influence. Standard Fruit had operations on the Atlantic Coast from 1922 to 1940, yet these were much less extensive than those in the other Central American countries. In 1930 Honduras exported almost 30 million banana stalks, while Nicaragua exported approximately 3 million.
In the 1960’s the banana companies in Central America expanded into banking, infrastructure and manufacturing. Yet in Nicaragua, Standard’s investments were limited to packaging plants, cable ways, irrigation systems, roads, housing and other necessary infrastructure. The only extension outside of bananas was in plastics and box-making. Standard also had some stock in the local cooking-oil company.
IHCA interviewed Mr. Tobic, Standard’s first general manager in Nicaragua, and now Vice-President of EMBANOC. Mr. Tobic recalls the arrival of United and Standard Fruit to Nicaragua:
“United came here in 1960 and planted on over 20 individual farms. In the meantime, the banana industry world-wide was changing with the introduction of the carton by Standard Company in Honduras. That more or less revolutionized the industry. United had to move to cartons and change the variety. Due to the poor soils chosen, an outdated variety of fruit, wind damage and poor irrigation, the final product was so small, they just said, ‘Let’s forget it’, and in 1965, they said ‘away we go!
“After United left, INFONAC then attempted to continue production, but without success. In 1969, INFONAC, with a sizable accumulation of losses, approached Standard. Standard undertook a study involving agricultural suitability, infrastructure, roads, available transportation and electricity, manpower and the physical and political climate.
“In 1970, they decided to go ahead and came to Nicaragua on April 1, 1970. They founded partnerships comprised in each case of the land owner who had 80% of the stock and Standard who had 20%. The financing for all investment was negotiated by Standard with the Bank of America and Standard gave their guarantee for the loan. In return, Standard received administrative rights on the plantations until all debts were paid off.”
The Associated Producers ArrangementIn an interview with IHCA, Francisco Lacayo explained Standard’s relationship with the associated producers partnership. Standard divided its stock in the partnership producer partnership. Standard divided its stock in the partnership of each plantation between itself with 15% and a Panamanian doctor with 5%. Voting powers were divided among partners equally, rather than according to shares. Thus while Standard held only 20% of the stock, it controlled the partnership.
The partnership itself was largely fictional. It was a legal mechanism which enabled Standard to control production according to its interests, while appearing to operate through national producers.
Standard had administrative rights, provided technical assistance, negotiated and guaranteed the loan. Standard set the labor contacts and agreements. They sold seeds, fertilizers, pesticides, chemicals, farm machinery, plastic wrapping and cardboard boxes to the partnership, which they in turn controlled.
According to Lacayo, the partnership was designed so that it could never become a profitable business. Standard paid the partnership a fixed price per box with which the partnership had to cover labor costs and other expenses. A logical priority for the partnership would be to export the greatest amount of high quality fruit possible.
Yet Standard was interested in bringing fruit to the U.S. market from various countries in accord with the demand so as to maintain its profit margins. Its priority was to sell the fruit from plantations which it owned directly in other countries. The local landowner received income from the plantations primarily through the rent paid by Standard and through the commercialization of the off-quality fruit within Nicaragua. The partnership granted the owner the income earned from the marketing of the fruit within Nicaragua as a concession.
The associated producers arrangement was designed in such a way so that both Standard and the local landowner could make a profit, at the same time that the partnership accumulated losses and went further into debt.
Immediately following Standard’s pullout from Nicaragua, EMBANOC and the landowners reached an agreement which granted EMBANOC administrative rights. In addition, the income from the domestic marketing of the fruit would go to the partnership to be used in paying off debts held with the National Financial System.
According to Lacayo, relations between EMBANOC and the landowners will not be further defined until the market for Nicaragua’s bananas becomes more stable. The immediate priority for EMBANOC and the landowners alike is to secure that market.
A Visit to the PlantationsFor Standard and the landowners, the agricultural laborer signified a minor percentage of production costs. Since Standard has left, the workers have become the protagonists in the struggle to ensure a high quality fruit that will have success in the international market.
IHCA visited the banana plantations on November 21 and 22 as the workers were preparing for the second shipping. In each farm, we heard versions of the same story. In recent weeks, production levels have increased and the quality of the fruit has improved.
The banana can easily be damaged en route from the tree to the packing plant. Each tree produces one stalk, weighing approximately 70 pounds. The stalk is cut from the tree with machete and placed on the shoulder of a man who runs it over to the trolley. When there are 25 stalks on the trolley, a man with a rope tied round his waist tugs along the line of bananas until he reaches the selection point. There the fruit is measured, weighed, trimmed and cut from the branch. Women, lined up in front of huge bins of water, wash, select and pack the fruit for shipping. Any mishandling along the way is reflected in the quality of the fruit. In the plantation El Paraíso, the farm workers explained the precautions they are now taking to protect the fruit.
