New Internationalist

The Risk Shifters

Issue 081

The Third World is increasingly being used to supply luxury crops to the rich countries, while at the same time becoming dependent on importing basic foodstuffs from the West. SUSAN GEORGE explains how all this makes perfect sense to transnational corporations who control the process - especially if they can make sure that developing countries also take the risks.

In the market system food must be produced where it costs the least and sent to where it can command the highest price. That is why, in a world increasingly dominated by Transnational Corporations (TNC’s), poor countries are being used more and more as a source of those foods which fetch high prices in rich countries.

The US Department of Agriculture places agricultural imports into two broad categories - ‘complementary’ and ,supplementary’. Complementary products are tropical crops that can’t be grown in the West - such as cocoa, coffee and tea - and the market for these is generally stagnant or declining.

Supplementary products are those which can also be grown in the US. And here the story is quite different. If imports for 1967 as a base year are indexed at 100, those for more recent years have been:

1974 125
1975 134
1976 156
1977 165

This is a huge increase when one considers that the US population has grown very moderately in the last ten years. Americans have greatly improved the quality of their diet, if one measures it in monetary terms, by adding to it mostly luxury items - year-round fresh and frozen fruits and vegetables, nuts, oils and meats. But the central fact is that imports of food which can be grown in the US itself have increased by 65 per cent in a decade.

Most striking of all is that 52 per cent of these supplementary imports now come from the Third World. In other words, the part of the world where the greatest numbers of hungry people live is supplying the largest and wealthiest country in the world with its supplementary diet.

Certain regions are, of course, more integrated than others into this new international division of labour: Latin America, for example, supplies about 78 per cent of all the US animal product imports from developing countries. But for vegetable products, Latin America is very closely followed by Asia. Africa, because of its particular colonial history Susan George is a fellow of the Transnational Institute and author of How the Other Half Dies (Penguin Books). Her latest publication is Feeding the Few - Corporate Control of Food (see p.31) and its connection with European markets, is a very minor US supplier. Imports to the US are indicated in Table 1.

Countries like Mexico, the Dominican Republic, Taiwan, the Philippines, Thailand and a handful of others stand out. But smaller countries are actually exporting more to the US in terms of their total production and the-needs of their own populations.

For example, five small Central American countries (Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica) between them export over $125 million worth of animal products to the US. This can only be accomplished by rationing the local population - as the World Bank’s nutrition expert has pointed out - and by using huge amounts of land for cattle raising which could better be used for food production.

Central American meat is not of top quality and mostly goes to fast-food hamburger restaurants. But it can be cheaply produced in countries whose people are deprived in order to supply just 5 per cent of US animal product import needs.

Data is scanty on which company controls what proportion of a given country’s production. One can, however, cite the case of Mexico for a group of TNC’s. The ‘Church Report’ - an investigation of TNCs carried out for the US Senate Foreign Relations Committee - discovered that,for the food firms answering its request for data, 77 per cent of all trade took place between the Mexican affiliate and the parent TNC. Trade inside firms is probably the rule, at least for the large, integrated companies. Del Monte (recently acquired by R.J. Reynolds) has its own transport and shipping fleet as does Booker-McConnell in the UK.

Tracing the role of particular food companies in the more ‘complementary’ product area of tropical crops is also difficult, but possible in some cases. Unilever, for example, is estimated to buy between 50 and 70 per cent of all the fats and oils commercialised in the world.

And, by comparing the tonnage of soluble coffee which Nestle said (in a PR document) it had bought in the Ivory Coast with the UN trade statistics on this item, one could determine that Nestle controlled 89 per cent of all the Ivory Coast’s exports. It was also possible to establish that the company had grossly underpaid when compared to world prices. But’ companies are rarely so obliging with basic data that leads to real information.

Some estimates have been made of the portion of trade in primary commodities ‘commercialised’ by TNCs. The Secretariat of the UN Conference on Trade and Development (UNCTAD) for example, has published the following speculative figures.

Cocoa 85%
Bananas 70-75%
Tobacco 85-90%
Tea 85%
Coffee 85-90%
Sugar 60%
Natural rubber 70-75%
Cotton 85-90%
Jute 85-90%
Forest products 90%

The corporations are therefore deeply involved in the transactions of Third World commodities, both supplementary and complementary. But it is important to note that they are involved in ways which minimise the risks to them and correspondingly increase the risks to developing countries.

This ‘risk-shifting’ entails both ensuring a list of alternative suppliers and developing synthetic substitutes for Third World products. The result is that, even if a particular farmer or country manages to bargain for a higher price, the company is able to move away either to a different place or to a different product.

