NOTES ON AGRIBUSINESS IN THE 1990s
(Róbinson Rojas Sandford)(1998)
Times Magazine, October 6, 1997, wrote about "Indonesia's Inferno. Dark
Cloud of Death. A lung-burning haze from forest fires raging across
Indonesia casts a pall over Southeast Asia, taking a heavy toll on
travel, environment and human life".
As we all know, that "cloud of death" was the size of Western Europe,
a major human-made environmental disaster this century. Times Magazine
explained:
"For the past two decades, authorities in Jakarta have blamed the blazes
-an annual occurrence- on small-scale, roving farmers who set fires to
clear and fertilize land for cultivation. But, says Noerid Radam, a
professor at Indonesia's Lambung Mangkurat University, these local
nomads are "so expert in their techniques that it is inconceivable that
their fires would spread beyond their small fields". This year,
Indonesia's Environment Minister Sarwono Kusumaatmadja finally admitted
that satellite photos show most of the fires originate on the grounds
of large plantations. In mid-September Sarwono named 176 companies
suspected of arson and gave them two weeks to prove their innocence or
lose their operating licenses...Until now the political clout wielded
by Indonesia's major plantation owners -which include the Salim Group,
headed by Suharto confidant Sudomo Salim, and the army's Kartika Eka
Paksi Foundation- has shielded them from regulatory action.."
The Economist, October 4th, 1997, had this to inform:
"...most of the fires were deliberately set. Some were lit by farmers,
slashing and burning as they always have done, but most by plantation
workers employed by companies...Worryingly, Indonesian timber barons
seem more concerned about denying guilt than preventing a recurrence.
One of the biggest, President Suharto's golfing-partner, Mohamad "Bob"
Hasan, has asked why timber companies would want to burn their raw
material. This is disingenuous. Nobody accuses loggers of deliberately
burning primary forest. The fires are being set on land that has already
been logged. Fire is the cheapest and fastest way to clear the ground of
misshaped and scrubby tress, together with undergrowth. It can then be
turned into plantations growing palm oil, rubber and fast-growing trees
for the booming pulp-and-paper industry. Setting the fires is supposed
to be illegal. The practice was outlawed in 1995, after a previous bad
bout of smog".
The above describes the triple alliance between transnational
corporations, domestic big capital and the state, which makes huge
profits from natural resources-intensive production, depleting them at
the highest possible rate of profits. This type of business is called
agribusiness. One of the transnational corporation involved in the
Indonesian fires was Cargill, Inc.
Cargill, Inc is the largest privately owned U.S. corporation. The
company operates in forty countries and has about 150 affiliates and
subsidiaries. Its business interests go from machinery factories in
the U.S. to soybeans in Brazil. Cargill's sister company is called
Tradax, with headquarters in Geneva. It owns grain elevators and storage
facilities, arranges regional financing with foreign banks, employs a
large number of sales agents, operates its own shipping network, and
deals heavily in buying and selling foreign currencies. In the 1980s,
Cargill was Argentina's leading exporter of wheat, barley, maize and
other grains...and the leading exporter of grain in France.
The enormous economic-political power that transnational corporations
in agribusiness can exercise in the host countries where they operate
comes mainly from the links between production and trade in what is
called 'vertical integration'.
United Nation's World Investment Report 1996, "Investment, Trade and
International Policy Arrangements", U.N., 1996, describes the dynamics
driving agribusiness towards oligopolistic markets:
"...renewable resources products are imported by firms of the home
country (as a rule, a developed country), normally in the first instance
through arm's length contracts, i.e. by trade between independent
companies. Then, for various reasons -ranging from the minimization of
transaction costs (such as the need to ensure the security of supplies,
and thus reduce the costs of accomodating potential opportunism on the
part of an independent supplier) to the exploitation of economies of
scale, and depending on the resource involved -home-country firms
undertake FDI in a backward vertical integration process to internalize
markets for raw materials and thus assume control of foreign activties.
"While in commodities such as sugar, tea, bananas and rubber, foreign-
owned plantations became important, in the case of other agricultural
raw materials (such as cotton and tobacco) production often remained in
the hands of local commercial interests or peasant farmers. In these
latter commodities, long-term non-equity contracts with local producers
are in some cases arranged directly by home-country processing companies.
