Introduction

This history and present status of the banana market in Guatemala is marked by outside forces controlling internal activities. The rise of United Fruit, who later became Chiquita Brands, marked the level of influence that foreign corporations can have in small countries. Here, an attempt will be made to examine if there is a viable market for individual banana producers in Latin America, specifically Guatemala. Can individual producers succeed in the world banana market today? To understand the viability of this market, one must first examine the current status and history of Chiquita Brands in Guatemala. Chiquita represents a perfect model of a transnational corporation with influences outside of production. With the current discussion of the banana trade and European markets opening up to Latin American banana, there may be possibilities for sales in Europe. The World Trade Organization (WTO) may be forced to allow Latin American bananas into the European market, increasing the profit potential of small growers. When entering these new markets, world price structures must be investigated. Can Latin American banana producers charge a competitive price? This question may be answered here. The final concern for individual producers entering the global banana trade are labor practices in Guatemala. Exploitation has long been a common theme, especially with large corporations who pool labor from a vast area. Expendability of the worker is a common threat to the small producer. By including of all of these concerns into this plan, solutions for non-corporate, individual banana growers can be developed to export directly the US and European markets without help nor hindrance from large names such as Chiquita, Dole and Del Monte who control the world banana market today.

Whether it is a case of a notorious, corporate giant who exploited resources in Guatemala through it's power, or simply an American success story, Chiquita banana undeniably has dominated the world banana market in the twentieth century. Under several different names, it is an illustration of a somewhat checkered history. With companies such as Chiquita being extremely global and diversified, options for the individual banana farmer are limited. Every aspect of national life is controlled by foreign companies and governments, thus it may be virtually impossible even now to change policy when people are willing exact drastic measures to protect corporate profits. The history of United Fruit is a glaring example of the power of economics in world politics.

In the early years of the twentieth century, what later became Chiquita banana was known as the infamous United Fruit Company. Their reputation for dubious activities in the banana market began in 1899 with the merger of the Boston Fruit Company and other companies who produced and marketed Caribbean and Latin American bananas. Minor C. Keith, the principle founder of United Fruit, began as early as 1872 building railroads in Costa Rica. Somewhat later, in 1884, he contracted the Costa Rican government to fund their national debt and lay fifty more miles of railroad. In return Keith received 800,000 acres of virgin land, with full rights for the next 99 years and a tax exemption for the next twenty.1 This initiated Latin America's dependency on the United Fruit Company (UFCO). Keith thus became and integral component of the Costa Rican economy - both it's growth and decline.

When it was founded the capitalization of United Fruit was around $11 million dollars and in 1930, some 40 years later, the capitalization grew to a then astounding $230 million.2 Much of this rapid growth can be attributed to United Fruit consuming over twenty rival firms in becoming the largest employer in all of Central America. As they grew, so did the land given to them by Latin American governments anxious to reap benefits. At this point they expanded to new nations in the "banana belt" such as Guatemala. To transport these large quantities of bananas, United Fruit utilized the largest private shipping fleet, known as the Great White Fleet. In 1970 AMK Corporation merged with United Fruit to form United Brands as well as expand their overall production to not only bananas, but oils, fats, meats, plastics, animal feeds and telecommunications.3 While still maintaining vast holdings in Central America, United Brands began to utilize the Chiquita symbol for it's bananas. The result was the change in name to Chiquita Brands International in 1990 to capitalize on global name recognition, and quite possibly to leave behind a somewhat notorious and questionable past.

Because United Fruit was the largest employer in Central America and the largest company, they received much negative attention from the Latin American press who called the company "el polpus" or the octopus. They claimed that the tentacles of United Fruit reached into every aspect of national life. They were accused of labor exploitation, (which will be discussed in detail later) bribing officials and influencing sovereign governments. Later their image changed through Associate Producer programs, which gave the titles to much of their land to individual producers. They then offered this native producers credit, marketing and technological assistance while still retaining control as well as restricting competition.