Risk-shifting may mean, for example, pulling out of corporate plantations. Outside of the huge ranching operations in Brazilian Amazonia (and there only because the government insists on it) one would be at pains to find a single example in the world where agribusiness corporations are investing in land-based assets. Companies like United Brands are getting rid of plantations, often by re-ceding them to the government, as in Ecuador and Panama. One obvious reason for this is the fear of nationalisation. But the main reason seems rather to be the companies’ desire to eliminate risk - both physical and commerical.

They no longer want to be involved in the physical processes of production - which does not of course, mean that they no longer control them. But farming is inherently risky.

One new production strategy is to have a small central estate as the centre of a satellite system of farmers tied to the company by contract. The President of Unilever described this system in 1978:

Such an arrangement would benefit local farmers by channelling new technology to them, improving their productivity and providing a ready market for their produce. It would benefit the food processors by providing an assured supply of raw materials.’ In spite of this idyllic description, all is not necessarily well for the small grower, especially in poor, low-wage countries. The House of Bud in Senegal began with a plantation leased from the government but soon realised that an effective small farmer scheme would provide cheaper produce. This was because labour was, in effect, provided at a rate below the wages paid on the plantation. The family farm structure is preserved, with all its advantages to the dominant firm, including the willingness of all family members to work long hours for a low return. Farmers, in such schemes, are tied to the company by credit; the firm supplies inputs or other technology; sometimes as in the case of Nestle it also insists the farmer must pay for these.

Reimbursement of company-supplied credit comes out of produce; with Nestle it is deducted from milk payments before the farmer ever sees his cash. The company, however, is not obliged, under the terms of the contract, to accept any produce of less than top quality. Such satellite schemes tend to make the producer a prisoner of the corporation on his own land.

But just as companies can switch from one farm to another, they can also switch country when a commodity is cheaper elsewhere. TNC information networks allow them to judge such situations instantly. Such price comparisons are especially evident in the case of fats and oils - US soya oil has been progressively replacing tropical oils ever since World War II, because it is essentially a by-product of feedcake for animals. Oil gluts frequently develop as feed production increases.

But perhaps the major and least recognised new TNC strategy of risk shifting is the one involving the use of substitutes. When raw material prices increase to the point that companies fear they can no longer maintain and improve profits by passing the cost along to the consumer, they seek cheaper substitutes. Most of these replacement purchases turn out to be of advantage to industrialised, not Third World, countries.

We need hardly mention plastic as a replacement for jute in bags and carpet backings, or chemical fibres as a substitute for cotton. But there are many other items.

High Fructose Corn Syrup (HFCS) whose development was prompted by high sugar prices in 1973-74, has already taken over part of the sugar market, particularly in the bakery, confectionery and soft-drink industries. Even conservative Coca-Cola is now using it in one of its drinks.

The rubber companies are experimenting with a desert shrub that grows wild in the Southwestern US. Called guayule, it has a high latex content and the labour problems in cultivating and harvesting it would not be complicated because there are so many Native American (Indian) unemployed people in the area.

Coffee is more amenable than previously thought to the inclusion of substitute products. Flavour chemists have already isolated over 400 substances that contribute to coffee’s complex flavour profile. And substitutes for up to 80 per cent of the beverage may be based on corn, wheat, barley, oats, soy-beans, molasses, peanuts and other foods plentiful in the US.

Cocoa substitute

Other extenders have been developed for cocoa and chocolate products. The SuCrest Corp. appears to be front-runner here with a molasses-based product that reportedly even improves the flavour of cocoa, chocolate desserts and toppings etc.

Back to Unilever. Nearly fifteen years ago, the Chairman told the Financial Times that:

The aim (of Unilever’s Research and Development) is always to enable us to switch from one oil or fat to another without any loss of quality … we are trying at all times to put ourselves in a position to use less of the oils and fats which are in short supply and more of those which are easier to get … Our research has, therefore, been directed for years to making us more flexible, more able to use as many different fats and oils as possible for as many purposes as possible.’

Since tea keeps me going, I am pleased to report that I have not yet learned of any feasible substitution plans. Tea is, however, the only major agricultural raw material exported by the Third World for which this is still the case.

These examples suggest that a Third World strategy for development based largely on ‘fairer and more stable’ prices for primary products will fail. This is because the multinationals control not only the purchases but the processing; if their costs for natural raw materials increase too much, they will have recourse to substitutes.

