Investments for Indigenous Farmers in Guatemala

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Investments for Indigenous Farmers in Guatemala

• ECE 410 Spring 2008
• EDGE III Prejudice and Poverty
• By Christopher Byers

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Banana Republic The United Fruit Company
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A Brief History

• 1870 Captain Lorenzo Dow Baker started importing
  bananas from Jamaica for sale in the United
  States.
• 1872 Minor C. Keith began planting bananas
  alongside a railroad he was constructing in Costa
  Rica.
• 1885 Captain Baker and Jesse H. Freeman
  established the Boston Fruit Company.
• 1899 Merger of Keith's railroad and banana
  companies with Boston Fruit created the United
  Fruit Company. Bought Snyder Brothers banana
  operations in Panama. Ships used for hauling
  bananas, painted white to reflect the sun, became
  known as the Great White Fleet. Company
  established first hospital for banana workers in
  Central America.
• 1903 Company built first refrigerated ships,
  revolutionizing transportation of perishable
  foods. Company listed on New York Stock Exchange.

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The Company's Great White Fleet was used to
transport bananas, tourists, and U.S. postal
service mail.  Company ships were also used at
the request of the U.S. government in both World
Wars, in the 1954 overthrow of the Guatemalan
government, and in the failed 1961 U.S. invasion
of Cuba.
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• 1904 Great White Fleet became major carrier of
  materials for building the Panama Canal. Began
  introducing radio communication to allow farms,
  ports, ships and markets to communicate and
  coordinate shipments.
• 1906 Guatemala added as banana-producing
  operation.
• 1913 Began operations in Honduras.
• 1918 At the end of World War I, 13 Company ships
  had been lost, most commissioned by allied forces
  for the war effort.
• 1927 Panama disease led to the expansion of
  banana production on the Pacific coast of Panama,
  and a decade later, in Costa Rica.
• 1928 Colombian army killed an undetermined
  number of employees and others during labor
  protests.

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• 1941 World War II allied forces commissioned
  Company ships for the war effort and virtually
  shut down the banana industry. United Fruit
  founded prestigious Zamorano Agricultural College
  (EAP) in Honduras.
• 1944 Introduced the Chiquita brand, Miss Chiquita
  character, and jingle.
• 1945 By end of World War II, 27 ships, operating
  under Company administration, and 275 men were
  lost while serving allied forces.

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• 1950 Company began massive post-war banana
  replanting projects.
• 1954 United Fruit ships were used in U.S.
  government-backed overthrow of the Guatemalan
  government.
• 1958 U.S. antitrust decision forced United Fruit
  to sell an operating division sold a portion of
  Company holdings in Guatemala to Standard Fruit
  and local entrepreneurs.
• 1960 The Republic of Cuba expropriated the
  Company's sugar cane operations in that country.
• 1961 Company ships provided support for failed
  U.S. invasion of Cuba. Initiated sale of bananas
  in Japan.
• 1963 Began largest-ever branding program for
  produce and pioneered banana stickers with
  Chiquita label. Most farms began conversion to
  Valery variety of bananas due to its resistance
  to Panama disease and windstorm losses.

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The Chiquita Image
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• 1970 United Fruit merged with Eli Black's AMK
  Corporation and became the United Brands Company.
  
• 1973 Introduced the first refrigerated container
  ships for transport of bananas. Sold remaining
  Guatemalan holdings to Del Monte to comply with
  antitrust ruling.
• 1975 Involvement of United Brands in Honduran
  bribery scandal led to the enactment of the U.S.
  Foreign Corrupt Practices Act. Company stock
  plunged and Chairman and Chief Executive Eli
  Black committed suicide.
• 1990 Changed name to Chiquita Brands
  International, Inc. and launched Chiquita Brands
  South Pacific.
• 1992 European Union banana regime cut Chiquita's
  European market share by more than 50. Entered
  U.S. private label vegetable canning business
  through acquisition. Began working with
  Rainforest Alliance on the Better Banana Project.
  

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• 1997 Launched Chiquita-DeNadai joint venture in
  Asia and shipped first Chiquita bananas to China.
  
