Costs go bananas

Banana producers in Latin America wrestle with higher costs and standards.

Banana exporting countries in Latin America have experienced sharp cost increases due to a rise in prices of fertilisers, cardboard and plastic. This, coupled with the loss of production caused by the application of new standards for residue limits are causing unexpected difficulties to the sector.

An executive at a banana producer in Colombia explained that the exchange rate wasn’t helping, “Some of our inputs are inflexible and are based on international prices so we are exposed to exchange rates. We need to open new markets and sell in international currencies to help us offset these cost increases.”

“Some of our inputs are inflexible and are based on international prices so we are exposed to exchange rates.”

Executive, banana producer, Colombia

The increase in costs puts at risk the export competitiveness of Latin American bananas. More than 808,000 families in the region live off the banana industry and, in countries like Ecuador the sector generates 2% of the country’s GDP. In addition to Ecuador, Costa Rica and Colombia are among the top-five global banana producing countries, with India and the Philippines.

The banana industry makes an important contribution to Colombia’s economy, reaching about USD 900 million per annum in sales. An advisor to the industry commented, “Banana exports are so important for Colombia that approximately 95% of the country’s production is exported, in some regions bananas account for more than 80% of GDP.”

Instead of triggering cooperation between countries, the current situation has led to a race to the bottom in cost cutting terms, which mostly affects workers. Ecuador has registered a drastic reduction of permanent contracts, Costa Rican workers often average 11 daily work hours and, in Guatemala basic labour rights are often disregarded.

In early September, producers and exporters in Colombia, Ecuador, Guatemala, Honduras, Dominican Republic and Costa Rica, which account to 60% of global banana production, issued a press release calling on all actors in the value chain to assume part of the costs.

“For now, supermarkets in Europe, especially Germany, are not recognising the situation and are refusing to increase banana prices.”

Manager, CORNANA, Costa Rica

A manager at CORNANA, the National Banana Corporation of Cost Rica explained, “For now, supermarkets in Europe, especially Germany, are not recognising the situation and are refusing to increase banana prices and insist on maintaining the same price as before the pandemic. This has a negative impact on producers and is forcing us to look for creative options, including new markets. Undoubtedly, we need to join forces with our neighbours to add weight to our negotiating position.”

Banana producers are calling for a shared responsibility model in which costs, risks and gains are more equally shared. They argue that the benefits of this model will also improve the efficiency of investments, and increase the traceability, which will result in higher quality product, better conditions for labourers and a more sustainable production model.

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