Nicaragua - The Banana Agreement

September 25, 2007

As the U.S. government's economic and political attacks on the Nicaraguan revolutionary pro- cess increased, Standard Fruit became the first major U.S. transnational to reach a mutually satisfactory nationalization agree- ment with the new government. As Minister of Agricultural Development, Sandinista Com- mander Jaime Wheelock put it, "from now on the relationship will be between partners, not boss and subordinate." On December 20, 1980, Nicaragua's revolutionary govern- ment, prompted by months of escalating pressure from planta- tion workers, took over the management of the nation's 16 banana estates. This control was ratified in a January 12, 1981 agreement with the sole buyer of Nicaragua's banana exports, Stan- dard Fruit, a subsidiary of Castle and Cooke. According to the settlement, Nicaragua will buy out all of Stan- dard Fruit's investment in Nicaragua for $13 million. This will be financed by a no-interest loan from Castle and Cooke to the government, to be repaid over a five year period. An increase in the export price of bananas, from $3.70 to $4.30 per box, will help liq- uidate the loan. And annual price revisions will take cost increases into account. As part of the settlement, Stan- dard will continue to provide 44 technical assistance and guaranteed access to U.S. markets over the five year period. Standard's local partners will con- tinue to hold title to their land. Because bananas generally ac- count for less than 10% of Nicaragua's agro-exports, about $25 million annually, the impor- tance of the settlement may be more political than economic. Still, after months of class conflict in the banana plantations, many observers believed that Nicaragua was about to lose a needed source of foreign exchange. Yet the revolutionary government suc- ceeded in reaching a settlement which, surprisingly, both the con- servative daily, La Prensa, and the Sandinista newspaper, Barricada, considered to be in the national in- terest. Banana Background Nicaragua's banana production began ten years ago when Stan- dard first set up "production com- panies" with local landlords. Their organization reflected the strategy pursued by U.S. agribusiness in Latin America during the late 1950s and 1960s. Following the 1953 expropriation of United Fruit's holdings in Guatemala by the Arbenz government, agribusiness concerns found it politically prudent to divest themselves of large landholdings. By paying a nominal rent to local partners, who held title to the land, these corporations retained con- trol of production while maintain- ing a low political profile. In this pattern, Nicaraguan banana operations were 20% owned by Standard and 80% own- ed by Nicaraguans. This majority ownership by nationals, however, hardly represented national con- trol. In production decisions Stan- dard had two votes to the local growers' one. Furthermore, the local owners were largely financed by Standard; at the time of the set- tlement they owed Standard some $10 million. As Wheelock put it, the local owners "were proprietors only in a technical sense, and could have been expropriated by Standard at any time." (According to the agreement, part of the rent they will receive from the govern- ment will go to pay their debt to Standard.) While banana production was totally oriented towards the pro- duction of a healthy blemish-free fruit, working and living conditions on the bananeras were among the worst in Somocista Nicaragua- -perhaps second only to the brutal conditions which prevailed in the now-nationalized mines in the north. The workers, a large percentage of whom are women, earned about three dollars a day. Typhoid, hepatitis, tuberculosis, acute pesticide poisoning and work accidents were all endemic among the 3800 workers. Over the years, when workers risked repression pressing for bet- ter conditions, Standard and its local partners went back and forth, passing the buck from one to the other. The workers were never able to establish who really was in charge. All this changed, however, when Anastasio Somoza was overthrown in July 1979. NACLA Reportupdate.update update update Workers Move Soon after the Sandinista vic- tory, the growing unionization of urban and rural workers and the deepening of class conciousness began to be felt in the bananeras. After the workers' first major meeting in April 1980, the growers reacted quickly with a campaign of economic sabotage and layoffs. But the workers refused the employers' orders to cut fruit prematurely and charged that in- correct spraying was being done deliberately to allow plant diseases to spread. By May, thousands of boxes of cut, quality bananas stood rotting as Standard suddenly upped the "finger," the minimum quality re- quirement for export. Unexported bananas meant less export revenues for the government, but local growers cut their losses by selling the bananas on the domestic market. In August the workers took their charges to the Council of State, the revolutionary government's highest expression of "popular power," opening what became a national movement on their behalf. The workers pressed the government to take action, and by November it announced plans to create a state banana production company. It promised badly need- ed housing for the workers and pledged to work to solve their problems with access to basic supplies, health care and wages. As the workers' consciousness developed, so did their militancy, yet they showed a remarkable pa- tience. The Sandinista trade union leadership played a key role in ex- plaining to the workers that, although the government was unable to provide massive or im- mediate improvements, it was Mar/Apr 1981 fighting for their interests. The workers agreed to wait, but their pre-revolutionary fear of voic- ing their demands was over forever. Faith in the future was a common sentiment, a willingness