In other cases, trading TNCs become involved in establishing such
contracts, sometimes eventually leading to FDI by these firms in the
plantations or other farming operations. For some plantations, imports
become almost completely intra-firm through FDI, and so large vertically
and horizontally integrated TNCs are created. In the 1950s and 1960s,
for example, a high proportion of world trade in bananas was controlled
by two United States TNCs, United Fruit and Standard Fruit, both
vertically and horizontally integrated (box III.3).
-----------------------------------------------------------------------
"BOX III.3. Backward integration in renewable resources.
Problems of quality control arising from information asymmetry encouraged
the sequential transition from imports to FDI through vertical
integration in tropical fruit products, such as bananas. Bananas are
highly perishable. Moreover, production is at a distance from the major
consumer markets. The shift from arms-length trade to FDI (and therefore
intra-firm trade) was undertaken to ensure adequate supplies, and as an
important means of quality control. Consistent quality was better
assured by vertical integration. Banana production offered few economies
of integration, and in fact numerous small producers co-existed with
major companies. It was the coordination of production and marketing in
which the economies of integration and internalization were found."
"Large integrated TNCs also developed in tea and sugar-cane but, in these
cases, trading TNCs also played a role in the transition to non-equity
contracts and FDI. In the nineteenth century, numerous British tea-
plantation companies had flourished in South Asia (an early example of
trade giving rise to FDI in purely resource-based TNCs rather than in
vertically integrated processing firms), but later they came under the
control of large British managing agencies or trading TNCs. In some other
British packaging and marketing companies, imports led to FDI again
through backward vertical integration into tea production. Most FDI in
sugar plantations also took the form of vertical integration -for
instance, United States sugar refineries invested in Cuban sugar
factories. However, British sugar plantations in Guyana were bought by
Booker McConnell, a trading TNC that also owned a shipping company which
transported most of Guyana's sugar to the United Kingdom. In renewable
resources especially, trading TNCs had a prominent role in shaping and
reinforcing the FDI/trade relationship. (Source: M. Casson et al,
"Multinationals and World Trade: Vertical integration and division of
labour in world industries", Allen & Unwin, 1982)"
By the 1980s, transnational corporations totally controlled commodity
trade, especially agribusiness:
TABLE 1.- ESTIMATED SHARES OF COMMODITY TRADE CONTROLLED BY TNCs
(percent)
Proportion of global
exports marketed by
Commodity 3-6 largest TNCs
---------------------------------------------------------------
Foods and beverages
Wheat 85-90
Maize 85-90
Sugar 60
Coffee 85-90
Rice 70
Cocoa beans 85
Tea 80
Bananas 70-75
Agricultural raw materials
Timber (nonconiferous) 90
Cotton 85-90
Hides and skins 25
Tobacco 85-90
Natural rubber 70-75
Jute and jute products 85-90
Minerals and metals
Copper 80-85
Iron ore 90-95
Bauxite and alumina 80-85
Tin 75-80
Phosphate rock 50-60
_______________________________________________________________________
Source: UNCTAD, as quoted in F. Clairmonte and J.H. Cavanagh, "World
Commodities Trade: Changing Role of Giant Trading Companies",
ECONOMIC AND POLITICAL WEEKLY, Vol. XXIII, No. 42, 1988
_______________________________________________________________________
For a look at agribusiness and its social and economic effects in less
developed societies, see BOX 1.
AGRIBUSINESS AND THE WORLD SYSTEM
Transnational corporations engaged in agribusiness, international
organizations like FAO, GATT (and now WTO) and home countries'
and host countries' ruling elites, especially through the governments
the latter dominate have been involved in an economic-political
partnership since the end of the second world war.
M. A. L. Miller, "The Third World in Global Environmental Politics",
Open University Press, 1995, describes:
"It is important to focus on transnational agribusiness, since agriculture
is the primary economic sector for many developing countries.
Transnationals control 80 percent of the land used for export crops
worldwide. Twenty transnationals account for more than 90 percent of
pesticide sales and control the bulk of the world's genetic seed stocks.
(See "Transnational Corporations and Issues Relating to the Environment:
The Contribution of the Commission and UNCTC to the Work of the
Preparatory Committee for the United Nations Conference on Environment
and Development," United Nations Centre on Transnational Corporations,
February 28, 1991)."
"One important sector of this business is the agrochemical industry. It
is economically powerful, but its influence depends on more than this.
Over time, agrochemical interests have made alliances with research
institutes, agricultural colleges, regulatory agencies, government
ministries, and aid agencies. Because of these alliances, they are able
to significantly determine agricultural practices and policies."