United Fruit used many production methods to retain control of the industry, especially through obligating individual producers to sell only to them. By stifling competition in the industry, they were able to acquire bananas at the lowest possible price. They also turned independent producers (who owned their own land and operated independently) into associate producers. This allowed UFCO to control the land without direct ownership, and still regulate resource allocation within the region. Even though some of the producers were independent, they were offered five year contracts to sell only to UFCO, provided that the UFCO supplies all of the capital and technology to the farm, cutting their labor and production costs. Technology was then retained by Chiquita, which prevented the producers from starting independent businesses. Workers were the lowest point of the hierarchy, which had UFCO at the top, then the plantation owners (if not UFCO itself) and then the expendable worker. Technology leads to a lower demand for labor on the plantations, thus UFCO ensures an over-supply of labor by controlling the technology, increasing the expendability of the banana worker. This represents a serious problem for workers attempting to acquire their own land.

Another supporting example of UFCO intervention in the Guatemalan government occurred when the United States government, at the request of the UFCO, utilized the Central Intelligence Agency (CIA) to overthrow then socialist president Jacob Arbenz. This occurred in 1954 and marked the end of the 10 year democracy period in the stormy political history of Guatemala. Arbenz's mission at the time was to lessen social disparities in his country through land reform. This was to be accomplished by reallocating (nationalizing) privately held land holdings by foreign corporations like the UFCO. Naturally United Fruit was opposed to this, so they asked the United States government to help. In order to prevent another communist regime in the Western hemisphere, the Eisenhower administration authorized the CIA to remove the Arbenz led government by training a rebel force in Honduras. All this was done to implement U.S. corporate-friendly dictators. This simply illustrates the extent of the measures foreign governments take to protect their interests. In this case those interests were solely economical.

Current discussions have arisen in the media over the competitive nature of the banana market. The present dispute is over how open the European market is to Latin American bananas. In the past Europe has instituted favorable trade policies with former banana exporting colonies. The result has been a boom for Caribbean countries that produce bananas, low prices in Europe and loss of revenue for large Latin American banana producers such as Chiquita. It is estimated that Chiquita banana lost $1 billion in earnings since late 1992 due to the restrictive trade programs.4 Before 1992 the European Union (EU) had a restrictive import system which favored Caribbean bananas. At this particular time period Chiquita had a 40% share of the EU banana market.5 Chiquita's market share then decreased to 20% after new and supposedly fairer policies were adopted in the EU. For Caribbean banana producers, restrictive EU importation policies has been their economic savior. The Caribbean Banana Exporters Association (CBEA) says that the loss of European favoritism would be devastating to their banana-dependent economies. For the CBEA countries like Jamaica, Belize, the Dominican Republic, Grenada, St. Lucia and St. Vincent, access to the European markets is viewed as "matter of life and death."6

U.S. solutions to this problem are protectionist trade schemes which could lead to an all out trade war with the European Union. In response the U.S. has threatened to impose 100% duties on a wide range of imported European products such as French cheese and wine, German coffee-makers as well as Christmas products such as toys and electronics.7 The World Trade Organization (WTO) has told the EU repeatedly to change its policies without much success. They have found loopholes in the rulings and delayed action for long periods of time. Some believe though, that uni-lateral sanctions by the United States may violate WTO rules and thus could backfire. It may in fact be a breach of WTO rules, thus could provoke a retaliation from Europe on the importation of US goods.8 This amounts to a trade war. Judging by the seriousness of the US response, action is most likely to occur and thus expand the markets.

With the WTO poised to force a reopening of European markets to Latin American bananas, instant opportunity is created for the individual producer to export to Europe. Whether exporting occurs through their own means or through established distributors, there is definitely room for more Latin American bananas in the world market.

Another component of individual production and the banana market in Guatemala are pricing structures and world banana prices. Unless farmers can charge a competitive price, then they cannot sell their bananas anywhere.

The world banana market recently (within the past 4-5 years) has remained relatively stable with prices consistently at levels of fifty cents per pound (See Figure 1 in the Appendix).9 This recent stability of banana prices, even slight increases in 1998, is a promising sign for emerging banana sellers in Guatemala. One of the central components that is necessary for a business is stable prices from which to base a pricing scheme. Because of the large influence of Chiquita in Guatemala, farmers receive the equivalent of $5.20 per box of bananas.10 In order to breakeven under established standards of Guatemalan banana production, farmers need to receive $7.25 per box. This $2.05 discrepancy merely translates into increased profits for Chiquita. Based upon the approximate 50 cents per pound U.S. market price and the volume of Guatemalan bananas imported, Chiquita banana can sell the bananas purchased for $5.20 per box at about $20 per box. Profits per box equate to three times the purchase cost which is rather astounding. The banana industry is very lucrative for transnational corporations.

