Meso-Level Policies

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.

III.3.2.2 Meso-Level Policies

Policies addressed to banana production are diverse and attempt to solve the specific strategic problems of each country. Table III.5 shows the main meso-level policies of selected producing/exporting countries.

Social and environmental standards have been strongly enforced in all countries by the technical assistance of public and private agents. This enforcement has been influenced by four factors: the pressure of social and interest groups (for example, unions in producing/exporting countries and campaigns of NGOs such as BananaLink and BanaFair in importing countries); the national consciousness of producers (seen in projects such as CORBANA in Costa Rica and AUGURA in Colombia); demand-side market pressure (including the Euro-Retailer Produce Working Group—EUREP—

certifications of Good Agricultural Practices, EUREP-GAP¹⁰⁶, and the market strategies of TNCs); and finally, the governmental policies of foreign countries (such as the EU institutions’ promotion of environmentally friendly production via qualitative aid to ACP producers).

The utilization of financial policies has been also a normal practice in producing/exporting countries. Price supports commonly take the forms of direct payments or tax exemptions. In the dollar countries, this assistance comes from the national governments. In contrast, ACP and EU producers’ support comes from the supranational EU. Furthermore, temporary measures (safeguards), independent of

105 Statistical data on costs are available but their reliability is often questioned. See section IV.2.1

106 EUREP-GAP is the certification of a set of European supermarkets judged by quality and labor standards of producing countries.

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region, are used throughout the banana industry. The main reason given for implementing a safeguard is unfavorable weather conditions. All other subsidization regulations are being increasingly prohibited by the WTO and have to be changed according to the Agreement on Agriculture of the GATT¹⁰⁷.

Administrative support remains the most flexible tool for governmental and institutional support of the banana industry. The role of the private sectors in Colombia and Costa Rica (AUGURA and CORBANA respectively) are considerable. Ecuador depends on governmental decisions to be functional, because of the permanent differences between producers and exporting firms (mainly over the determination of the reference price)¹⁰⁸. According to the report of ACP country assistance (2000), a complete reform of EU assistance would be necessary to achieve competitiveness. Only Cameroon, Ivory Coast, Belize, and the Dominican Republic have increased in their competitive advantages, not so much because of the EU assistance as because of market circumstances and labor cost advantages (Hubbard et al. 2000a p. xi). Despite many agreements and rules (including the Banana Protocols, Lomé and Cotonou Conventions¹⁰⁹, over 20 years of EU production assistance, and the Windward Islands’

agreement between producers, the government, and exporters¹¹⁰), Caribbean exports remain price uncompetitive with Latin American producers¹¹¹.

107 See Section I.4.2.

108 In Ecuador there is a reference price that exporters must pay to producers (Baquero et al. 2004). This price is supposed to be set by consensus. However, due to the lack of agreement between producers and exporters, it has always been fixed by government decree.

109 For a summary of the different conventions and protocols, see the Cotonou Infokit of January 2001.

110 On the 29^th of September, 1995, a compromise was signed by the Prime Ministers and the Donor Consortium (EU included) to make the core banana industry capable of competing in liberalized markets by he year 2005. This compromise was written in the Production Recovery Plan of the Windward Islands Banana Industry.

111 This is also corroborated by Rhys & Goate (2003, p. 24). They argue that there are three main determinants of producer prices in the Windward Islands: UK price fluctuations, exchange rate movements, and competition from dollar zone and African producers.

Table III.5 Meso-Level Policies of Selected Producing/exporting Countries

Technical Financial Administrative

Colombia

- Governmental and guild institutions, particularly research and development support for the region of Urabá.

- Program (Banatura) to support environmental and social development by the private guild AUGURA.

- Private certifications of quality, environmental, and social issues.

- Elimination of tax support for exports, in line with the WTO agreements.

- Plan Vallejo: program to import duty-free raw materials used in the processes of exports.

- Fund of Exchange Adjustment: temporary fund to subsidize flower and banana producers who are highly affected by devaluation effects.

- Productive Chains program for bananas:

Governmental program to ease interaction between the public and private sectors.

Costa Rica

- Research assistance, sustainable development, market information, marketing campaigns, and credit facilities by the public-private institution CORBANA.

- Private certifications of quality environmental, and social issues.

,

- Temporary aid to compensate producers’ losses to weather conditions or market instabilities.

- Rulings to guarantee a minimum price for products of exporting firms (based on international prices).

- CORBANA supports companies through promotion, providing market information, and facilitating interaction between government, producers, and exporters.

Ecuador

- Since 1994, environmental regulations for the process of production and to introduce environmental standards as factors of competitiveness.

- Private certifications of quality environmental, and social issues.

,

- Exemption from financial agreements for producers (temporary measure)

National Banana Program (1994):

- Reference price to be paid to producers by exporting firms.

- Temporary direct investments when economic shocks or disturbances in weather or market conditions occur.

- Since 1997, creation of the Law to Stimulate and Control the Production and Commercialization of Bananas.

- Anti-trust laws force large-scale agents to buy from small producers according to a reference price.

- Since 1999, enforcement of environmental regulations.

- National Finance Corporation: fund to facilitate the payments of the reference price between producers and exporting firms.

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Western Africa & Windward Islands - The EU assistance: aid package to support the ACP banana industry technically and financially. ^a According to , Regulation (EEC) No. 404/1993, the main objectives of EU assistance have been to establish producers’ organizations which meet Community demands (amount and quality) and to develop infrastructure and service capacity for social and environmental standards. ^b

- Banana Production Recovery Plan: since 1998, public-private initiative increases production volumes in the Windward Islands. It maintains grower prices and provides technical support to the producers.

- The EU system of marketing, distribution, and sale of bananas is the main basis of administrative support for ACP countries.

- The government regulates the work of Banana Growers Associations.

European Producers

There is a mechanism of compensatory payments created as a response to the loss of communitarian companies’ competitiveness. ^c

- The COM bananas regulates and administrates technical and financial assistance.

- Temporary national policies provide support during market instabilities and/or adverse weather conditions.

a Council Regulation 2686/94, later extended by Council Regulation 2320/96, contains the legal framework of , EU assistance to ACP banana producers.

b The Evaluation Report 2000 defines “current competitiveness” as “the ability to supply the market price without assistance. Producer’s revenue at least cover costs at the present time,” and “trend competitiveness” is defined as “the ability to innovate technically and organizationally to meet the needs of the market, and thereby maintain or increase profitability relative to alternative uses for the land, capital, labor, and management skills employed in the industry, so that production is maintained or expanded”

Although the general terms of the assistance are the same for all ACP beneficiary countries, the amounts and means of delivery are specific to each situation, even at the local level. Oddly, as the country is less competitive, it receives more assistance.

c See Annex D

Source: Author’s elaboration based on SENA (2003), Notifax – Corbana (various issues), UNEP (2002), Baquero (2004), Commonwealth of St. Lucia (1999), & EU Regulations.

III. DETERMINANTS OF COMPETITIVENESS

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Finally, European producers’ dependency on compensatory payments (more than 50 percent of the income of EU growers comes from compensatory aid) also affects the EU’s ability to keep competitive producers¹¹². The compensations are seen as unfair by domestic EU producers because of the calculation methodology. Some proposals suggest differential levels of compensation according to the region in order to avoid the current cross-subsidization among EU producers¹¹³.

Meso-level policies seem to be a decisive factor for the enforcement of competitiveness, whether for producing or importing countries. Clearly, it is necessary to measure the implications of policies on the competitiveness of producing/exporting countries.