Caribbean banana industry decline is no sideshow by Nick Mathiason, Aurelie Walker and Renwick Rose

A surge of international inward investment and rising commodity prices has eased Latin America through the crisis-hit global economy. Good reason why Europe pines for closer trading links with this powerhouse of business opportunity.

Today, the door will swing open when EU leaders and their counterparts from Colombia and Peru strike lucrative trade partnership agreements spanning financial services, industry and agriculture at the EU-Latin America and Caribbean Summit of Heads of State and Government in Madrid.

It will be the first major bilateral trade agreement between the EU and Latin American nations since a similar accord with Chile was signed in 2003.

Immediately after sign off, the EU’s attention will focus on even bigger prizes: the mighty Latin American trading bloc known as Mercosur which includes Brazil and Argentina. Talks between the EU and Mercosur resumed last year after a six year impasse.

The EU has also today established a so-called free trade agreement with 27 Central American states including Guatemala and Costa Rica.

Another example of the awesome power of globalisation to generate wealth? Maybe so but there is a less rosy side to the seemingly inevitable victory march of trade liberalisation.

And it lies in the islands off Latin America’s northern coast.  While the giant economy of Latin American underpinned by Brazil is projected by the International Monetary Fund to grow 4.1%; much of the Caribbean is engulfed in financial services failure, rising unemployment, falling tourism income, increasing inflation and agricultural abandonment.

Barbados saw a 46% rise in unemployment in the nine months to September last year. Grenada has been hit hard by the global economic slowdown with GDP estimated to have declined by 7.7 percent in 2009. The number of active banana growers in the Windward Islands of St Lucia, St Vincent, Dominica and Grenada fell in 12 years from 11,664 to 3,100 today according to the Windward Islands Farmers’ Association.

In other words, there is an economic hurricane whipping through the Caribbean which has prompted the IMF in the past year to intervene in Jamaica, Antigua & Barbuda, Dominica, St Kitts & Nevis, St Lucia & St Vincent and the Grenadines.

As European business interests ready themselves for breaking into new markets, it should not be forgotten that breakthrough would never have materialised without selling the Caribbean banana industry down the river.

Unlikely as it may seem, until last December, there was an impasse in closer trade ties between Europe and Latin America. And it came in the form of the banana – the world’s most exported fruit.

Europe historically protected Caribbean banana growers. Since 1975, bananas from these former colonies had preferential access into the 400 million strong trading bloc as a sop to the gradual erosion of broader trade links brought about by the UK’s entry into the Common Market.

But the largely American interests that controlled the vast banana plantations in Ecuador and Colombia, where workers’ rights are at best an afterthought, persuaded the then fledgling Clinton administration, whose election they generously funded, to lodge a complaint with the World Trade Organisation demanding they overturn this perceived “unjust support”.

For 17 years the Banana Wars raged. Gradually tariffs were lowered to allow a flood of cheap Latin American exports into Europe. Caribbean growers’ trade dropped sharply. And then five months ago, with one eye on huge trade deals between Colombia and Ecuador – who together account for 39% of world banana exports – and Peru, Europe completely relented after Ecuador cited the lack of a breakthrough as a reason to pull
out of bilateral talks with the EU last summer.

The Banana Wars were over. Tariffs on Ecuador bananas will gradually be lowered from euro176 per tone to euro 114 per tonne - a 35% reduction – by 2017. In the case of Colombia and Peru, the tariff reduction is even more drastic, to 75 euros per tonne.

Compensation for banana farmers in a dozen Caribbean and African countries comes in the form of euro190m fund. Too low to make a difference to the hundreds of farms now poised to go under. Furthermore, money will be paid to Caribbean governments in the form of budget support. In other words, the farmers are unlikely to see much of the cash.

The most serious challenge to agriculture in the Caribbean comes as islands face sharp falls in tourism, foreign direct investment and a catastrophic decline in financial services. This, after the islands were strongly advised to pursue these precise paths by the international community.

But the collapse of Sir Allen Stanford’s bank in Antigua and the demise of the Trinidad-based conglomerate CL Financial together with corruption exposes in the Turks & Caicos and serious financial problems in the Caymans have failed to deliver the benefits of diversification away from agriculture.

The decline of the Caribbean banana industry may seem like an irrelevant side-show to some. If only that were so. Abandoned farms together with laid off financial workers are the perfect seed bed for enveloping the Caribbean economy and political system in a drug morass.

More than a decade ago, the late Prime Minister of Dominica, Dame Eugenia Charles, warned that if the liberalisation tide continued to undermine Caribbean banana exports to Europe, farmers would not be able to resist the temptation of the marijuana trade.

There is evidence of the spread of marijuana growing and trafficking, especially in St. Vincent where a Marijuana Growers Association was publicly announced in spite of the practice being illegal with increased efforts by law-enforcement officers to stamp it out.

Latin American drug cartels are now picking on the carcass. Strategically placed on the cocaine route from South to North America, the Caribbean used to be simply a stopping off point for traffickers. Now, say well placed sources, drug barons are making connections with the marijuana trade supplying a deadly mix of guns and cocaine.

In a region where unemployment has surpasses 30% in some countries, according to International Labour Organisation estimates, drug dealing is more than a tempting option. It has spread from the cities to the countryside.

There is concern in many circles in the Caribbean about the possible influence of drug money on the political process. One former government minister in Jamaica, for instance, has warned about such a negative development and the possible funding of political parties by drug barons.

This is what happens when you lose a trade war. Farmers question whether it is worth tilling the soil when a shrinking export market, a lower return and a bank crisis envelopes you.

Trade is not a cure-all for poverty alleviation. Investment in infrastructure, technology and human capital are also pre-requisites for meaningful developmental progress.

That said, the economies of vulnerable nations are being sacrificed to satisfy the wider interests of western corporations. The last rites are being administered by global food giants who have and continue to diminish workers’ rights to increase margins.

The result in the Windwards threatens a tropical rural dystopian nightmare. As farmers abandon the land and unemployment soars, emerging evidence from WINFA suggests that children are being pulled out of secondary and tertiary education.

The Windward Island farmers who remain are doing their best to fight back shortening supply chains and investing in community and business developments across the islands. Backed by the UK consumer’s better nature who are choosing Fairtrade in increasing numbers, at least there is one way they can still receive a decent price for their crop in a market that has seen long term real terms price decline.

But the big, contradictory picture is that while fighting poverty, drugs and crime with financial assistance on one hand, as a consequence of the European Commission trade policy; poverty, drugs and crime are deepened with the other.

The EU ‘Strategy for the Caribbean’, based on an ethos of “equality, partnership and ownership” has, as its objective, “growth, stability and development.”

The resolution of the Banana Wars and now the imminent EU – Columbia and Peru deals, severely compromises the objective.

The EU’s newly ratified Lisbon Treaty includes a stronger legal commitment to ‘policy coherence for development’. This creates a legal obligation for trade policy that contributes to social and economic instability to end. 

The EU’s responsibility now is to reassess its relentless pursuit of market access for European goods and services at any cost.

Nick Mathiason and Aurelie Walker work at the Fairtrade Foundation in London. Renwick Rose is co-ordinator of the Windward Islands Farmers Association