• 1998 Became through acquisitions the largest U.S.
  private label vegetable canner. Became first
  major company to meet with COLSIBA, an
  affiliation of Latin American banana labor
  unions, concerning social responsibility issues.
  Hurricane Mitch wiped out Honduran division and
  damaged Guatemalan operations Company provided
  over 3 million in immediate relief.
• 1999 Began 94 million farm rebuilding effort in
  Honduras and Guatemala.
• 2000 Adopted Core Values and expanded Code of
  Conduct. All 127 Chiquita-owned farms in Latin
  America achieved certification to the standards
  of the Rainforest Alliance's Better Banana
  Project.

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• In 2001, COLSIBA coordinated an agreement with
  Chiquita.  Half of Chiquitas workers are
  unionized, and they make up 90 percent of the
  unionized banana workers in Latin America.  For
  whatever reasons, since the late 90s Chiquita
  had been positioning itself as the socially
  responsible banana corporation.  Through the
  good offices of the International Union of Food
  Workers, the global union federation for the food
  industry, an agreement was negotiated in which
  Chiquita pledged to respect worker rights.  The
  agreement established COLSIBA as the
  representative of banana workers throughout much
  of the region.  The agreement applies to
  anti-union activity by the company at its
  unionized plantations and protects the right of
  workers to organize at plantations that Chiquita
  owns or subcontracts with. How much protection
  the agreement will provide in practice is still
  being tested.  But it has already established two
  facts.  Even under extremely adverse conditions,
  people who work in the same industry or company
  can create links for cooperation and even joint
  bargaining across national boundaries.  And when
  they do so, they are likely to be a lot stronger
  than if they try to take on powerful global
  corporations one union or even one country at a
  time.

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Chiquita in Guatemala Today

• Another Guatemalan banana union leader shot dead
• Submitted by David Ransom on March 12, 2008 -
  247pm.On March 2nd, Guatemalan banana union
  leader, Miguel Angel Ramirez of SITRABANSUR, was
  shot dead. SITRABANSUR, which is affiliated to
  Banana Links Guatemala partner union UNSITRAGUA,
  was founded by Miguel Ramirez and his fellow
  workers at the 'Olga Maria' plantation in the
  Pacific South of Guatemala in July 2007. Since
  then SITRABANSUR members have been harassed and
  threatened by private security hired by the
  company -Frutera Internacional Sociedad Anónima,
  supplier to Chiquita Brands- and 24 union members
  have been sacked. UNSITRAGUA has been working
  with SITRABANSUR to support these sacked workers
  and strengthen union organisation on the Olga
  Maria plantation. The murder of Miguel Angel
  Ramirez is just one of the many recent cases of
  violence against banana union leaders in
  Guatemala. In September 2007 SITRABI union
  leader, Marco Tulio Ramirez Portelo was also shot
  dead and just four weeks ago the daughter of the
  General Secretary of SITRABANSUR was raped by
  armed men.Pressure must be put on the
  Guatemalan government to ensure that the people
  responsible for these killings are brought to
  justice and the systematic violations of labour
  rights are put to a stop. As a result of a
  previous international campaign led by the IUF,
  EUROBAN and COLSIBA, the new Guatemalan
  president, Alvaro Colom, promised to take action
  so that the previous murder of SITRABI union
  leader Marco Tulio Ramirez is investigated by the
  authorities. Political pressure is needed to get
  EU governments to criticise the Guatemalan
  government for their lack of action on these
  violent and shocking cases of trade union
  repression and ensure that Alvaro Colom sticks to
  his commitments to end impunity and violence in
  Guatemala.

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• The production of bananas in Guatemala takes
  place in large monoculture plantations where
  labor conditions are very poor. Workers receive
  low wages which often dont cover the basic needs
  of their families and endure long 12-hour work
  days and exposure to dangerous chemicals. Yet
  employees lack the freedom to organize
  independent trade unions and negotiate agreements
  with their employers in order to improve these
  working conditions. Those who have tried to
  organize have come under attack from both
  transnational banana companies and independent
  banana producers. Illegal firings, plantation
  closures, temporary contracts, civil law suits,
  trumped up criminal charges, and violence
  targeting union leaders have all become
  commonplace. So far in 2007, four unionists have
  been assassinated in Guatemala and no charges
  have been made against the guilty parties.