Probably the largest impediment to individual banana production on a small scale can be attributed to labor practices in Guatemala. On the whole they are very poor, offering little in the areas of rights and privileges workers who are regarded as expendible. Technological advances are good for the consumer, but make the need for extra labor very low. Jobs done by several workers before can be done cheaper by new machines. With work difficult to procure in impoverished areas, merely retaining any employment is essential. Because concerns over employment are primary, workers do not have ambitions to possess their own land and compete against corporate conglomerates like Chiquita, who are so diversified that they can lower costs and charge cheaper prices than a small scale producer.

Residents in the banana belt of Central America are for the most part a permanent fixture. Some choose to migrate to other areas, but labor conditions are generally similar. Social relationships are based upon the banana states especially in Guatemala." Complaints are widely similar throughout all countries in Latin America, which leads to the assumption that there is a generation of international norms of poor working conditions that is consistent throughout all of Central America.12 If workers complain about the conditions, then they are fired. If they ask to be relocated then they are fired. Besides the threat of being fired for trivial reasons, they face poisoning by the chemicals used to prevent a fungus, sigatoka, which causes the banana to ripen prematurely.13 Owners of the plantations have a system of spies within the labor force to serve as informants of troublemakers on the plantation. This thwarts any attempts by the workers to unionize. Plenty of workers exist to be replacements, thus concern by ownership over firing is non-existent. Immigrant populations also represent a grievous miscarriage of labor rights. Because they migrate into Guatemala from other Latin American countries undocumented, they are physically abused. Wages are then lower than the already low wages for banana workers if they are known to be undocumented immigrants. "The employment of undocumented labor has undeniably generated revenue for the banana industry and the government."14 Because of increased profit, any government that attempts to prevent immigrant labor would be met with severe opposition from both plantation owners and foreign investors.

All of these examples represent the control and the transnationalism of the banana industry. Modern globalization through technology has led to increased foreign influence (both American and non-American) in the Guatemalan economy. Governments are then pressured to maintain the status quo because of ties to foreign corporations and governments, as can be seen from past U.S. involvement in Guatemala.

In the current world economy marked by technological growth and globalization of people and resources, the individual worker may be forgotten and dismissed as merely a victim of progress. Even though they represent the most essential aspect of production, workers are taken for granted and deemed expendable in the grand scheme corporate profit acquisition. Is it even possible for Guatemalan banana producers to break free from the Chiquita banana conglomerate? The outlook is definitely bleak for small scale producers, whose necessities fall along the basic levels of survival, rather than ambitions to create new business which could possibly thrive in the world market. The uncertainty of any venture represents risks far to great.

Probably the single largest impediment to individual banana producers thriving in the world market is Chiquita banana and transnational corporations in other Latin American countries such Dole and Del Monte. In Guatemala1 Chiquita has a long history of being intertwined in the government of this small Central American nation. At the earliest stages of development, these conglomerates have become an essential unit of these small economies. Because large, diverse corporations have the ability to expand and lower costs across the board, small distributors cannot compete. This is the same effect that the Wal-Mart chain has had on small stores all across the United States. Such large corporations are inherently bad for competition from smaller counterparts,

forcing them from the market because smaller firms generally have higher production costs which equate to higher market prices. Also because Chiquita is so large in Guatemala, that it prevents rival companies from exporting bananas. Through these efforts to control the entire production process, Chiquita has forced the individual producer to sell only to them because they lack the necessary resources to export bananas to countries throughout the world. Individual producers have no ships of their own in which to export goods. From this perspective the banana producers cannot charge the lowest price in a market, nor can they get the best price from exporters. Individual production, independent of the conglomerates, does not look promising. The only possible way to overcome large foreign corporations is for the Guatemalan government to restrict foreign access and reappropriate land to the workers. Since this threatens foreign, powerful governments, this course of action may not always be taken. When this was tried in the past, people were killed and governments were overthrown.

A positive possibility for individual producers to distribute bananas in new markets is Europe. Because of the threat of unilateral actions by the United States, the World Trade Organization is going to be pressured into opening up the European markets. Once these markets are opened, Guatemalan distributors can compete for importers in Europe who will now capitalize on new bananas in the market. With more firms in Europe, (U.S. companies, Caribbean nations and individual producers) prices will naturally begin to come down. Once the drop in prices occurs, individual producers will have the opportunity to compete with Chiquita prices. Although their market share will not be that of Chiquita, their lives will be improved greatly from current levels.

