competitiveness. Unfortunately the lack of these types of research is pronounced in all countries, especially those where the overall economy is highly dependent on the banana trade (such as the Windward Islands)93. Researchers have focused firstly on the economic assessment of trade flows (Valles 1968; Roche 1998; FAO 2003b; UNCTAD 2003) and secondly on the effects of the “banana wars” (Josling and Taylor 2003;
Striffler and Moberg 2003; Myers 2004)94. The internal determinants of (producing/exporting) country cases are a necessary research topic, and this section approaches these issues.
The comparative perspective in this section follows a twofold procedure. First the competitive basis of the selected producing/exporting countries’ clusters is briefly described, and second, based on the classification of the parameters from the previous section, the determinants of competitiveness are analyzed. A preliminary evaluation of the environment of competitiveness based on these parameters is presented at the end of this chapter in Section III.6, when the cluster-value chain analysis is completed.
III.3.1 Competitive Basis of the Cluster Model in Selected Producing/Exporting Countries
The traditional theories discussed in the second chapter argued that the main forces for development of a cluster are common location among firms and the need to achieve collective efficiency (external economies and joint action)95. In addition, modern developments of the theory and the inclusion of the value chain analysis incorporate size of firms, international aspects, and bargaining power of economic agents. This section focuses on the assumptions of location and collective efficiency as applied to the banana sector. The remaining assumptions of the model are discussed in Section III.4, where the strategies, structure, and rivalry of the firms are included.
93 Studies dealing with socio-economic issues of the Caribbean region include ILO (1999), the Commonwealth of Saint Lucia (2002) and the Evaluation of the EU Assistance to ACP Banana Producers by Hubbard et al. (2000 a &
b).
94 These are only examples of general studies of the banana wars. For more specific approaches of studies related to this topic refer to the fourth chapter.
95 In Section II.2.2 the factor conditions determinant is introduced as the basis for comparative and competitive advantage analysis. Additionally in Section II.3.2, the fundamentals (or basis) of the cluster analysis are mentioned.
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The banana industry can be considered as a deliberate cluster under the classification of Schmitz and Nadvi (1999)96. The special weather and agrological conditions from India and China97 were also found in Africa and Latin America where productivity and marketing links with demanding countries were more favourable. Therefore, bananas were gradually moved to these alternative tropical regions in order to achieve the necessary scale for commercial purposes. Thus, the condition of location, responsible for the development of a cluster, was also fulfilled.
Table III.3 Distribution of Banana Production in Selected Countries Share of Production (%)
a Ecuador includes Dole and large companies (Noboa, Reybanpac and Palmar).
b The area and percentage of production varies depending on the source. Anecdotal information shows that there are more than 20,000 hectares of bananas not registered in the agricultural census.
c Data from 1996
Source: Author’s elaboration based on Brenes and Madrigal (2003), FAO (2003b), (Hubbard et al.
2000b), and national agencies (CORBANA and AUGURA)
In addition, the commercial viability of the banana business depends on the potential to develop the necessary infrastructure and industrial integration (vertical and horizontal) to export. Only large companies were able to achieve the necessary scale to make business. The establishment of large companies, in some cases was facilitated by strong
96 See section II.2.1
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influence of foreign capital from developed countries without any interference from governments’ regulations or even with a governmental permission98. Table III.3 shows the national share of cultivation of the specific regions where these conditions were fulfilled and the share of the ownership either by TNCs or by independent producers99. In spite of the economic interest of large companies, in all producing/exporting countries, banana cultivation for commercial purposes has been linked with colonization problems and local social struggles.
Location matters in the banana sector because production is highly sensitive to risks of diseases and changing weather conditions. For example, production in the Caribbean has been affected by hurricanes, and in these risky regions large companies have been less interested in making investments in production. This has motivated smallholders to cooperate with one another. Once they achieve the necessary scale and obtain the necessary raw materials and inputs, they are able to compete internationally.
Furthermore, they have been supported technically, financially, and diplomatically100 first by colonial links with the UK and later by the EU preferential regime. Only once all these conditions were met did marketing firms became interested in trading Caribbean bananas.
Production in dollar countries includes both smallholders and large companies.
Production units are linked horizontally with firms located in neighboring regions to provide specialized raw materials and inputs while reducing transaction costs.
In both regions, the dollar zone and the Caribbean, smallholders are motivated to cooperate in order to achieve access to international markets. Moreover, they compete with larger firms and are forced to develop new strategies to survive in the market.
Thus, they are examples of the joint action assumption of the cluster analysis. As it is explained in section III.4.1 the strategy of former smallholders in the past results in the formation of large companies such as UNIBAN in Colombia and WIBDECO in the Windward Islands. They found the necessary scale to compete internationally even against the largest TNCs.
97 The agrological origin of the bananas is recorded by historians to India and south of China.
98 From this relationship between large firms and governments emerged the well-known term “Banana Republic”.
99 Annex C shows some figures and trends of the selected producing countries.
100 For a complete political-economy approach to the Caribbean situation and the colonial relationships with the UK through the banana trade, see Clegg (2002) and Myers (2004).
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Development in the banana sector has been driven by the external economies inherent in the business. For example, in Ecuador and Colombia the agglomeration of small producers in specific regions motivates larger national firms to increase their scale of production. Meanwhile, TNCs in other regions, such as Costa Rica, Central America, and more recently Western Africa, have been the most interested in becoming producers. The agglomeration of banana producers has also strengthened interest in participating in the industry among specialized providers of raw materials and inputs.
These links with international and specialized firms have provoked technological spillovers that are reflected in increasing productivity, particularly in dollar and West African countries. The specialization of workers is the remaining effect derived from the external economies of clusters. Table III.4 shows the numbers of workers directly involved in the banana industry in selected countries and their share in the active agricultural economic population. The overall labor force dependency on banana cultivation seems to be rather important for countries such as Ecuador and the Windward Islands. However, it should be noted that for other producing countries, the labor force differs by region and that countries differ in size and in their reliance on other sectors (industry, services). Conclusions should therefore be drawn with care.
Table III.4 Workers in the Banana Industry of Selected Producing/Exporting Countries
Direct Workers As % of Agricultural Economic Active
Population
Colombia 35,000 (2002) 0.01%
Costa Rica 33,800 (2000) 0.10%
Ecuador 380,000 (2003) 30,42%
Cameroon 10,000 (2001) 0.003%
Windward Islands 7,300 (2001) 16.59%
Source: Author’s elaboration based on FAO (2003b), Rhys & Goate (2003), national agencies and FAOstat
In summary, banana has been a deliberated cluster enhanced with the particular agrological and climate advantages of the producer regions. The location of plantations were based on these criteria in order to improve the cluster by the vertical and horizontal integration with other industries located in the same region of production.
However, as explained in the theoretical framework, additional assumptions and a broader methodology are necessary to explain competitiveness. The following section
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deals with the determinants of competitiveness of the selected producing/exporting countries from a comparative perspective. Analysis of firms will then confirm the remaining aspects of the cluster-value chain model.
III.3.2 Comparative Perspective of the Internal Determinants of Competitiveness