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The Next Chiquita Del Monte

• Del Monte, the third largest producer of bananas,
  is owned and controlled by the Chilean-based IAT
  Group (their capital is held in the United Arab
  Emirates) and maintains its headquarters in
  Miami, Florida. As of 2005, Del Monte controlled
  about 15 of the world banana trade. Along with
  the other major banana producers like Chiquita
  and Dole, they yield a great deal of power in
  Latin America and can sell bananas to the
  northern markets at an extremely cut-rate price.
  According to a French research institute CIRAD,
  only 12 of the final retail price stays in the
  producing countries. An even smaller proportion
  goes to small farmers (5-7) or to plantation
  workers (1-3). The rest is profit in the
  pockets of the CEOs and investors.Bandegua,
  the Guatemalan subsidiary of Del Monte, is one of
  many companies with a long history of targeting
  trade unionists. In 1999, Bandegua dismissed 900
  workers who were involved in the Banana Workers
  Union of Izabal (SITRABI), the oldest and one of
  the most powerful unions in Guatemala. On October
  13th of that year, a heavily armed attack was led
  against the union organizers who were planning a
  massive protest in response to the dismissals.
  Consequently, seven members of SITRABI fled to
  the US to defend their lives and pursued a case
  against Bandegua. As a response, the US
  government placed Guatemala's trade benefits on
  probation until Guatemalan courts convicted the
  criminals. Unfortunately, due to the sustained
  violence in Guatemala, the seven organizers
  continue to live in the US.

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Guatemala union heads killed despite US trade deal

• By Mica RosenbergMORALES, Guatemala, Oct 17
  2007 (Reuters) - Masked gunmen dumped a
  Guatemalan banana picker's bullet-ridden corpse
  yards from fields of fruit bound for the United
  States, a grim reminder of the risks of
  organizing labor in the Central American country.
  Marco Tulio Ramirez, killed last month, was the
  fifth Guatemalan labor leader murdered this year.
  Activists say the deaths show promises to
  protect labor rights under a U.S. trade pact have
  changed little at a time President George W. Bush
  is pressing for similar deals in other Latin
  American nations with bad labor records. The
  Central American Free Trade Agreement, or CAFTA,
  was approved by the U.S. Congress in 2005 after a
  tough battle with Democrats who argued that
  worker safeguards in the agreement were too weak.
  CAFTA breaks down tariff barriers between
  Central American countries and the United States.
  It has increased Guatemala's export revenues and
  improved the investment climate in the country,
  the government says. Guatemala, which began
  implementing the pact last year, was notorious
  for labor abuses during its 36-year long civil
  war and rights are still weak. Opponents of
  CAFTA both in the United States and Central
  America complained that Washington should not
  encourage trade with countries like Guatemala
  without tougher rules to protect workers. The
  U.S. Trade Representative gave 40 million to
  spend in Guatemala on strengthening the labor
  ministry, resolving industrial disputes and
  monitoring work-related abuses. But little has
  changed. "Organizing a union in Guatemala is
  life-threatening," said Noe Ramirez, Marco
  Tulio's brother and the head of the banana
  workers' union SITRABI. "We know the Central
  American Free Trade Agreement has a chapter on
  labor protections, but it is not followed," he
  said, at the union's office in the town of
  Morales.FACTORIES CLOSEDBush urged Congress on
  Friday to approve pending free trade pacts with
  Colombia, Panama and Peru, saying failure to do
  so would reduce Washington's leadership in the
  region. Critics fiercely oppose the agreement
  with Colombia, where rights group Human Rights
  Watch says 72 trade unionists were killed last
  year. "I oppose continuing the same failed
  CAFTA-style trade model in other countries," said
  Rep. Linda Sanchez, a California Democrat.
  "Colombia is one of the most dangerous countries
  in the world for labor organizers, more so than
  even Guatemala. Abuses are common across the
  Guatemalan economy, especially in textile
  factories known as maquilas, where workers put in
  long hours for little pay. Activists say
  companies often close factories when workers try
  form unions. In January, Pedro Zamora, head of
  Guatemala's port workers' union, was murdered in
  front of his two sons in the middle of
  contentious negotiations between the union and
  company bosses. Two leaders of the municipal
  vendors' union were killed a month later. In
  1999, SITRABI leaders were forced to resign after
  200 armed men threatened them ahead of a planned
  strike. Seven still live in exile in the United
  States. In July, soldiers raided the SITRABI
  union's office asking to see information about
  members. The ministry of defense later said the
  action was unjustified. Since Ramirez's death,
  suspicious cars have followed union members on
  and off the company's property, his brother said.
  Such intolerance of labor unions has a long
  history. Hundreds of union members were murdered
  or 'disappeared' by state security forces during
  the country's 1960-1996 civil war between the
  army and left-wing rebels. The war began after a
  coup backed by banana company United Fruit, now
  known as Chiquita Brands International. United
  Fruit sold many of its plantations, including the
  ones where Ramirez worked, to Fresh Del Monte
  Produce Inc. Representatives from the Fresh Del
  Monte Produce subsidiary Ramirez was employed by
  said they have nothing to do with his killing and
  urged authorities to conduct a full
  investigation.

