Guatemala and the Banana Industry

The Guatemalan economy is primarily based on family and corporate agriculture, which accounts for 25% of GDP, employs about 60% of the labor force, and supplies two-thirds of exports.  Thus it becomes apparent that the production of fruits and vegetables is an important industry on which many Guatemalan people depend for survival.  This paper will attempt to use the Banana industry as a case example of the agricultural industry in the country of Guatemala.  More specifically the paper will focus on developing a strategy that can possible further economic development within the nation and better the standard of living of Guatemalais Agricultural workers.  Keep in mind that we are focusing on a particular industry in order to make this project more manageable and that the results of this project can be applied to the other industries with the Guatemalan agriculture as well.

Currently large companies foreign to Guatemala dominate the banana industry in Guatemala; one such company is the US owned Standard Fruit.  In the late 1970is huge companies like Standard fruit turned many independent producers of Bananas into associated producers.  This meant that Standard fruit negotiated long term renewable contracts with producers of bananas in which Standard Fruit committed itself to supply the producers with capital and technology needed to grow the bananas.  In return the producers committed themselves to only sell their bananas to standard fruit and turned over all technical control to the huge Export Company.  The technological advancement made possible through such arrangements had huge effects on the industry.  Such technology allowed levels of production to remain constant although the surface of the area planted dropped by about 70%.  Such changes in the production of bananas also led to a large decrease in the amount of workers needed to produce the crops.  The number of workers has gone down by about approximately 45%.  Another result of such change in the industry was the termination of small and medium producers and the growing domination of transnational companies.

Although the profits of such huge industries have placed Guatemala in a better place according to the global market, such control of the industry has led to a reduction in the social and regional disbursement of the profits generated.  The reduction of employees has caused a lower potential retention of profit on national levels.  There has been an increase in revenue for exporters and producers while the wages of the workers have been kept considerably low.  Currently in Guatemala the average agricultural worker makes about $78.00 a month.  The fact that the revenue of these foreign companies is not reinvested into Guatemala and is instead invested abroad also causes problems for the Guatemalan economy.

This foreign domination and exceeded profits of national industries has been possible in countries like Guatemala for several reasons.  The instability of economic, social, and political situations in Guatemala has allowed transnational business to negotiate contracts extremely favorable to foreign interest.  Although the government seems to sustain losses from these types of negotiations with foreign businesses, the people who truly see the losses are the agricultural workers.  The vast majority of Guatemalais agricultural workers are indigenous people without any type of organized representation.  The fact that the supply of agricultural workers is greater than the demand makes workers expendable and very cheap to hire in nations such as Guatemala.  Such circumstances keep agricultural workers anxious to work even in the presence of deplorable working conditions.  In Guatemala only about 60% of the workers have stable jobs while the other 40% is forced to move throughout the production zones in search of work.  There is rarely any labor legislation that is followed by employers.  Thus most employees do not have the right to a minimum wage, overtime pay, retirement, permanent work, or social security benefits.  In addition various methods have been employed by the producers of bananas in order to prevent employee uprisings.  Such methods include the immediate firing of employees who express unsatisfaction, the presence of armed patrols, frequent use of violence, and the bribing of government officials.  More than 90% of the employees have no access to unions or legal representation in the face of their employer.  Thus,

when most of the workers reach the age of 40 they are usually fired from their job with nothing that can be done about it.

It is hard to reconcile the conditions under which many workers find themselves with the fact that Guatemala exports over 428,976,759.00 kg of bananas a year.  If we were to just consider the US to whom Guatemala exports about 70% of its bananas, and also consider that the average US cost of bananas is about $00.50/lbs, this would mean that the American people alone spend about $330,312,104.40 a year on bananas.  Yet with current prices producers get paid an average of $5.20/ 40 lbs carton of bananas, that is approximately an average of $85,881,147.15 a year.  If all the workers involved in the production of bananas only see about 65% percent of what the producers see, they would see about $57,774,589.9 in one whole year.  This means that between the producer, the exporter, the retailer, and of course trade tariffs the workers stands to lose an average of about $275,537,514.5 a year.

Thus I have proposed that if workers of the banana industry in Guatemala formed a coalition and petitioned for loan in order to raise the initial capital needed to produce bananas, they would be able to produce the bananas on their own without having to work for a producer.  This would also enable such a group to seek the opportunity of direct exportation to foreign distributors.  In doing this the workers would not only make the profit that covered their usual pay, but would also make the profit that was usually made by the producer and exporter as well.  A major problem in attempting such a project would be that a group such as the proposed one would suffer from great competition by the large established exportation companies such as United Fruit.  Yet because the group of banana growers would not be working for a producer or export through foreign company, it would even be able to lower, price on bananas.  This would not only lead to increased economic benefits for the agricultural workers but would also lead to better working conditions.  The excess money made by these workers would then be reinvested into their own country and could very possibly help fund health care programs and labor organizations to ensure the rights of workers.  In order to also increase competitiveness with big companies like standard fruit) A group of individual producers and exporters could advertise that the fruit that their organization sells was produced under fair labor and human rights conditions.  A good labeling and marketing plan of this fruit would be sure to raise sympathy from many people throughout the nations to which the group was exporting its bananas.  In fact this is quite possible, it has been done in the United States by the United Farm Workers (UFW).  During the agricultural labor movement in the US labels were put on the fruit that had been grown by union workers under fair conditions.  The farm workers raised sympathy for their cause throughout the United States, which lead to a boycotting of fruit that was produced under unfair labor practices.  The employment of such a label by a group in Guatemala might not be enough to cause boycotts but it seems as though it would at least get people to buy the groups bananas.