"Many agricultural research institutions in the industrialized world
receive funding from agrochemical or farm machinery companies, which are
then able to exercise control over the content of research projects and
can retain the power to suppress research that might prove controversial
or harmful to their interests. ( H. Hobbelink, "Biotechnology and the
Future of World Agriculture", Zed Books, 1991)".
"Through the strategic placing of grants, the industry can also influence
the research agenda, directing research within universities and other
public institutions into areas that best serve its own ends. These
research orientations inevitably affect the curricula of training colleges
and the programs of agricultural extension services. There are similar
ties at the international level, with the industry working primarily
through alliances with international development agencies".
"The UN Food and Agriculture Organization has consistently discouraged
traditional methods of agriculture. In its quest to modernize farming
in the Third World, it has worked closely with the agrochemical
companies. In the 1960s the FAO and an agro-industry lobbying group set
up a joint program called the Industry Cooperative Programme (ICP),
under which representatives from agrochemical companies worked hand in
hand with technicians from the FAO. ICP seminars that promoted pesticide
distribution were organized in Third World countries. Criticism of the
relationship between the FAO and the agrochemical industry forced the
FAO to dispense with the most obvious example of this collaboration, the
ICP, in 1978; however, the alliance continues. FAO programs encourage
the use of pesticides, and the agro-industry group still provides
personnel and training material for FAO workshops. The agrochemical
industry, therefore, derives much of its clout from the involvement in
the network of institutions, individuals, and industries that have a
stake in undustrialized agriculture. ( "Power: The Central Issue", THE
ECOLOGIST 22, No.4 -July-August 1992)".
"Agribusiness companies will find their interests well served by the
Uruguay Round of GATT. Grain companies such as Cargill, Continental
Grain, Louis Dreyfus, Bunge, Andre and Company, and Mitsui/Cook can
benefit from the subsidy system retained for farmers in the United
States and Europe, which will allow the corporations to buy grain cheaply
and dump it in the Third World. Some of these companies already dominate
the economies of various Third World countries. In Brazil, as one
example, transnational corporations own more acreage than the amount
owned by all the country's peasants combined. As farmers are driven off
the land by cheap, imported grain, they may find themselves growing
crops under contract for the transnational corporations. In India, for
example, the richer farmers are growing maize and sunflowers for Cargill
and tomatoes and potatoes for Pepsi. ( "Cakes and Caviar? The Dunkel
Draft and Third World Agriculture", THE ECOLOGIST 23, No. 6, November-
December 1993)."
"Creating a network of alliances has been very important for the
strategies of transnational corporations, which have been able to
identify political and personal contacts with similar interests. Financial
institutions such as the World Bank have helped in the cultivation of
Third World factions and interests that were sympathetic to those of the
industrialized world. World Bank funds assisted the creation of autonomous
agencies that would be somewhat insulated from domestic pressures and be
responsive to the World Bank and its affiliated interests. The Bank has
controlled the staffing of these agencies, and their personnel's
transnational outlook is further encouraged through training at the
World Bank's Economic Development Institute."
"When the cultivation of personal and political interests has failed to
ensure the establishment or maintenance of transnational regimes, more
direct action has been taken. Brazil is one example that has particular
relevance for environmental politics. In Brazil a transnationalist
faction under General Castello Branco came to power by way of a coup that
removed the nationalist government of Joao Goulart in 1964. After the
coup, the IMF resumed loans under conditions that hastened Brazil's
shift to export-oriented industrialization. ( R. Broad, "Unequal
Alliance, 1979-1986: The World Bank, the International Monetary Fund,
and the Philippines", Ateneo de Manila University Press, 1988)".
"Plans for land reform were abandoned, peasants were suppressed, and
the military regime began to court foreign industry. With the backing of
the World Bank, Operation Amazonia encouraged occupation and development
of the forest interior, with subsidies, cheap land, and new roads being
used as incentives. (N. MacDonald, "Brazil: A Mask Called Progress",
Oxfam, 1991) This is just one instance of the conglomeration of forces
at work and of the asymmetry of power and influence affecting the Third
World in environmental politics".