As they showed us the selection process, a group of young people pulled up in a truck and for a moment all attention was focused on them. Salvador Corazón told us:
“We were in class today when we heard that students were needed to help out on the banana plantations. The banana generates foreign exchange. Its not right that we remain in our homes while the country faces this situation. We want production to go forward.”
There is an easing of tensions since Standard’s supervisors have left. Everyone comments on how Standard rejected the fruit for whatever reason, applying arbitrary criteria. EMBANOC’S president Marcos Castillo, explains that in recent months Standard applied stricter selection criteria, even though they had committed themselves to buying all fruit which met export criteria. In the last months, Standard was shipping an average of 40,000 boxes a week, whereas the Nicaraguan government now estimates that Nicaragua will export between 120,000 and 130,000 boxes a week.
The workers were the ones who felt most immediately Standard’s rejection of the fruit. Ernesto, local union leader, explains:
“Standard was boycotting the production. What did Standard’s supervisors and technicians do? Live off the workers. They threw away half the crop because it was no good, they said. One day we had a talk with one of them. Listen brother, I said, you’re Nicaraguan just like us. Why do you act that way? I have to follow Standard’s orders, he said. What they were doing was destabilizing the country’s economy, but now we’re the ones that are controlling the situation.”
Living Conditions on the PlantationsAt the entrance to El Paraiso, there is a three-story castle. Before the front gate, 15 barefoot children, some with bloated stomachs, are playing in the dust. The owner leaves his castle and drives out in his car. A young girl cups her hand around her younger sister’s mouth and says SHHH until the car passes by.
Across the way, there are stables with tin siding and shelves of rotting wood. The shelves are divided into small spaces where each family lives. On some plantations, workers live in long narrow sheds, resembling chicken coops.
IHCA spoke with a group of union leaders from the plantations while they were meeting in the town of Chinandega. One of them, Ricardo summed up their most pressing demands saying:
“We have priorities: food, housing and medical attention. You cannot ask for more output from someone who is undernourished and has no medical attention. You’ll do him in. Insofar as our demands are being met, we have to increase production and insofar as the rhythm of production intensifies, we have to demand more social improvements.”
He went on to say that both medical attention and the diet have improved recently.
For those who choose to eat on the plantations, the diet now includes meat, vegetables, fruit and dairy products, in addition to rice and beans. While the workers pay for their meals, EMBANOC subsidizes 50% of the costs. EMBANOC covers medical costs for the worker, spouse and all children under six. EMBANOC has begun to build new housing for the workers, though on many plantations the old housing still remains.
EMBANOC has a Human Resources department which includes organization, training and labor safety. Human Resources is responsible for studying the working and living situations and defining priorities in coordination with the unions and the Ministry of Labor. The director of this department, Marcelo, spends a large part of his time on the plantations. He says that some of the most immediate needs are education in safety precautions, masks and gloves to protect against the toxic effect of pesticides, and boots for the women who wash the fruit. The women stand barefoot in water all day long and suffer from skin diseases.
The banana plantations today are a poignant juxtaposition of yesterday’s scars and hints of a healthier tomorrow.
ConclusionThere is nothing novel in the decision of a multinational to shut down operations in a country, based on profit considerations. Multinationals are not known to be accountable to the countries or the people with whom they work.
Yet in the case of Standard, the economic factors do not add up to the decision to pull out abruptly and completely from Nicaragua. Standard has stated that it withdrew from Nicaragua due to overall losses in its banana operations world wide. Yet Standard continues to operate in Costa Rica, where the workers went on strike for almost two months, and in Honduras and Ecuador, where Standard is also suffering substantial losses.
Standard’s decision to withdraw from Nicaragua at this moment while remaining in the other countries is congruent with the Reagan Administration’s policy, that is, to stabilize Costa Rica, strengthen Honduras, and destabilize Nicaragua.
Standard’s decision to break its contract with Nicaragua cannot be interpreted in isolation from the diplomatic, military and economic pressures which are intensifying against Nicaragua at this moment. This December, Nicaragua will have to respond to increasing attacks from anti-Sandinista forces trained and financed by the U.S., the threat of war with Honduras, and the diplomatic moves against Nicaragua which will accompany Reagan’s visit to Central America. In December, Nicaragua will also have to pay 40 million dollars in foreign debt payments, which represents a significant strain on the economy. The Reagan Administration has pressured both private banks and international financial institutions to hold back loans to Nicaragua.
The shutdown of Standard’s operations could have signified unemployment and corresponding political discontent, tension between the government and land owners, and losses in foreign exchange.
Yet while the situation will remain serious until Nicaragua secures a market, Standard’s withdrawal has not resulted in unemployment. An agreement with the landowners has been reached in the context of the mixed economy, and Nicaragua is bringing in foreign exchange by exporting the fruit directly.
Standard’s withdrawal is one more pressure against Nicaragua which takes on significance as it interacts with the other multiple attacks that Nicaragua is suffering. The nature of both the attacks and Nicaragua’s response to these will determine in part the characteristics of the new Nicaragua.