Labor practices delineate the most grim outlook for individual banana production in Guatemala. With constant threat of termination, workers are naturally concerned with doing their job and making money merely to survive. An attempt to change the status quo would result in the worker being branded as a troublemaker and abruptly fired. Human nature dictates that man's first instinct is survival. When this can be threatened on a daily basis, workers will never think to own land themselves and compete against the giants in the industry. To do so would threaten their survival, which is their primary need and concern. Nothing else is more important to the man who needs to feed his family and is working for owners who view him as a replaceable appendage of the banana exporting machine.

In the end1 change seems to be almost impossible. The current state of world affairs promotes the transnational corporation due to low transaction costs, globalization and a decrease in trade barriers. Chiquita banana and other transnational syndicates can only be combated through government regulation on the part of Guatemala. This regulation would ultimately reallocate the land to the producers in the country, whereby they could produce and export to the new European market as well as those in the United States. This form of regulation would isolate Guatemala from the world economy in a time when decreasing trade barriers is essential for long term growth. Besides this, the United States has shown how rigorously it will defend corporate and economic interests with the impending trade war with the European Union and the overthrow of the Arbenz government. Ultimately economics dictates world affairs, thus at this point in time the workers have no money and with that no voice either. The world banana market, as it currently stands, is not viable for individual producers in Guatemala or any other Latin American countries until serious institutional changes overhaul the current economic practices throughout the world.

1Kepner Jr., Charles David, and Jay Henry Soothill. The Banana Empire. New York.. Russell & Russell, 1963. p 220

2Kepner, 221

3 Stanley, Diane K. For the Record: The United Fruit Company's Sixty-Six Years in Guatemala. Guatemala: Centro Impresor Piedra Santa, 1994. P 67

4 Palmer, Doug. "European banana stand undermines WTO, says U.S." Yahoo! Finance. Online (htip://biz.vahoo.comlrf/981 I 18/cc.html) 18 Nov 1998 *note: many sources on this topic are current, thus are from a site on the Internet

5 Palmer Yahoo! Finance

6 "Caribbean nations upset by U.S. banana proposals" Reuters. Online. ~3 Nov1998

7 "Monkey Business" The Economist. Vol 349 no 8094 November 14, 1998: 82

8 "Monkey Business" 82

9 United States. Department of Agriculture. Fruit and Tree Nuts: Situation and Outlook Report. August 1998, p 27.

10Luxmer, 4

11Moberg, Mark. "Transnational labor and Refugee Enclaves in the Latin American Banana Industry." Human Or~anization. Winter 1996: 432

12Moberg, 432

13Luxmer, Larry. "Superbanana (pesticide-free banana)." Americas. V45 n6, November-December 1993: 4

14Moberg, 433

Bibliography

"Carribean nations upset by U.S. banana proposals" Reuters. Online. 13 Nov 1998

Dosal, Paul J. Doing business with the dictators : a political history of United Fruit in Guatemala, 1899-1944. Wilmington, DE : SR Books, 1993.

FAO Commodities and Trade Division of Food and Agriculture Organization of the United Nations. The world banana economy 1970-1984: Structure, performance and prospects. Rome: FAO, 1986.

Grossman, Lawrence S. The Political Ecolo~v of Bananas. Chape Hill: The University of North Carolina Press, 1998.

Kepner Jr., Charles David, and Jay Henry Soothill. The Banana Empire. New York: Russell & Russell, 1963.

Luxmer, Larry. "Superbanana (pesticide-free banana) Americas v45 n6 Nov-Dec 1993:4

Moberg, Mark. "Transnational labor and Refugee Enclaves in the Latin American Banana Industry." Human Organization. Winter 1996: 432

"Monkey Business" The Economist. Vol 349 no 8094 November 14, 1998: 82

Palmer, Doug. "European banana stand undermines WTO, says U.S." Yahoo! Finance. Online (http://biz.vahoo.com/rf/981118/cc.html) 18 Nov1998 *note: many sources on this topic are current, thus are from a site on the Internet

Stanley, Diane K. For the Record: The United Fruit Company's Sixtv-Six Years in Guatemala. Guatemala: Centro Impresor Piedra Santa, 1994.

United States. Department of Agriculture. Fruit and Tree Nuts: Situation and Outlook Report. August 1998, p 27.