INCOME ELASTICITY, VOLATILE PRICES AND HIGH PROFITS
Agricultural prices are volatile and, by and large, income elasticity
of demand is relatively low, which creates turbulent business cycles for
commodity-exporting countries. Tables A and B below are illustrative:
TABLE A.-INCOME ELASTICITY* ESTIMATES IN DEVELOPING COUNTRIES FOR
SELECTED COMMODITIES
-----------------------------------------------------------------------
Item Income elasticity
Wheat 0.04-0.98
Rice 0.01-0.30
Beef 0.75-1.85
Poultry 0.40-2.20
Pork 0.50-0.97
Milk 1.50-2.50
Eggs 0.80-1.20
Fish 0.61-1.50
Shrimp 1.25
Fruit 1.22-2.50
Sugar 1.50-2.00
Vegetables 0.10-0.92
Vegetable oils 0.50-1.81
Beverages 0.74
Cocoa 0.75
Manufactures 0.74-3.38
_______________________________________________________________________
* Income elasticity here is the percentage increase in demand as a
result of a 1 percent increase in income. The estimates are based on
studies of developing countries. The range of estimates reflects
differences in per capita income levels among countries.
Memorandum item: The income elasticity of commodities varies greatly
but tends to be lower than the manufactures.
_______________________________________________________________________
source: The World Bank, "Global Economic Prospects and the Developing
Countries. 1994", World Bank, 1994
_______________________________________________________________________
TABLE B.-VARIABILITY OF WORLD PRICES FOR SELECTED AGRICULTURAL
COMMODITIES, 1950-1989
Commodity 1950-59 1960-69 1970-79 1980-89
---------------------------------------------------------
Bananas 2.2 3.0 3.3 3.4
Cocoa 8.7 7.5 9.7 7.2
Coconut oil 5.2 3.8 13.3 15.9
Coffee 6.3 3.0 11.7 7.4
Copra 6.4 4.0 14.4 14.3
Cotton 4.0 1.5 6.7 5.9
Groundnut oil 3.9 3.1 7.8 10.3
Maize 2.0 3.3 7.5 7.1
Palm oil 4.3 4.6 8.4 10.5
Rice 11.4 3.4 14.9 7.2
Rubber 9.1 4.3 6.3 4.3
Sugar 7.8 21.7 25.4 20.4
Tea 6.2 2.2 6.9 10.7
Wheat 1.7 1.6 12.0 4.4
______________________________________________________________________
The "instability index" used here measures the deviations from the
linear trend forecast for the price. If there are no deviations, the
result is zero. The more the variations the higher the index. To
make sense of the table comparisons across periods are also necessary
______________________________________________________________________
source: The World Bank, "Global Economic Prospects and the Developing
Countries", World Bank, 1991, Table 2.5, pape 23.
_______________________________________________________________________
Even when there is uncertainty in commodity markets, transnational
corporations engaged in agribusiness can overcome the fluctuations
( because they control the most profitable stages of the trade:
processing and marketing) and reap above average profits, unlike the
producers -mainly host country's- who are not involved in the final
stages of processing and marketing.
Take Lonrho, the London-based transnational comprising over 800 companies
operating in over 80 countries. Its principal activities embrace mining
and refining of minerals, manufacturing, general trade, agriculture,
motoring and equipment, distribution, and financial services.
Wholly-owned subsidiaries are in the U.K., Angola, Belgium, Bermuda,
France, Kenya, Luxembourg, Malawi, Malta, Mauritius, Mozambique, Nigeria,
South Africa, Swaziland, Switzerland, Tanzania, U.S.A., Germany, Zambia,
and Zimbabwe.
Agriculture and mining concerns are mainly in Africa. Lonrho is Africa's
largest food producing company, with a ranch and crop cultivation spread
of over a million and a half acres, a total herd of 125,000 head and
seven sugar plantations, which in the late 1980s were producing half a
million tonnes. Major crops are maize and wheat, tea, coffee, chilies,
macadamia and cashew nuts, palm oil, and cotton lint. Some cattle
interests are in the U.S.. Mining and refining in Africa includes gold,
platinum, copper, coal, and asbestos. A joint venture with the
government of Zambia to promote the mining and marketing of amethysts
was agreed in 1987.
Also, Lonrho is one of the largest distributor of motor vehicles in
Africa for Audi, Jaguar, Rolls Royce, Toyota, Ford, Massey Ferguson
and Mercedes Benz. Textiles in Zambia and Zimbabwe, and finance and
general trade all over the continent.
