The Labor Edge
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|B.B. Sanford||August 2nd 2010|
Council on Hemispheric Affairs
Commonly known, for good reasons, as Banana Republics in the 19th century, Central American countries like Guatemala granted companies from the U.S. and other Western nations market access to develop the banana trade, yielding huge profits to Western producers. Powerful multinational fruit companies, such as U.S.-based Dole, Del Monte, and Chiquita, began heavy, often fraud-laden operations in Latin America, gaining control over much of the farmlands, manipulating government officials, and influencing the media, all within a cloud of secrecy. For Guatemala, the banana trade set the stage for a grossly unbalanced land distribution pattern for farmers who suffered a low standard of living and a harsh dependence on a single crop.
Elected in 1951, Guatemalan President Jacobo Ãrbenz launched a land reform program, Degree 900, by confiscating almost 400,000 acres of unused United Fruit (now the Chiquita brand) land for redistribution to landless peasants. At that time, â€œonly 10 percent of the land was available for 90 percent of the population, most of who[m] were Indians.â€ The United Fruit Company complained to the Eisenhower administration, claiming that Guatemalaâ€™s power of eminent domain had been used to unfairly seize its land, particularly infuriating United Fruit by the fact that Ãrbenz was only prepared to pay the U.S. corporation the artificially low price that United Fruit had assessed its own land for tax purposes, proof of the â€œevils of communism.â€
In 1954, the United States CIA led a coup in Guatemala, which overthrew the Ãrbenz government. The CIA then installed Colonel Carlos Castillo Armas as the countryâ€™s new president. Armas promptly returned all of the disputed landholdings to the United Fruit Company. He began his term as a loyal servitor of the U.S. and volunteered his flexibilities to Vice President Nixon, stating, â€œtell me what you want me to do, and I will do it.â€ Former Boston Globe and New York Times reporter Steven Kinzer maintains that United Fruit was the â€œhook that brought American intervention [to Guatemala].â€
By the 1960s, Guatemala disintegrated into a bloody civil war as Armasâ€™ oppressive dictatorship became more hard-line. The civil war between the newly formed leftist guerrillas and the government lasted for over thirty years, costing approximately 200,000 lives, mostly people of Mayan decent. When the U.S assisted in modernizing the government troops in 1965, kidnappings and assassinations significantly increased in a systematic manner. The warâ€™s victims included farm workers, student activists, Catholic priests, and labor leaders who were part of a non-violent social movement. The war was devastating; more people were killed in this conflict than in any other Latin American war. The valiant efforts of the Guatemalan Historical Clarification Commission,6 which the government initiated at the end of the war, identified the genocide in the Mayan communities. Unfortunately, the report did not soften the culture of violence and racism fueled for thirty years, the effects of which still linger today.
The Peace Accords of 1996 ending Guatemalaâ€™s Civil War obligated the government to facilitate the formation of independent trade unions, providing an option for workers as well as other victims to hold their employers to a degree of accountability. The trade union stipulation, however, was not enforced. In 2003, Guatemala gave up this apparent ghost-like stipulation and amended its National Labor Code in order to reduce union guarantees and responsibility, such as making the right to strike â€œillegal [when used] in nonessential services.â€ Unsurprisingly, transportation was deemed nonessential, adding to the Labor Code the right to confiscate traditional prerogatives from the trade unionistsâ€™ list of powers.
How to Price a Banana
If one examines the sales-side of production, banana pricing proves to be an elusive topic. Fearing competition and the possibility of being classified as a monopoly, MNCâ€™s are careful not to disclose pricing information. The lack of information also keeps the majority of the local population, as well as eventual consumers, relatively ignorant. Pricing decisions are kept under wraps while giant MNCs, along with jobbers, wholesalers, and supermarkets, discreetly comply with their marketing strategies.
Mysteriously, competing national grocery store chains consistently appear to have the same price listed for bananas. Statistical evidence is quite hard to find. Retail stores protect their buying and selling prices and generally do not share this information with the public. MNCs are also evasive. Supermarket prices for May 2010 on bananas throughout the U.S. did not vary substantially outside of $.50/lb and $1.27/lb.8 One statistic, though based on very little data, reports that the average price of bananas for the past 15 years (prior to the last seven years) was approximately $.26 (dollar/lb).