There seems to be relatively little awareness among underdeveloped country negotiators of such facts; nor do they seem to have seriously examined the issue of TNC control over the total production process in which their own countries are relatively minor components.

While the Third World exports its agricultural produce to the US and other rich countries, what is happening to its own nutritional status? As one might guess, it is deteriorating.

And as some corporations import more cheaply produced strawberries others also profit by supplying the developing countries with a greater and greater proportion of their basic staple foods.

While big customers like Germany and Japan remain vital to the US, the Third World is now absorbing 30 per cent of all US agricultural exports. And there is every reason to believe that prices for these food exports, particularly grains, should rise substantially as we move into the 1980s.

Certain developing countries are front runners as markets for US exports, as Table 11 shows.

The list of Third World countries now buying at least one hundred million dollars worth of US agricultural products includes the Dominican Republic, Colombia, Venezuela, Peru, Brazil, Iran, India, Bangladesh, Indonesia, Thailand, the Philippines, Korea, Hong Kong, Taiwan, Algeria, Egypt and Nigeria.

What all this boils down to is that Third World nations are devoting their time and investment - not to mention their peasantries and agricultural workers - to producing not only traditional tropical crops but also new luxury foods for the North - at prices they do not control. Meanwhile, they import greater and greater quantities of basic foodstuffs at prices they do not control either. Inputs, growing, processing, marketing, imports and exports all take place under the auspices of the TNCs over which neither they, nor any national government, have any real control at all.

'These tough, hardened men - no word of ours could stop their sobbing and their tears'

ARSENIO JESENA, a Jesuit lecturer at the Ateno de Manila University in the Philippines, recalls the experience of living for several months with the migrant workers of Negros Island - cutting sugar cane for export.

There were 200 of us - men, women and children staying in two adjoining quartels. There was not a single toilet. There was only one source of water - an old pump. Here everyone did his or her washing, bathing, laundering. We had no blankets, no mosquito nets. For food, three times a day we were served rice - the cheapest, driest, coarsest, most unappetising I have ever tasted. Many of the grains were unhusked, and there were pieces of gravel to be found among the grains of rice. Rough rice and dry fish, that was all. No liquid, no vegetable, a diet which gave no delight and no strength. Yet strength is needed for the sacadas (migrant workers) work. At 3.30 a.m., the lights come on, and by 5.00 a.m. the sacadas have trudged, barefoot, through the one kilometre which separates the canefields from the quartels. The sacadas work is cutting and loading. This is easier said than done.

The work of cutting is monotonous - the same endless bending of the entire body, the same strong cutting strokes of the espading with one hand, the same grasping and jerking and piling up of the sugarcane by the other hand. The work is also very exacting. It saps away one's strength in a very short time. Added to this is the discomfort of wearing thick, close-necked, long-sleeved denims (to protect oneself against cuts and rashes from the gilok and the leaves) under the heat of the burning sun. But the sacada must continually keep on working, since, if he is to eat, he is supposed to cut tons of sugar cane.

The sacada must now load the sugar­cane. He bends down, grapples with his pile of 25 to 35 canes, and then, under this heavy burden, navigates his way through the field to the railroad tracks where he dumps his load into the bagon. Then the sacada goes through the whole process again and again until all the sugar cane he has cut is completely loaded into the railway cars.

Sometimes, when I could no longer raise my arm for another cutting stroke of the espading, or when, after carrying a heavy load to the bagon I would, from sheer exhaustion, just sit down on the ground. I would look up and see the sacadas still at work - some of them younger than my students, some of them older than my father, carrying twice the load I could carry. I could not help but be struck by a terrible contrast - for I would think of the sacadas, who work so hard, and receive so little, and I would think of my students in the Ateneo, who do so little, and receive so much. I would think of how the sacadas slave for every centavo, and how easily the rich man and the rich man's son squander the money they have not earned - and I saw the injustice of it all, and I began to understand why the communists are communists.

As the day ends, the sacadas slowly drag their way back through the canefields and the dusty roads to the quartels where they know they will be met by the same unappetising food. As they walk on, a cloud of dust would be kicked up by an occasional Mercedes-Benz zooming past as the hacendero hurries to an appointment in Bacolod. As the sacadas near the quartels they see the children they love - dirty and tattered clothing, children who like them would inevitably fit into the perpetual cycle of ignorance and hard work. Some of those who have gone home earlier would be sitting about doing nothing, one of them perhaps strumming a guitar, but giving forth that music peculiar to the sacadas which always has a plaintive note of melancholy and despair.