Nevertheless, only a quarter of Lonrho sales are in Africa, but half
of its net profits come from Africa. D. C. Stafford and R. H. A. Purkis,
"Macmillan Directory of Multinationals", Macmillan, 1989, provides the
following data:
LONRHO plc.- SALES AND PROFITS. FINANCIAL YEAR: 30 September
(percentages)
1987 1986 1985 1984 1983
Total Net Sales
United Kingdom 61 62 59 58 57
Europe and other 17 15 14 12 14
The Americas 4 6 6 6 4
East, Central and
West Africa 10 10 13 13 13
Southern Africa 8 7 8 11 12
---------------------------------------------------
Total Operating Profits
United Kingdom 34 40 31 31 30
Europe and other 5 6 6 4 2
The Americas 12 7 15 12 9
East, Central and
West Africa 29 28 31 34 37
Southern Africa 20 20 17 20 22
---------------------------------------------------
This type of agribusiness, where rate of profits are not consistent
with the average rate of profits for the whole business, have been
leading less developing societies to an structural deficit in food
production.
The OECD Observer, December 1996, published a paper by T. Mackey and
H. Raidl, director and deputy director of the Country Studies I and
Structural Adjustment Division in the OECD Directorate for Food,
Agriculture and Fisheries. The paper, "Trends in Agriculture Trade",
stated that "although the share of agriculture in the total world trade
has fallen, from 14.5% in 1984 to 11.9% in 1994, it remains one of the
most important traded sectors, larger than (for example) motor vehicles
or telecommunications".
And then, describing the traded sector:
"There is an increasing gap between production and consumption of
agricultural products in many developing countries; it will require more
imports. The expansion in domestic livestock production, which has been
a feature of a number of developing countries in recent years, has also
led to an increase in imports of feedstuffs including grains for
animals. This is good news for OECD countries, which have traditionally
accounted for a large proportion of the total imports of grains, meats
and dairy products by the non-OECD region...For low-income food-deficit
countries, food aid is expected to be an important component of their
food-security requirements".
"NAFTA and Inter-American Trade Monitor", Volume 3, No. 10, May 1996,
informed that
"In 1996, Mexico will import one-third of its food needs, according to
a report from the National Union of Autonomous Regional Campesino
Organizations (UNORCA). Per capita consumption of corn, wheat, fruits
and vegetables has dropped by 29 percent over the past six years, and
annual per capita protein consumption is less than 20 kilograms,
one-third of the amount recommended by the National Nutrition Commission
(Comision Nacional de Alimentacion).
"UNORCA blames NAFTA for endangering 80 percent of agricultural
producers -more than 3 million ejidatarios and 2.5 million small
landholders- and claims that NAFTA has meant the end of national food
self-sufficiency in Mexico. Mexican government policies, such as the
reduction of subsidies and access to credit, privatization of development
banks, and foreclosure on land and property of producers, have also
worsened the agricultural situation".
-----------------------------------------------------------------------
_______________________________________________________________________
see also LINKS: The unnatural cycle
_______________________________________________________________________
BOX 1__________________________________________________________________
ON AGRIBUSINESS
(Robinson Rojas. Lecture notes. 1986)
Hunger and malnutrition are still a brutal reality for a large portion
of humanity. Today (early 1980s) almost half a billion people, or one
in eight of the world's inhabitants, are chronically undernourished.
One explanation (widely accepted by industrialized countries'
population): there are too many mouths to feed and not enough food to
go around.
Other explanation: social factors as an outcome of economic factors
rather than scarcity are the root of the hunger phenomenon; i.e. in
XIX century's England and Wales there was an 'overpopulation' in the
urban slums. Marx explained this overpopulation as a massive social
problem created by the dynamics of expanding capitalism:
a) in the countryside large-scale capitalist farms were
closing in on the lands of small peasants farmers,
forcing them into the overcrowded cities;
b) these tens of thousands unemployed appeared as a
"surplus" population, but in fact they played the
role of a "reserve army of labour" for the capitalits
in the cities and the countryside;
c) this labour reserve was essential to ensure a sound
supply of cheap labour power.
d) in the cities and the countryside the members of the
'reserve army of labour' were undernourished, poor and
in bad health because they couldn't afford quality
food, preventive health and decent shelter.
FOOD SUPPLY AND AGRIBUSINES
Production of food has increased dramatically during the last one
hundred years. Statistics collected by FAO (Food and Agricultural
Organization) indicate that in the last 50-60 years food production
increased faster that population.
