An analysis of the Latin American Banana Industry

It is difficult to believe that the bright yellow, delightful and alimentary banana has greatly affected Latin America and, in peculiar, Ecuador. As Latin America produces 83 % of the universe ‘s bananas, the bulk of the bananas that Canadians consume are exported from at that place. Most of these are from Ecuador. ( Hellin and Higman, 2002a:65 ) During my clip in Ecuador, I ate a wild banana. It tasted nil like the bananas that North Americans have entree to all twelvemonth unit of ammunition in the food market shop. It is because of my experience in Ecuador and the relationships that I formed with the autochthonal people at that place, that I am really connected to this subject. The procedure of trading bananas that have been produced in Ecuador and so transported all over the universe relates to the construct of comparative and absolute advantage, from the Classical liberalism theory ( David Ricardo and Adam Smith ) and Globalization. The primary end in the classical liberalism theory is economic freedom. This could be achieved by taking all obstructions that could potentially acquire in the manner of free trade and the market, such as ordinance by the province. ( Wagner 2010. ) Globalization fits into the Classical liberalism theory as it functions around free trade, and hence, requires the remotion of obstructions such as duties. ( Herold 2011. ) It is because of the deductions of Globalization and the constructs of comparative and absolute advantage, there has been an outgrowth of multinational corporations ( TNC ‘s ) and transnational corporations ( MNC ‘s ) in the Global South, for illustration, in Ecuador. In this paper, I argue that globalisation, though may by and large be positive development, can hold a damaging affect for the Global South, when it comes to the production of nutrient trade goods such as bananas.

Theoretical Approach:

The function of TNC ‘s and MNC ‘s in the procedures of the banana industry are related to the construct of Comparative and absolute advantage from the classical liberalism theory. ( David Ricardo, Adam Smith ) Companies from the Global North ( U.S and Canada ) set up their production in the Global South, where the production of good quality fruit is less dearly-won. The workers that work for these companies are paid well lower rewards than workers in more developed economic systems where there are governmental ordinances to supply criterions of working conditions and rewards. As mentioned in the article, Smallholder Banana Producers Need Policy Adjustments, Ecuador is an illustration of a state in the Global South that has a comparative advantage over other exporters in the banana industry. The European Union and the United States are the two major importers of bananas from Ecuador, due to Ecuador ‘s fertile land, cheap labour and low opportunities of being impacted by storms that could potentially destruct the banana harvests. ( Hellin and Higman 2002a:29 ) Because Ecuador has this comparative advantage, the Global North will trust on them for bananas and non much else. As a consequence, this banana bring forthing state must trust upon its trading spouses in the developed universe for supplying other goods which are produced at well higher costs and hence are really expensive for them and other developing states. In the terminal, as mentioned in, Smith, Ricardo and the universe market place 1776-2007, Back to the hereafter, an instability of trade occurs between the Global North and Global South, where trade understandings between industrialised states and the Global South are skewed against developing economic systems. In the bulk of instances, the footings of trade between the Global North and Global south to a great extent favour the industrialised states, hence go forthing “ slender takings ” for the Global South ( Sapsford, 2007 ) .

The Role of Multinational Companies in the Banana Industry

Globalization has provided the chances for a diverse market of merchandises, but at a cost. As Globalization additions, more MNC ‘s and TNC ‘s make their grade on developing states by concentrating on bring forthing one trade good from those states for the benefit of the company. As mentioned in the article, Bananas, the universe trade of bananas is controlled by 5 major companies that control 80 % of the market. These are: Chiquita trade names, Dole Food Company, Del Monte Fresh Produce, Noboa and Fyffes. ( Hamer, 2007 ) Although these five companies do non have the farms that produce the bananas for trade, they have control of the market for selling the bananas for export. As a consequence, they have the power to put a fixed monetary value on the bananas, while commanding the rewards paid to the manufacturers. ( Hellin and Higman.b. 5,11 ) The MNC ‘s therefore control merely under 90 % of Ecuador ‘s banana exports. Although there are independent manufacturers of bananas in Ecuador, the bulk of them mark contracts with these companies to vouch a limited income, because holding a low income is better than non cognizing when you will be paid when viing in the unfastened market. ( Hellin and Higman, 2002a:65 ) This is another illustration of banana manufacturers ‘ dependance upon multi national companies. Having to vie in the universe broad market topographic point for U.S husbandmans and markets is dashing for independent husbandmans, doing them vulnerable to MNC ‘s to pounce in and take advantage.

