Banana Woes: Part Duex

Turns out the banana subsidies referenced in my last post are still quite necessary; it has been revealed that life for banana farmers is certainly not getting any better, based on this article.

Since Colombia's exports have increased, a large portion of their income is due to exports of primary products, of course, including bananas. This trading has resulted in a revaluation of the Colombian peso, meaning the value of the Colombian peso to the US dollar has changed. The peso has been appreciating, which makes Colombia's assets more appealing to investors. There has consequently been a huge problem in the banana sector, resulting in losses of over $400 million US dollars in Colombia during the last three years. However,the subsidy aid that is being recieved by Colombian banana producers is not nearly enough; the total aid is less than 10% of the amount of loss sustained by the banana farmers that are still even in buisness - there are hundreds who have gone bankrupt and are now unemployed.

It was suggested in the article that any potential solution or additional aid must be provided on a macro level, allowing for national policies to help the farmers reduce their unemployment and recieve some of their financial losses. The president of the Asociacion de Bananeros de Colombia (Association for Banana Farmers of Colombia) has planned a meeting with the minister of finance to help determine reliable resolutions for the farmers.

Banana Woes

My apologies from this somewhat convoluted explaination; the article that spurred this whole banana war discovery can be found here.

With its main exports being petroleum, minerals, bananas and cut flowers, there is no question that Colombia is a developing nation. Consequently, Colombia was rather upset to find out the EU was implementing a banana tariff on imports, especially since Colombia exports 60% of its annual banana crop to the EU. Unfortunately, these banana difficulties are not new - this predicament has been going on between the EU and Colombia since the 1990's. In retaliation, Colombia and Ecuador have since filed a claim with the World Trade Organization (WTO) declaring the tariffs as devestating for their economies. In 2005, the EU's banana tariff system was pronounced illegal by the WTO. However, in late 2005, the EU presented a revised tariff system on bananas, still targeting Latin American countries.

Although there has still been no compromise, Colombia's government is providing aid to the suffering banana producers in the form of subsidies. While this aid comes as a breath of fresh air to Colombia, their relief is somewhat shortlived as the EU is also looking to import from Africa, where costs of banana production are cheaper, driving sales away from Colombia.