Of course, occasionally bad weather-induced crop failures occur and
severely limit the supply of food, but, in general, contemporary
"food" shortages exist mainly because of the way in which food is
distributed in the industrialized world economy, which has very little
to do with the absolute availability of food. On the other hand, food
shortages exist mainly because less than half the cultivable areas of
the world are in production...and that, because of "market" reasons
(prices). Where these 'market' reasons come from? From the way in
which agricultural production is organized worldwide. The name of this
organization is 'agribusiness' and within agribusiness U.S. agribusiness.
WHO CONTROLS WHAT
One set of data:
Of the food on the world market, more than a half of all wheat, more
than three quarters of maize, and three fifths of soybeans move into
or within the industrialized societies...The United States' agribusiness
alone controls 60% of all secondary cereals, 50% of the world wheat and
95% of soybeans.
It is through the Chicago Board of Trade that the bulk of world grain
is traded and where the world price is set following the dynamics of
oligopolistic markets:
-only five companies control the sugar and cereal exports of the U.S.
which already are in a dominant position in the world as a supply
centre
-two among the above five companies handle more than 50% of the
whole grain shipments
-these companies are interested in maintaining high and stable profits
and NOT in the elimination of shortages and unstable and falling
profits
-hunger is fostered by greed (one of the driving forces behind
maximization of profits in a capitalist system) and not by scarcity.
BACK TO AGRIBUSINESS
In general, agribusiness is the rural equivalent of urban businesses
in the capitalist system: production for profit through hiring labour
power to work with means of production transforming raw materials.
Thus, food production becomes a business like any other, loosing its
connection with human welfare. Food, then, becomes a commodity which
is allocated through market mechanisms. That is, is produced for those
who can afford it, not for every human being.
Alongside production of food, agribusiness produce classical cash crops
like coffee, bananas, cocoa, tea, etc, and industrial crops like cotton,
jute, etc.
In the case of food, for example, agribusiness is an integrated 'food
system': from 'farm' to 'factory' to 'consumer', and from food
production to the manufacture of farm implements and pesticides and
fertilizers.
(the term 'agribusiness' was first utilized in the late 1950s by Ray
Goldberg, a professor at the Harvard Business School, U.S.A., to
describe the integrated food system of the United States)
By linking agriculture to industry agribusiness increasingly became
similar to industrial production:
a) in the application of technology to control
natural processes, in this case genetic changes;
b) in the use of research and development to
increase productivity, and
c) in the use of machinery and waged labour
Plantations become the natural shape of this new 'rural units of
production' where production, processing and marketing tend to be
stages within the same corporation, or, in many cases, the last two
in the hand of the same company. Worldwide, this huge type of
business is part of the activities of transnational corporations.
The amount of value added created by the above three stages is large in
marketing, less large in processing, and the smaller of the three in
farming. Because of this, transnational corporations' presence is
very strong in marketing, with 3-5 corporations dominating the world
market of each commodity, less strong in processing, and some times
just subcontracting producers (the case of cocoa growers in Ghana is
a typical example).
Increasingly, agribusiness is the model for agricultural development
in less developed societies because integrates the rural sector to
international capital, making the 'partnership' international capitalist
class with native capitalist class in less developed societies more
efficient.
The above not only determines how food is produced (or not produced
to make room for cash crops) and distributed, but it also shapes the
daily lives of millions in Africa, Asia and Latin America whose
livelihhod depend on agriculture.
1.- agribusiness not only entails the 'industrialization' of rural
activities, but also the transfer of a particular model of economic
development and social relations to less developed societies;
2.- because of the above, agribusiness makes even stronger the social
inequalities already in place and, also, create new ones, those
who are the outcome of the way in which capitalist market allocate
income to capital and labour;
3.- typically, the growing dominance of agribusiness means that vast
numbers of small farmers are deprived of their means of production
and become landless peasants;
4.- many new landless farmers are pushed from the land into the ranks
of waged labourers in a gradual process of proletarianization;
5.- conversely, land, rural income and resources are increasingly
concentrated in the hands of the largest and wealthiest agribusiness
practitioners who end up dominating production.