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Whos Land is it Anyway?Land Reform and Conflict
in GuatemalaBy LISA VISCIDI

• In rural Guatemala, poor mostly indigenous
  farmers scrape off a living on the nations
  poorest soils while wealthy finca (large
  plantation) owners reap the benefits of an
  agricultural system based on international
  exports and the exploitation of cheap labor.
  Guatemala has one of the most skewed land
  distribution patterns in the world and the second
  most inequitable in Latin America--roughly 2
  percent of the population owns 70 percent of all
  productive farmland. This has led to fierce and
  often violent land conflicts between poor
  campesinos (farmers) and a powerful landed elite
  that maintains dominance vis-a-vis close ties to
  the government.

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A Brief History of Land Rights in Guatemala

• Guatemalas inequitable land distribution system
  is rooted in the Spanish conquest, when land
  seized from the indigenous populations was
  granted to colonizers. The Spanish usurped the
  nations richest soils and exploited the
  indigenous labor force in order to sell products
  such as sugar and cacao on European markets.
  Indigenous farmers were relocated to the most
  unproductive farmlands where they barely survived
  off of subsistence farming.

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• Independence from Spain in 1821 brought few
  rewards to Guatemalas rural indigenous
  population. The emerging class of wealthy ladinos
  (non-indigenous) gained increasing control over
  land and labor. Coffee became the nations
  largest export, and a powerful elite of coffee
  growers forced farmers to abandon their lands in
  order to further agribusiness interests. As
  communal land tenure disappeared and export crop
  growers forced indigenous villagers to relocate
  to less productive highland areas, many
  campesinos were compelled to migrate to coastal
  plantations in search of work.

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• Land ownership became increasingly concentrated
  until Guatemalan President Jacobo Arbenz
  initiated the Agrarian Reform Law of 1952, which
  called for the expropriation of mostly idle lands
  from large plantation owners to be redistributed
  to poor farmers. The reform, which benefited an
  estimated 100,000 families, threatened the
  holdings of large landowners and powerful foreign
  companies, especially the North American-owned
  United Fruit Company.

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• Under the guise of combating communism, the U.S.
  government ordered a CIA-orchestrated coup to
  oust Arbenz in 1954. The democratically-elected
  president was replaced by a U.S.-backed general
  who annulled the majority of the land
  expropriations, returning the territory to its
  previous owners. In the following decades a civil
  war ensued, pitting military dictatorships
  against a leftist guerilla insurgency. The best
  lands were rewarded to military officers and rich
  land-owners tied to the military regimes, thus
  cementing the system of inequitable land
  distribution.

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• Land ownership was one of the most controversial
  components of the 1996 Peace Accords, which
  charged the state with the task of providing land
  to peasant farmers. The stipulations of the
  accords, however, have yet to be implemented, and
  Guatemala remains a panorama of inequality and
  poverty-- the same ills that have devastated the
  nation since the Spanish conquest.