The contracts that bind the MNC to the little husbandmans in Ecuador are really good to the companies. While non straight commanding the husbandman ‘s operations, the MNC ‘s influence how farms are run by turning a blinds oculus to working conditions and environmental direction. As a consequence, because of their merchandise ‘s low monetary values, husbandmans resort to utilizing child labour with long on the job hours, or to pretermiting the environment to run into production duties. ( Hellin and Higman: b.12 ) As husbandmans become more dependent on the MNC ‘s, they are less likely to belie what the company demands, or to take a political base against them. ( Hellin and Higman: b.12 )

The five transnational corporations mentioned supra have significant power in the banana industry by commanding the market of bananas and come ining into lopsided contracts with husbandmans. They besides have a big influence over political relations and authoritiess in states where the husbandmans live. As the power that these companies have over 3rd universe authoritiess is what caused the banana difference between the European Union and the United States. The American banana exporting companies, with a vested involvement in Latin America, encouraged the American Government to affect the WTO in the banana trade because of the discriminatory entree that the European Union was giving to African, Caribbean and Pacific Country banana exporters ( OPEC ) . ( Hellin and Higman 2002a:5 )

These events are illustrations of how Globalization has had negative effects on the Global South, particularly in the instance of Ecuador. Scholars in, Could Developing Countries Take The Benefit Of Globalisation? argue that if certain states in the Global South did non run into the standards required of MNC ‘s such as slack labour Torahs and nonexistent brotherhoods, they would pack up and caput to the other states, who are willing to come in into one sided relationships in order to hold some employment. ( Foo and Bass cited in Could Developing Countries Take The Benefit of Globalisation? 2006:731 ) Although employment is necessary for the economic systems of states in the Global South to turn, there should be a bound as to what extent development of the Global South and the workers is justified.

Exploitation of workers in the Banana Industry:

In the Global South, the development of workers is progressively a job. Companies from the Global North move their companies to developing states with lower rewards to take down the cost of bring forthing the trade goods they sell to us. This is an issue for Ecuador. Harmonizing to the article, Small Holder Banana Producers Need Policy Adjustments, the Ecuadorian authorities sets a minimal monetary value that the MNC must pay the independent manufacturer per box of bananas. This minimal monetary value by itself hardly covers the monetary value of production. This consequences in husbandmans paying their workers at or below subsistent rewards. The workers are afraid of losing their occupations, therefore they will non kick. If they were to kick, there would be many capable people waiting for occupations, as there are many unemployed people in these economic systems. This makes it easy for these companies to happen replacement manufacturers. ( Hellin and Higman, 2002a:65 ) When the Chiquita fruit company, officially known as the United Fruit company, began utilizing local husbandmans to bring forth their fruit in Colombia, there were many regulations attached as to their concern contracts. ( Enforcing Business contracts in South America: The United Fruit Company and Colombian Banana plantation owners in the 20th century. Bucheli, 2004 ) As noted by Bucheli, in these contracts the United Fruit company had the option of non purchasing the fruit produced by the local agriculturists ; nevertheless, these agriculturists could merely sell their fruit to this company. These contracts guaranteed the protection of the United Fruit Company and left the fruit agriculturists to cover with the hazards and at the same clip, if the fruit being exported was non up to criterions, or if there was no demand for it, so the plantation owners would have no wage and could non sell the jilted fruit anyplace else. They would be forced to cover with the “ blemished ” fruit that was unsellable. The United Fruit Company created many regulations in the contracts and were sneaky when it came to forestalling fruit manufacturers from fall ining forces and organizing their ain company by publishing the contracts in a staggered mode ; that is, the different manufacturers at different times to fudge one husbandman ‘s production against another ‘s. ( 2004 )