One example of this process is Latin America. Because Latin America is
the most industrialized region of the third world, the presence of
agribusiness there is equally the larger in the third world:
--the number of subsidiaries of transnational corporations trading in
agribusiness in Latin America more than tripled between 1960 and 1980;
--the sales of each of the top ten U.S. agribusiness corporations there,
exceed the gross domestic product of 21 of the 28 republics in Latin
America and the Caribbean;
--at the same time, in Mexico alone, the number of landless farmers is
estimated to have increased almost TEN times, from 1.5 million to
14 million, well over half the rural population;
figures for El Salvador show that the proportion of the rural
population without land soared from 12% in 1961 to 45% in 1975;
the city of Sao Paulo, Brazil, was having in the late 1970s around
half a million new arrivals every year, all of them landless peasants;
once in the city the majority of these migrants are faced with the
prospect of living in crowded slums without services, and finding
occasional jobs as street vendors, maids, gardeners, or prostitutes;
these people live marginalized from the economy, in sub-human
conditions. They account (1986) for around 20% of the population in
the continent;
--the devastating impact of chemicals on the health of farmworkers
-a familiar problem in U.S. agriculture- is even more serious in
Latin America, where restrictions on their use are extremely limited
and seldom enforced. A United Nations study (U.N. Environment Program
an Central American Research Institute for Industry. "An environmental
and economic study of the consequences of pesticide use in Central
American Cotton Production"(United Nations, 1977)) revealed that in
the cotton producing regions of Guatemala and Nicaragua the average
DDT content in human blood is 520 parts per billion (compared with
46 in Dade County, Florida)
THE TRANSNATIONALS
United Brand, Del Monte, Coca-Cola, General Foods, W. R. Grace, Ralston
Purina and Nabisco, are among the 60 largest U.S. agribusiness
corporations in Latin America ( see R. Burbach and P. Flynn,
"Agribusiness in the Americas", Monthly Review Press, 1980, for the
whole list). They have been involved equally in politics and production.
They help to maintain a social structure characterized since colonial
times by extremes of wealth and poverty in the countryside, where
7 percent of the population owns 93.8 percent of the land (see R. Rojas,
Latin America: Blockages to Development).
As a result, the expansion of agribusiness in Latin America is an
explosive social and political force in the countryside.
But then, the transnationals have extended their operations into every
phase of agribusiness in nearly every corner of the globe, and they are,
especially U. S. transnationals, in the more profitable markets of the
agribusiness sector:
a) input manufacture (chemicals and machinery)
b) food processing
d) marketing
Over three-fourths of all U.S. agribusiness subsidiaries in the third
world are now located in Latin American countries, and their main trade
is concentrated in the following areas:
1) the chemical fertilizer-pesticide industry;
2) the mechanized farm equipment industry, and
3) the food processing industry
As a general result, rural production under the control of agribusiness
meets the needs of the richest section of the world market, the
industrial countries' market. Thence, arable land is dedicated to
grow pineapples or strawberries for export to London, New York, Paris or
Bonn. The outcome of this is less domestic production of food to meet
the needs of the host country's population, and increased imports of
food, adding to balance of payments deficit.
By and large, the final result is scarcity of food amid plenty of food.
Many statistics have been produced by FAO and other organizations
showing that even with present levels of technology, vast areas of the
world are potentially able to produce food crops.
Roger Revelle, in "Food and Population", Scientific American, September
1975, calculated that the world's potentially cultivable area was 2.3
times the area cultivated in the 1970s and could support 38-48 billion
people...which was almost 10 times the present world population.
Colin Clark, "Abundance and Famine", New Yor, 1971, has shown that the
industrial countries alone could feed 11.2 billion people. Today's
food mountains in the European Economic Community are a dramatic proof
of Clark's paper.
The following data from FAO, 1980, are dramatic:
CULTIVATED AREA AS PERCENTAGE OF ARABLE LAND:
Australia and New Zealand 2%
North America 51%
South America 11%
Europe 88%
Africa 22%
USSR 64%
Asia 83%
CONCLUSION
Coming back to the notion that because of market led agribusiness many
less developed societies concentrate their rural activities leading
to exports and not to meet internal needs (food and industrial crops),
several pieces of information illustrate the impact:
-within 51 food-importing countries in the world, only 19 have
inadequate supply (which 37% of the total);
-but, among the 77 food-exporting countries, 42 have inadequate supply
for their own population (which is 55% of the total)
-and, among the above 77 food-exporting countries, 30 percent have
suffered at least one famine since 1950
-whilst of the food-importers, only 21 percent have experienced famines
over the same period
-one extreme case is Mali, food-exporter and the food available for
internal consumption is only 80 percent of requirements.