Banana prices are generally determined at the retail stage. Transnational marketing companies have far more power than banana producers to determine the eventual selling price. The UK daily Independent wrote about UK banana price cuts that halved the cost to the average consumer; the cuts lowered the price of bananas below the costs of growing, picking, and distributing them. The European Union (EU) provides the worldâ€™s largest banana market, and countries belonging to the EU, such as the UK, have a major impact on the banana industry. While the MNCs continue to understate the impact of the price war on the industry, banana farmers and workers have suffered from the price cuts. Similar supermarket price wars are also taking place in the U.S., further devaluing the banana. The Fairtrade Foundation, an organization that develops and reviews fair trade standards, states that these wars and subsequent price cuts are highly irresponsible, particularly when banana farmers are already facing their own economic crisis.
In 2008, the European Commission fined banana import companies for fixing prices in Europe. Three companies participated in this cartel: Chiquita, Dole, and Weichert. In keeping with historical precedent, Chiquita managed to dodge the fines. Dole and Weichert together had to pay â‚¬60.3 million total; however, if Chiquita had been required to pay its fines, the total cost of penalties would have more than doubled. Chiquita escaped penalty as a result of a loop-hole in â€œa clause that allows the Commission to exempt or lower fines if a company informs the Commission of illegal activities,â€ which was reported in an article from Europeanvoice.com. However, the fine paid by Dole and Weichert does not amount to even 10 percent of their â‚¬2.5 billion income for the same period.13 Therefore, the fines are ineffective deterrents for such actions.
A Deeper Look into the Multinationals: Dole, Chiquita, Del Monte
Three main companiesâ€”Dole, Chiquita, and Del Monteâ€”dominate the banana industry in Latin America. As noted earlier, these MNCs have participated in cartels, have used their enormous political influence, and have chronically abused the rights of their workers. Their bright, colorful, and seemingly perfect images promulgated by expensive public relations campaigns and multi-million-dollar advertising budgets do not show the sordid reality behind these fruit companies that have had such a negative impact around the world.
In Guatemala, Chiquita Brand (United Fruit) has historically maintained a monopoly: no other brand successfully competed in the Guatemalan banana industry. Kinzer, who co-authored Bitter Fruit: The Story of the American Coup in Guatemala, argues, â€œUnited Fruit Company dominated for decades and distorted the development of a middle class.â€ A middle class is an important ingredient associated with the development of democracy and equality. United Fruit, disdainful of competitors, contemptuous of organized labor, and enraged by the 1950s land redistribution, took action against policies that would threaten its singular control of the banana industry. Using its connections with Washington, D.C. and the CIA, United Fruit managed to dispose of the regimes at odds with its agenda and arranged to install its own singular degree of control. Kinzer went so far as to say that â€œUnited Fruit was better connected to Washington than any other company in the U.S. The contacts that the company were able to make in Washington were unparalleled.â€ For example, John Foster Dulles, the Secretary of State during the Eisenhower administration, was a former lawyer for United Fruit. Dullesâ€™ brother, the chief of the CIA at that time, was also heavily involved with United Fruit. These two, along with numerous other high-ranking government officials, well-placed administrators, and corporate figures, shaped the U.S. intervention in Guatemala and, consequently, the fate of the countryâ€™s subsistence and peasant farmers.
Free Trade or Fair Trade?
Guatemala imports far more than it exports, thus creating a growing trade deficit over the past twenty-five years, which has sharply increased during the last five years. There are no tariffs or import quota restrictions in the U.S. for bananas, and the cost of transportation from Guatemala to the U.S. is lower than from most developed countries because there is less distance to cover: the shorter the ocean distance, the lower the price. In 2008, Guatemala was the 17th largest agriculture supplier to the U.S., with bananas and plantains as the leading exports.
Guatemala has entered a number of Free Trade Agreements (FTAs) within the hemisphere, most notably the Dominican Republic-Central American Free Trade Agreement, or DR-CAFTA. In its most essential form, DR-CAFTA focuses on reducing tariffs on U.S. goods entering the region. Originally called CAFTA, the agreement created an FTA among the Central American countries of Guatemala, Costa Rica, El Salvador, Honduras, and Nicaragua, along with the United States. The Dominican Republic joined the pact in 2004 and renamed the agreement accordingly. DR-CAFTA is perceived as a stepping-stone towards a more ambitious FTA with all of the Americas, except Cuba.