Not merely do MNC ‘s take advantage of the husbandmans bring forthing bananas, but they besides turn their dorsums on the immoral employment of kids in the banana sector. Children are being employed in the banana industry from every bit immature as eight old ages old, where they are put into occupations that require difficult labour, the usage of unsafe tools and exposure to pesticides and other risky exhausts. Unfortunately, the Ecuadorian Government has non implemented strong labour Torahs to forestall this labour maltreatment of kids, and therefore it will probably go on. ( Ecuador: Widespread Labor Abuse on Banana Plantations. 2002 )

Workers Unions are a manner of implementing ordinances on working conditions and protecting worker ‘s rights. In Ecuador, Unions are found in the more formal sectors of work, which does non include the Banana Industry. These formal sectors are where the minority of Ecuadorian workers are employed, where an instruction is required. As a consequence, the bulk of workers in Ecuador are non protected by these ordinances and Torahs. ( Ecuador Working Conditions )

All of these illustrations portray how the American companies interested in the fruit of a underdeveloped state are merely interested in net incomes and are prepared to take advantage of the deprived fortunes of the local manufacturers to maximise their returns, even if this leads to the debasement of the environment and the local population.

Effectss of the Banana Industry on the environment and wellness:

With the addition of MNC ‘s come ining Latin America and exporting bananas, the environment and wellness of the workers within these states has greatly decreased. As stated in the article, Major Concerns of Developing states: Applications of the Precautionary Principle in Ecuador, Globalization has been one of the cardinal grounds for the debut of risky stuffs into Latin America. If the market remains unfastened for free trade, it becomes really hard to command what stuffs enter these states and hence risky substances are introduced into these states to increase production. As good, the article states that it is much more hard for developing states to implement ways to forestall the impacts of risky chemicals to the environment and the society. MNC ‘s knowingly take advantage of this by traveling their companies to states such as Ecuador, where they have non yet implemented regulations against utilizing certain bio-hazardous merchandises. This leads to certain chemicals that have yet to be tested for safety grounds to be “ lawfully sold ” and so used improperly. ( Harari.H, Freire and Harari.F 2005:249-254. ) Harmonizing to Ecocertification of Ecuadorian Bananas: Prospects for Progressive North-South Linkages, the production of Bananas is one that requires the heavy usage of pesticides and other environmentally degrading exhausts. These are necessary to maintain up with the increasing rate of production that is required by the little husbandmans. ( Castillo et. Al. 2000 ; Clay 2004 ; Henriques et Al. 1997 ; Muenos-Carpena et Al. 2002 cited in Ecocertification of Ecuadorian Bananas: Prospects for Progressive North-South Linkages. 2007:262 )

The usage of pesticides is non merely harmful to the environment, but besides to the workers. Hamer discusses in his article, Bananas, that even if workers wanted to kick about the impacts of the pattern of these companies on their wellness, the company would more likely terminal

up firing the workers instead than acknowledge their mistakes. ( 2007 ) Unfortunately because there is a deficiency of instruction on how to decently utilize the pesticides, the hazards that come along with these harmful sprays are even more toxic to the workers, as many of them do non have the proper protective equipment. ( Henriques et al.1997 cited in Ecocertification of Ecuadorian Bananas: Prospects for Progressive North-South Linkages 2007:262 )

As good, because of the big rainfall in Latin America, it is necessary to spray the banana workss repeatedly with pesticides, as the rain washes the pesticides off of the workss into the dirt. Harmonizing to the World Wild Life Fund, “ The banana industry produces more waste than any other agricultural sector in the Global South. ” ( Hamer 2007: 24-27 ) In position of the fact that its clime and environmental conditions are more suited for the production of bananas, the full universe relies on the Global South for their production. As the Global South produces more bananas, the greater will be its part to the diminution of its environment.

Globalization can take to many positive events, such as unifying the universe and conveying people closer through a freer flow of information, trade and thoughts. In the production of bananas, nevertheless, Globalization has had a figure of negative effects in those states which grow them. Multi national and Trans national corporations continue to hold immense sums of power which allow them to virtually disregard any Torahs or ordinances stand in their way of doing a net income. In the terminal, the Global South and in this instance, Ecuador suffers, as their workers are exploited and paid low rewards while prosecuting in farming patterns that degrades the environment.