Although it is probably not feasible the best proposition would be a complete stop of all employees that worked for foreign producers under unfair treatment, Without workers the production companies would be unable to produce and the exporting companies would be unable to export.  Thus without production both producers and exporters would be forced out of the business leaving the market open to organizations of workers such as the one proposed.  Realistically however, such an action would probably not work.  People would be too dependent on their job in order to survive and in the even that such a massive strike did happen the only result would probably be the massacre of many innocent people.

A plan that financed the purchase of land for agricultural workers to produce their own bananas would work in helping Guatemalan workers establish better working, economic, and humanitarian conditions.  However such a plan would only work under the assumptions that someone would care enough about the current conditions of agricultural workers in nations like Guatemala to provide the capital required carrying out such a plan.  A second assumption would be that the Guatemalan government would care enough itself about these indigenous workers that it would risk negative relations with huge US business in order to help its agricultural workers.  Lastly we are assuming that people within the United States

would care enough about the situation in Guatemala to differentiate between labels, and support the actions of such an organization.

If such a plan were possible through the export of products such as bananas and other foodstuffs, Latin American countries could slowly begin a process that would further its economic development.  Such programs would also contribute to narrow the huge spaces in the social and economic inequalities of many people in countries like Guatemala.

The next section focuses on how a Latin American country that is based on an export economy could pursue other economic policies that would further develop its nation.

Economic Development in Latin America Through An Adequate Exporting Strategy and Greater Industrialization

We are going to start out by talking about the current export economy of Guatemala as a whole, how it can be made strategically more productive, and how the country can pursue greater levels of industrialization in order to complement t6o its export economy.  According to economists in order to pursue higher rates of development Latin America is in need of a new trade strategy.

Since the 1970's there has been a decrease in the growth of world trade and an increase in protectionism policies by industrial countries, yet it is believed by many that there is still room for Latin American export expansion in order to increase competitiveness in the global market.  The goal here is to increase export rates through higher productivity levels and the same time earn the foreign trade required to permit a parallel increase in imports.  Increased imports are needed in order to help develop its industrial capabilities of a country.  Still for exports to grow, as a whole there needs to be a strong differential productivity increase as well as a reallocation of resources.  In other words consumption by the rest of the world from Latin Americas agricultural sector had decreased and in order to compete in the global market Latin America needs other products to offer its trading partners.  Thus the reallocation of its resources should be directed in national industry for a Latin American country.  Countries will need to continue to economize on imports, that is substitute on imports efficiently and consequently not put all the pressures of development on its exporting capabilities. (Fishlow)

Another area that needs to be given attention in furthering development is import liberalization.  A freer flow of imports can provide a greater source of trade and investment.  Foreign investment in particular can play a significant role in the process of reducing trade barriers and can sometimes pick up the tariffs normally put on imports.  Foreign investment permits a direct transmission of technology to secure added competitiveness, and also provides the foreign exchange needed to finance import liberalization.  Although import liberalization is a

necessary to promote greater trade, Latin American countries must remember to not advance trade at the expense of national producers.  That is that no contracts should be made where the nation guarantees closed domestic markets to its own producers.  Non-discriminatory and stable rules for foreign investment should be seen as an integral part of import liberalization.  Such investment will produce efficient import substitution and open greater future export possibilities.  Latin America requires an increase in imports to further develop its productive potential, yet exports must have an integral place in forming an industrialization strategy.

The last area that Latin American countries need to expand is regional integration.  Although the process of regional integration had its origins some thirty years the progress has been disappointing.  Despite efforts at the highest political levels, implementation has been impeded by the wide differences among the Latin American countries and the difficulty of assuring an equal distribution of the benefits.  Hence, for the most industrialized countries, the smaller countries constitute a very attractive preferential market.  The problem is that there is no specialization that enables the smaller economies to produce industrial products sufficiently competitive to replace the imports of their larger trading partners.  Instead their products can only compete against the alternative of domestic production.  Thus, regional exports fail to expand at a rapid rate because they cannot substitute for foreign exchange, but instead merely compete against internal industrial interests who have no intention of allowing competition.  Thus one must note that Latin American regional integration can lay a constructive, but still marginal part in spreading trade reform.

Bibliography

1.            Bidwell, Percy W. Economic Defense of Latin America World Peace Foundation, Boston 1941.

2.            Edwards, Sebastian.  "Trade and Industrial Policy Reform In Latin America" National Bureau of Economic Research, Cambridge 1994.

3.            Fishlow, Albert.  "Latin American Export Strategy In The 1990's" InterAmerican Development Bank, Washington D.C. 1989.

4.            Karlsson, Weine & Malaki, Akhil.  "Growth, Trade and Integration In Latin America" Stockholm University, Sweden 1996.

5.            Maldonado, Carlos L. Los cambios Recientes En El Subsistema Bananero Equatorian Y Sus Consequencias.  FLASCO, Quito 1988