The above illustrates a situation where agribusiness transnational
corporations interests coincide with the domestic agribusiness sectors
and both make a profitable partnerships as exporters, even when the
former and the latter interests are in contradiction with the interests
of the rest of the population in the host country.
Famines are usually viewed as the result of poor harvests, war or
population growth. Some famines do result from these factors, but
uneven distribution of food also plays a crucial part, and distribution
of food is affected by unequal access to means of production and,
therefore, unequal access to income. Both, also, affected by the world
trade, dominated by the same transnational corporations involved in
agribusiness in the host country.
(lecture delivered in 1986)
END OF BOX 1___________________________________________________________
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BOX 2__________________________________________________________________
The banana trade:
World banana exports by region (000 of metric tons)
1988 1997
WORLD 7,134 12,194
Latin America 5,625 10,156
Far East 1,023 1,418
Africa 196 403
Caribbean 299 216
Oceania 2 0.3
Memorandum item: Total world production in 1997 was 58.8 million tons.
-----------------------------------------------------------------------
Major exporters in 1997:
Ecuador 4.4 million tons
Costa Rica 1.8
Philippines 1.6
Colombia 1.5
Guatemala 0.6
The companies that run the trade:
Dole Food Company 25-26%
Chiquita Brands 24-25%
Del Monte Fresh Produce 16 %
Noboa 13 %
Fyffes 6-7 %
Other 13 %
Memorandum item: Chiquita, Dole, Fyffes and Del Monte are controlled by U.S.
and United Arab Emirates capital. Noboa is owned by one individual in Ecuador.
Who gets what from the price of a banana:
Producer 5% (in developing country)
Export costs 4% (in developing country)
International transport 11% (in industrialized countries)
Import licences 9% (in industrialized countries)
Profits 17% (in industrialized countries)
Ripening process 5% (in industrialized countries)
Taxes 15% (in industrialized countries)
Distribution and retail 34% (in industrialized countries)
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What bananas cost the environment:
WASTE: for every ton of bananas produced, two tons of waste are
left behind, frequently contaminated with chemicals and
non-degradable plastic.
DEFORESTATION: rising demand for bananas is met by extending the
size of plantations, which often means cutting down rainforest.
SOIL: copper and other residues accumulate and can leave land
permanently sterile. Fragility of exposed soils, together with
the concentrated water flows in irrigation systems, cause severe
soil erosion and increased flooding during tropical storms.
BIODIVERSITY: large amounts of plant, fish (including coral) and
animal life are lost from the intensive use of chemical agents.
Monoculture encourage diseases, some of which are becoming
resistant to the chemicals designed to eradicate them.
EXHAUSTION: many of the plantations in Latin America are now more
than 25 years old –the maximum optimal productive life for a
conventional plantation. Del Monte, Dole and Chiquita are
establishing new plantations in other areas of Latin America,
India and Indonesia.
What bananas cost the workers:
Almost all the bananas we eat are treated with chemicals
throughout the production cycle. By far the heaviest users
are the plantations in ‘dollar’ countries that have minimal
monitoring or healthcare services. Plantations in Central
America apply 30 kilograms of active ingredients per hectare
per year –more than ten times the average intensive agriculture
in industrialized countries.
FUNGICIDES: aerial spraying up to 40 times per year. Some,
like mancozebare, are suspected carcinogens.
NEMATICIDES: applied between two and four times a year.
Designed to kill parasitic nematode worms, they are extremely
dangeorus. The use DBCP resulted in the mass sterilization of
tens of thousands of plantation workers from Central America and
the Caribbean to the Philippines and West Africa.
INSECTICIDES: like chlorpyrifos impregnated into plastic bags and
tags placed around banana bunches.
HERBICIDES: are sprayed between 8 and 12 times a year. Glysophate
is a suspected carcinogen.
FERTILIZER: applied regularly throughout the year.
DISINFECTANTS: after harvest, the fruit is washed with tisabendazol
and aluminium sulphate, which can cause severe dermatitis in direct
contact with human skin.
-----------------------------------------------------
SOURCES:
Banana Statistics, Food and Agriculture Organization –FAO.
Anne Claire Chambron, "Bananas: the Green Gold of the TNCs",
in HUNGRY FOR POWER, UK Food Group, London, March 1999.
Andrew Wheat, "Toxic Bananas", in MULTINATIONAL MONITOR,
September 1996
----Published in NEW INTERNATIONALIST, October 1999, under
the heading: Bananas–The Facts.
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END OF BOX 2______________________________________
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