to "suffer today so my children don't tomorrow." As a leader of the banana workers' union stated, "We workers are able to run the bananeras by ourselves, without foreign control. To do this, to do what is best for our revolution, we are ready to give everything." On December 20, 1980, the revolutionary government decreed a full-scale re-organization of banana production. It nationalized control over the local share of the operations, while respecting Stan- dard's marketing role and the local owner's title to the land itself. The government explained that the joint local-Standard companies, claiming bankruptcy, had failed to comply with their labor contracts for four months. While the government had the political muscle to impose its terms on the local growers, Stan- dard still had to be dealt with. The government made its move against a background of heighten- ing domestic class tension. An openly reactionary minority of the business class, including the Nicaraguan banana producers, launched a calculated effort to scare Standard away. La Prensa, the conservative but still widely- read daily, led a major campaign to try to disrupt the new and delicate phase of the negotiations. Standard responded quickly to Intestinal injuries often result from Standard's outmoded practice of hauling bananas along overhead cables by a rope tied to worker's waist. 45update *update. update update Nicaragua's December 20, 1980 move, suspending banana shipments from the country two days later. According to Francisco D'Escoto, Minister-Counselor at the Nicaraguan Embassy and one of the negotiators, Standard's boycott was a result of a "misunderstanding." The decree said 'regulate' and they understood 'confiscate'." Nica Countermove A top-level Nicaraguan negotiating team flew quickly to San Francisco to try to iron out an agreement. Meanwhile, Nicaragua met Standard's unan- nounced suspension with a sur- prise countermove. A rented refrigerator ship loaded the already cut bananas to bring the fruit to market independently. In a massive, well-coordinated operation, 600 members of the Sandinista Popular Army worked secretly day and night to replace Standard's label with a Nicaraguan one. An extra large shipment of 129,000 boxes was loaded on January 9, 1981. In- stead of rotting on the docks, as Standard had hoped, the Ministry of Foreign Trade reaped a hand- some profit. The bananas were sold one week later in Los Angeles to a pre-arranged net- work of 36 buyers. The negotiating mission suc- ceeded in clarifying the govern- ment's position, and on January 12, three days after the cargo was loaded, the five-year agree- ment with Castle and Cooke was announced. Nicaragua was represented in San Franscisco by Commander Wheelock and Dr. Arturo Cruz, a prominent banker and at that time one of the five members of the govern- ing junta. After the junta was 46 streamlined to three members in early March, Cruz was appointed Ambassador to Washington, a move which reflects the impor- tance Nicaragua places on main- taining cordial relations with the United States. Limiting Factors Political and economic con- straints prevented the govern- ment from simply expropriating the operations and turning them over to the workers. At this point they feel the industry is still dependent on Standard's pro- duction expertise and marketing services, which assures them long-term export stability. Although Nicaragua supplies Standard with about one third of its West Coast market, long-term independent marketing of bananas cannot presently be guaranteed. Castle and Cooke is one of three U.S. transnationals that together control 70% of the world banana trade. More importantly, perhaps, are the political constraints. Unilateral expropriation would have further aggravated the FSLN's delicate relations with the private sector. And the government feels it needs their administrative and financial resources to rebuild the war- shattered economy. The Govern- ment of National Reconstruction is thus weaving a complex and careful path, trying to meet popular demands while preserv- ing the precarious participation of business. Given this policy of "national unity," persuasion and negotiation are the preferred methods of resolving conflicts with the private sector, which still controls 60% of the economy. The process of nationalization, reveals both many of the con- straints inherent in the present phase of the Nicaraguan revolu- tion and the FSLN's ability to find satisfactory solutions within these limits. In relation to the private sector, the government was able to turn a relatively weak bargaining postion into both a step away from dependence on transnational capital and a political defeat for domestic reaction. The government also proved itself to be responsive to the demands of the workers, albeit within the limits set by the policy of national unity. The accord also bolsters Nicaragua interna- tionally. It improves the climate for Nicaragua's massive debt renego- tiations, while acting to reduce the political feasibility of a U.S.-led economic blockade. The Final Irony In an interesting contrast to his company's well-documented his- tory of intervention and exploita- tion in Central America, the presi- dent of Castle and Cooke wrote to the Wall St. Journal, contesting their interpretation of the settle- ment: "We feel proud of our com- pany's role in these negotiations, because we think it shows the spirit which has characterized our dealings with sovereign nations." In the face of the movement towards national self- determination that is sweeping the "banana republics" of Central America, Standard may be sophis- ticated enough to realize that the company will have to learn to deal with independent regimes more and more in the future.

Tags: Nicaragua, banana nationalization, Standard Fruit, Sandinistas, workers mobilization

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