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The Solution Farmer Co-ops

• Today, Guatemala has the largest rural population
  in Central America-over 60 percent of its
  inhabitants depend on agriculture to survive. Yet
  available land is shrinking as rural families
  grow and expansive tracts devoted to export
  agriculture are concentrated into fewer hands.
  The United States and international institutions
  such as the World Bank have pressured Guatemala
  to employ an agricultural export model that
  allows multinational food corporations and
  wealthy finca owners to reap the benefits of the
  countrys rich agricultural environment and cheap
  labor source, while the majority of the
  population survives on tiny subsistence-oriented
  plots.

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La Asociacion Civil Maya de Productores of Santa
Anita

• 32 Families representing about 170 people
• All ex-combatants of Guat Revolutionary Unity
• Annual Production - 40,000 pounds of coffee
• All coffee, bananas are organic
• Founded in 1998, Joined FLO register in 2001
• Altitude of finca is approximately 4,000 ft
• Future Plans Pay off debt, dev other income

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• The association at Santa Anita is made up of 32
  families of ex-combatants from the Guatemalan
  Revolutionary Unity or URNG. With the signing of
  the Peace Accords, the association was able to
  purchase an abandoned plantation in February of
  1998. Working collectively, the members have
  recovered the lands production capacity.
  Approximately 65 of the 130-acre holding is in
  coffee and banana production the remaining
  acres are either too steep for any type of
  cultivation or have been left purposely in a
  natural state to conserve the existing ecology.

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• The cooperative's values reflect the URNGs 36
  year-long struggle to create a society based upon
  mutual respect and democracy. Now they are
  leading by example. Santa Anita has a "no-kill"
  environmental policy, which mandates that no
  indigenous animals within its confines can be
  killed. Additionally, their board of directors
  has to be composed of at least 50 women at all
  times. Free education and healthcare are provided
  to all of the communitys residents.

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• Data from the Organic Trade Association's 2007
  Manufacturer Survey of the 2006 market indicated
  that U.S. organic coffee sales amounted to
  approximately 110 million in 2006, up 24 percent
  from the previous year. Other studies show the
  figure could be much higher. A 2007 survey by
  Giovannucci and the Sustainable Markets
  Intelligence Center (CIMS) reported that
  approximately 65 million pounds of organic coffee
  were imported into the United States in 2006 with
  a retail value of approximately 617 million. The
  authors estimate the organic coffee sector
  represented 2.3 percent of the total U.S. green
  coffee imports in 2006. The 33 percent annual
  average growth rate for the organic category
  documented by the researchers between 2000 and
  2007 dwarfs the estimated 1.5-2 percent projected
  annual growth rate of the conventional coffee
  industry. Organic coffee is grown in 40 countries
  worldwide.

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• The market reality and various studies show that
  consumers are indeed interested in organic coffee
  and are prepared to pay a premium.
  Coffee-drinkers pay an average of 15 to 25
  percent more for organic and 20 to 50 percent
  more for Fair Trade organic coffee than they
  would for conventionally grown coffee.

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• The same is true for Fair Trade bananas.
  Especially in the EU the demand has increased
  over 50 a year the past few years and continues
  to grow

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What is Fair Trade Certification

• Fair Trade Certification empowers farmers and
  farm workers to lift themselves out of poverty by
  investing in their farms and communities,
  protecting the environment, and developing the
  business skills necessary to compete in the
  global marketplace. Fair Trade is much more than
  a fair price!  Fair Trade principles include
• Fair price Democratically organized farmer
  groups receive a guaranteed minimum floor price
  and an additional premium for certified organic
  products. Farmer organizations are also eligible
  for pre-harvest credit.
• Fair labor conditions Workers on Fair Trade
  farms enjoy freedom of association, safe working
  conditions, and living wages. Forced child labor
  is strictly prohibited.
• Direct trade With Fair Trade, importers purchase
  from Fair Trade producer groups as directly as
  possible, eliminating unnecessary middlemen and
  empowering farmers to develop the business
  capacity necessary to compete in the global
  marketplace.

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• Democratic and transparent organizations Fair
  Trade farmers and farm workers decide
  democratically how to invest Fair Trade revenues.
  
