Factor Conditions

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 in Selected Producing/Exporting Countries

III.3.2.1 Factor Conditions

- Land¹⁰¹

UNCTAD (2003) asserts that land is still available in Latin America for banana production, even in Ecuador, where the government has been forced to control production in order to avoid oversupply. On the other hand, the Windward Islands’

production has been limited by geographical conditions. Further analysis by NERA and OPM (2004, p. 79) suggests that Cameroon and Costa Rica are reaching their limits of land suitable for production.

The scale of the cultivation is also an important determinant of competitiveness.

Plantations are more common in Colombia (see cooperative firms in Urabá), Costa Rica (run by TNCs), and to some extent in Ecuador (in large domestic firms). There are also small producers in Colombia (Magdalena) and Ecuador.

The production within Caribbean countries is very diverse. Belize’s production is very similar to the standards of plantations in dollar countries. Jamaica has two large plantations for exports and a set of small farmers with less than one hectare producing for the internal market¹⁰². The highest volume of Caribbean exports comes from the Windward Islands, where small family farmers are predominant. The decrease of land use for banana production has been due to the withdrawal of many unproductive units and the development of new alternatives, such as tourism and illegal activities (including drug trafficking).

101 The graphs in Annex C present trends of production and productivity for the period 1960 – 2004.

102 Jamaican figures are difficult to interpret. According to the FAO production, Jamaica produced approximately 130,000 tons during the 1990s. However, Jamaican officers report between 200,000 and 250,000 tons since 1990 (Rhys & Goate 2003, p. 22).

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Western African production consists predominantly of small-scale cultivation and cooperatives of producers. However, TNCs have recently been investing in West African production because of the favorable costs and geographical conditions of the area. The major increase in West African exports indicates that these countries are approaching limits in sustainability and total usage of land for banana cultivation.

However, as Rhys & Goate (2003) argue, further investments from large companies indicate the opposite, and there is no technical data on availability of land in the area.

Finally, the EU producers are mainly of small scale and of low productivity. However, in contrast with the dollar countries, they do receive additional financial support from the EU to compensate for their low productivity¹⁰³.

Productivity is strongly related to the scale of cultivation. The best performers are plantations located in Costa Rica and Colombia. Ecuador has lower productivity than the other Latin American countries mainly because of the lower amount of cultivated land. The increasing exports of Ecuador are due to increases in production and suggest that potential to increase productivity remains.

Among ACP countries, only West African countries and Belize have figures similar to the dollar countries. However, the incipient control of plant diseases still threatens future productivity improvements in West African cultivation (Hubbard et al. 2000c).

The least productive regions are the Windward Islands and the EU producers, which, according to Hubbard et al. (2000a) and the Court of Auditors (2002), are only sustained by virtue of EU financial assistance.

- Labor

The cluster has led to specialization of workers in regions where plantations are predominant. However, the case of Costa Rica has been particularly worrisome for landholders. This country has the highest labor costs of the dollar region (Brenes and Madrigal 2003, p. 113) and has motivated the migration of temporary workers from poorer neighbor countries, putting social pressure on local Costa Rican workers.

103 See Annex D.

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For Colombia labor is a main competitive advantage; salaries and social issues have always been successfully negotiated between workers and producers¹⁰⁴. In contrast, Ecuador’s labor history of strikes, and social pressure has been one of its most notorious disadvantages. Nonetheless, this country’s low salaries are broadly cited as one of its competitive advantages.

Where small-scale production is predominant, labor is the central factor of production.

The Windward Islands and European overseas territories have the highest labor costs worldwide in the banana sector. Among small producers in West Africa and dollar countries, salaries are low and social conditions are poor. However, lower labor costs are advantageous for the regions’ labor-intensive banana production.

Social standards have become an important issue within countries’ competitiveness. The increase of labor standards at the expense of higher labor costs has been recognized internationally as a positive factor of competitiveness. Colombia and Costa Rica are the most advanced countries in this sense. They are opposed by Ecuador, the Windward Islands, and Western Africa, which still fail to meet international standards. However, this is compensated for by their lower labor costs¹⁰⁵.

- Capital, Innovation, and Technology

UNEP (2002) classifies the technology used in cultivated areas by infrastructure and agronomic management. A technology-based (capital-intensive) plantation includes irrigation systems, drainage channels, integrated production processes (cableways, packaging, standardized processes), and disease control. Semi-technological banana cultivators meet some of these requirements, and non-technological growers meet few to none of them.

Plantations from Colombia (in Urabá), Costa Rica, and Ecuador (particularly larger companies) are characterized by high technological development, including artificial irrigation (when necessary) and functional infrastructure. Small-scale producers from

104 However, this situation has been disrupted by conflicts between the government, paramilitary, and guerrilla groups that have been acting violently in the zones of production. Between 1988 and 1995, in particular, production in Urabá was strongly affected by the social and political conflicts resulting from extreme violence. Banana firms transferred most of their production to the region of Magdalena or to Ecuador and Costa Rica. Since 1996 production in Urabá has revived (Bonet 2000, p. 13).

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Colombia (in Magdalena), Ecuador, the Windward Islands, West Africa, and Europe are classified as semi-technological cultivators. Most non-technological cultivation is not of sufficiently high quality to sell in international markets.

With exceptions in Colombia and Costa Rica, few public institutions support significant amounts of research and development (R&D). In most countries, the governments are not involved in R&D, and investments depend predominantly on private marketing and/or exporting firms.