Guatemala and other underdeveloped countries, eager for economic connections and outside markets, saw the DR-CAFTA as a tempting offer they could not pass up. These agreements help to narrow the gap among per-capita incomes within the region. However, FTAs may pose a mortal danger to trade unions, and many workers already feel they have lost the ability to voice complaints about abuses suffered or discriminatory edicts which clamp down on workersâ€™ rights. No longer do MNCs listen to their requests, and trade union leaders receive frequent death threats that are all too frequently fulfilled if the leaders do not acquiesce to corporate demands or step down. The Human Rights Officer of The International Trade Union Confederation (ITUC), Manuela ChavÃ©z, disclosed the full dimension of the troubling situation in an interview. She claimed that CAFTA is â€œan absolute nightmare for Latin America.â€ Various businesses in Guatemala, as well as other Latin American countries, cannot compete with United States producers. CAFTA does not call for the same level of respect for Central American labor rights, as called for by other bodies, such as the International Labor Organization (ILO). It leaves room for foreign-based MNCs to come in and abuse their workers without being held accountable and even the AFL-CIO has filed a complaint against the lack of workersâ€™ rights under CAFTA.
Starting with the Clinton administration, the U.S. has relentlessly fought and eventually defeated the EUâ€™s preferential trade agreement with its former colonies, known as the LOME agreement that was extended to former dependencies in Africa, the Caribbean, and the Pacific (ACP countries). Among other exports, these deals granted tariff concessions for banana exports, coming from the former British colonies, Guatemala and the US, along with Honduras, Mexico, and Ecuador, filed a complaint against LOME before World Trade Organization (WTO), arguing that it was not consistent with the WTOâ€™s rules. The anti-LOME group argued that the same treatment should be given to all WTO countries, especially when many of them heavily depended on banana exports to Europe. The WTO, previously GATT, did not have any concerns with the principle of preferential trade but maintained that all WTO countries should be included. Accordingly, the WTO filed a ruling requiring that the ACP trade agreement be disbanded. The official WTO report states:
The fundamental principles and rules of the WTO are designed to foster the development of countries, not impede it. We conclude that the system is flexible enough to allow, through WTO-consistent trade and nontrade measures, appropriate policy responses in the wide variety of circumstances across countries, including countries that are currently heavily dependent on the production and commercialization of bananas.
The Normalcy of Abuse
Abuses of workersâ€™ rights and human rights extend beyond the banana industry in Guatemala into other Latin American agricultural pursuits. The ITUC has amassed copies of Guatemalan documents and letters depicting the abuses of the rights of workers and farmers conducted in areas throughout the country. The documents reported cases of women who were locked up, verbally and physically abused, victimized, and forced to work long hours in miserable conditions. Manuela ChavÃ©z elaborated on the plights of eight women, whom she knew personally, who approached the Ministry of Labor to seek rectification for their mistreatment. The agencyâ€™s staff refused to identify itself and shut all the gates of the Ministryâ€™s building, trapping the women inside. There, the staff duct-taped the womenâ€™s mouths and verbally insulted them. A few journalists were outside the gates calling for their release. However, when the women were finally let out, the journalists could not write about what they had witnessed. They were forbidden from publishing a single article about the chaos that had taken place at the ministry; this was yet another attempt to quash the media and keep it from exposing human rights violations to the public.