• Community development Fair Trade farmers and
  farm workers invest Fair Trade premiums in social
  and business development projects like
  scholarship programs, quality improvement
  trainings, and organic certification.
• Environmental sustainability Harmful
  agrochemicals and GMOs are strictly prohibited in
  favor of environmentally sustainable farming
  methods that protect farmers health and preserve
  valuable ecosystems for future generations.

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Investment Proposal

• Currently only 13.2 of Guatemalas land is
  arable and 5.6 is being used for permanent
  crops. That leaves 81.18 being used for other
  purposes according to the CIA fact book as of
  2005. So Guatemala is 108,430 sq km in land mass
  total. 13.2 of 108,430 sq km gives 14,313 sq km
  for food production if all arable land is put to
  use for this purpose. We will assume that not
  all of this land is currently being used for food
  production because if that was the case then
  nothing more could be done to increase the food
  production. Based on some real estate sites I
  have looked at for farm type properties I will
  assume a price of 10,000 an acre. I will also
  use the Santa Anita coop as a reference since
  they have a very successful coop. Their property
  is 130 acres so at 10k an acre the farm purchase
  would be 1.3M. Then assuming that the terrain
  is similar to that of the Santa Anita coop you
  can use 65 of the land for crop production. I
  would like to use 20 of the arable land for
  local food supply production so that would be 13
  of the total farm. That leaves 52 of the farms
  land for export crop production. This could be
  corn, sugarcane, coffee, or bananas. So if we
  assume all that is put into coffee production
  that gives us 67.6 acres of coffee. Since Santa
  Anita coop uses 65 of their land to produce both
  bananas and coffee I will assume that the portion
  that is producing bananas is what would be used
  to produce food for the local population to
  secure their food supply.

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• So if production is the same as at Santa Anita we
  would be producing 40k pounds of coffee a year.
  If 100 pounds costs 59.04 to produce then 40k
  pounds would cost 23,616. Assuming the cost to
  produce their food supply would be similar then I
  would say 5k for the region food supply
  production. So total cost for the farm purchase
  and first year of production would be 1.3M
  23,616 5k 1,328,616. The price on table 3
  is far below the Fair Trade minimum. So if we use
  the Fair Trade minimum for organic coffee the
  price would be 151/qq. Using that value and
  keeping production costs the same, the net income
  for 100 pounds would be 91.96. If 40k pound of
  coffee was sold at that price is would produce a
  net profit of 36,784. That is over and above a
  fair wage being paid to all coop workers that is
  taken into the production costs. So this excess
  could be used for debt reduction, social
  services, coop improvement or other investments.
  So after just one year they could pay for all
  their production cost the next year and also have
  money left over to repay some of the initial loan
  amount.

35

• This investment model is very promising and
  uplifting to the indigenous people. It would
  allow them to become self sufficient as far as
  their food supply goes and produce extra income
  for a better standard of living. So let us just
  say that OPEC wanted to donate .25 of the
  projected windfall profits from its oil sales for
  one year into this project. Assume the oil
  profits are 1.5 trillion a year. They are
  probably a bit more now with oil prices climbing
  every day but it is a good starting number. .25
  of 1.5 trillion is 3.75 billion. Let us just
  say there are other costs in starting the coop
  that would bring the initial loan up to 1.5M.
  That means that only .25 of one years profit
  would provide loans for 2500 coops like Santa
  Anita. If the coop was similar in size to Santa
  Anita at about 170 people that would provide for
  425,000 people to improve their living situation
  drastically and secure their food supply.

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• So with a total population around 13 million and
  50 are currently working in agriculture. You
  have 6.5 million people who could benefit from
  this plan. If you were able to increase the
  funding a little over 15 times then you could
  provide coops to the entire country of
  agriculture workers. With 4 of the OPEC profits
  for one year you could create more than enough
  coops to provide jobs for all the current
  agriculture workers in the country while at the
  same time creating greater food security for the
  region. This would be assuming all the coops
  were growing coffee as the export crop. You
  could of course set a percentage of the coops to
  grow whatever is needed as long as the crop would
  produce a net profit enough to pay back the debt.
  It is just amazing what you can accomplish with
  enough money. This investment proposal shows how
  only a small percentage of just one years profits
  from OPEC can completely change the lives of an
  entire country for the better.