When the Movimiento Sindical IndÃgena y Campesino Guatmalteco (MSICG), a labor organization advocating Guatemalan trade union rights, confronted the Ministry of Labor about the harassment, the agency did nothing to address the womenâ€™s concerns. Chiquita eventually took control of the situation. Chiquita bypassed all of the Guatemalan agencies in order to avoid accountability and deleted all complaints against the corporation that could be found on the public record. Leaders of the banana unions were excluded from any of the official dialogues with Chiquita. The silent but pervasive policy aimed to oppress Guatemalan workers and to ensure that the systematic human rights violations did not make headline news. Manuela ChavÃ©z described this situation perfectly as â€œa perverse cycle.â€
Organizing workers always has been one the most dangerous activities to undertake in Guatemala: organization represents a lethal threat to the all-powerful agricultural and industrial owners. ITUC published a list of the top twenty-five most dangerous countries for trade unionists, placing Guatemala in second place behind only Colombia for three years in a row. Guatemala purportedly has an official labor code that ensures that â€œevery worker has the right to a minimum wage.â€ The minimum wage in Guatemala is Q52/day ($6.27/day), but the basic cost of living is estimated at Q3226/month ($389/month). The minimum hourly figure without question is below the basic cost of living, and most workers do not even earn this amount. Manuela ChavÃ©z reports that Guatemalan workers receive pay that is â€œfar from the minimum wage.â€ In fact, women are statistically paid 24 percent less than men for the same work. The UNDP posits â€œ160,000 women and girls are domestic employees, and are therefore not protected by Guatemalan labor codes.â€ However, the violation of the labor codes is only part of the problem: a huge informal economy in Guatemala exists as well.
Some key facts about trade unions in Guatemala provide more insight:
â€¢ 8 percent of formal sector workers were unionized in 2008.
â€¢ 2 percent of all Guatemalan workers are unionized vs. 12.4 percent of all workers in the U.S.
â€¢ The Guatemalan president can terminate any strike deemed to â€œaffect essential activities.â€ Employers can dismiss any workers who participate in a strike, violating the right to freedom of association.
â€¢ Four trade union leaders were murdered in 2007, 9 in 2008, and 5 in 2009. They were found in the banana, healthcare, campesino, indigenous, street vendor, electricity and distribution sectors.
Labor rights violations continue to increase in Guatemala, even more so following the signing of DR-CAFTA. Murders of labor activists are widespreadâ€”over forty activists have been killed since January 2006, and at least six within the past six months. A high percentage of the deaths of union leaders have been within the banana sector. Victor Galvez, a well-known community leader and human rights advocate, is among the organizers who have been murdered. Galvezâ€™s assassination involved between eighteen and thirty-six shots. There were no forensic tests administered at the crime scene and not a single suspect was arrested.
â€œThey Have Not Lost Hopeâ€
The condition of Guatemalan workers is very precarious, and the demands that they are making would appear modest when compared to the average American employee. They continually work to earn the respect of their rights, compliance with Conventions 87 and 98 of the Guatemalan Labor Code, fulfillment of their calls for decent salaries and hours, implementation of the right of an education for their children, and an end to violence. ITUC is one of the few organizations that continue to advocate for the rights of workers. Its members write letters to protest President Ãlvaro Colomâ€™s policies, launch appeals, demand rights for trade unionists, support their affiliates at the International Labor Conference, and, in several cases, file complaints with the ILO. ITUC represents 178 million workers around the world. It consists of 311 organizations with trade union centers in 155 countries, and 40 percent of the laborers ITUC represents are women. Guatemala has three organizations affiliated with the ITUC with MSICG as the largest, autonomous trade movement counted among its number.
Guatemalan workers, specifically in the banana industry, appear to be caught up in a dismal trend of rights abuses. Beginning in the early 1900s, American intervention in Central America has always benefitted MNCs that repeatedly have mistreated human and workersâ€™ rights. These abuses and international price wars, involving the worldâ€™s banana market, only adds to the injustices featured in the trade of the fruit. Even with leadership provided by those who happen to be well-intentioned over the implementation of DR-CAFTA, there is no accountability affecting the MNCs that will ensure that workersâ€™ rights are fully respected.
Furthermore, Carlos Castresana, a Spanish judge leading the ComisiÃ³n Internacional Contra la Impunidad en Guatemala (CICIG), a UN commission tasked to fight impunity, resigned on June 7, 2010, out of frustration over panel recommendations that have not been applied. He felt he could do nothing more to help Guatemalan workers because of obstructions in the political process by the government.
Accumulation of these occurrences provokes a sense of failure; yet after much mistreatment, violence, and abuse, workers on Guatemalan banana plantations continue to advocate and fight for their rights. Asked if these workers wanted to give up or had lost confidence in their cause, Manuela ChavÃ©z responded without hesitation: â€œThe trade unions are fighting, even though it is very dangerous they havenâ€™t lost hope.â€
B.B. Sanford is a research associate with Council on Hemispheric Affairs, from this article is adapted.