No, the sacadas are not happy as they trudge back from their back-breaking work. And to think - for most of them, life would be like this for 30, 40 years - until they are too old to swing an espading. And so, to escape, if only for a moment, from a lifetime of much labour and little reward, some of them search out the tuba vendor, get drunk, and fall into the temporary peace that sleep can give.

But not all the sacadas sleep at once. In the darkness of the night many of us would huddle around and listen to each one open his heart and recount his personal tragedy. And these tough, hardened men - I actually saw them cry! And some cried like little children. And no word of ours could stop their sobbing and their tears. One night I looked around at the faces that surrounded me, and I asked these downtrodden sacadas, "if the communists come, will you join them?" They said: "Yes." I asked further, "if they tell you to kill the hacenderos, will you do it?" And they said: "Yes."

'Sometimes I think it is a miracle each year. I don't know how we survive'

PETER STALKER talks to Thomas Japp, a banana farmer in Jamaica who struggles to produce high quality fruit for a low price - all to send overseas.

Photo: Thomas Japp
Photo: Thomas Japp

"It's nonsense," says Thomas, some ten yards ahead of me picking his way up the hillside at a pace surprising for his 60 years. "The price we get for bananas - six cents a pound."

"Just foolishness," reiterates his wife, Icilda. We rest for a couple of minutes, more for my benefit than theirs, but also to gather together some of their grandchildren. Garfield, Everton and Cassandra have disappeared somewhere among the banana and coffee trees.

Down at the bottom of the valley is the cluster of houses that make up the village of Coolshade. I can just make out the rickety bridge across the river from which naked youths are jumping noisily into the water.

"Look," said Thomas, as Icilda wanders off in search of the kids. "We sell bananas for six cents a pound - then go to the shops and have to buy a pound of rice for 41 cents."

He explains that the family grow most of their own food on a couple of widely separated plots of land, but there are still many things they have to buy.

"And a medium sized box of soap powder is 59 cents," says Icilda, reappearing; "but still only six cents a pound for bananas."

"Well, I am going to tell you," says Thomas, "sometimes I think it is a miracle each year. I don't know how we survive."

The children, she says,are ahead of us. They have been to school this morning and are all coming up to join the rest of the family on the farm - about an hour's walk up the other side of the valley from their house.

"Even the little children help," says Thomas. "When we plant peas they help plant them and pick them. We say 'right, we had better go up and get them and help carry them down to the valley."

Indeed, all the way down the valley through the villages of Coolshade and Tranquility and the banana boxing­plant, you can see small boys trudging down the road bent almost double under what seem like small banana trees. Getting the fruit down the hillside without damage is a real problem.

And Thomas's complaint is that trying to deliver the perfect fruit is making all the farmers very vulnerable.

"At present, all that happens is that the best bananas go for export," he explains. "But it is difficult to carry these down to the boxing-plant. A lot of them get bruised and then rejected. Sometimes you take a box of bananas that has got perhaps ten hands and they only accept five."

"And they only pay us for five," says Icilda, "even when we have had all those expenses."

We appear now to have reached their plot. Three or four adults are clearing the land with another half-dozen children helping, more or less.

Both of Thomas's daughters are there with one of their husbands. Family ties in Jamaica are important but imprecise. Taking an instant roll-call produces a list of nine grandchildren by various parents, all of whom are now Thomas's responsibility, right down to Beresford who just appeared on his doorstep one morning and is still there seven years later.

Feeding them all is quite a task and Thomas is sure he and all the other farmers will stay in debt until something can be done about the price - and until they can get involved more in processing the fruit.

"What we need," he says, "is a processing plant. We keep asking the Banana Board for one so we can use bruised bananas instead of throwing them away. You can use them to make vinegar or rum or banana chips. That way we could do a lot more things and everyone would get more to eat."

But at least all the mouths he was having to feed seem to be helping on the farm - so they aren't all just a drain on the family budget.

"No," says Icilda, "but they are all at school now." She points to Marlene, a bouncy 12-year-old hacking away at the undergrowth a little further up the hill. "She's going to the secondary school in September and she's told me she needs eight exercise books. She needs to lodge five dollars for books as soon as she is in school and then wants a pen and pencil, and her uniform is six dollars per yard.

Given the hive of activity among the banana trees, it is difficult to picture the kids neatly back behind desks tomorrow morning. With all this education, do they want to stay working on the farm when they grow up? Opinions are mixed and varied from Marlene who thinks she will probably stay, to ten-year-old Desmond whose big ambition is to join the Air Force.

It all depends, according to Thomas, on how much money is going to be invested in the countryside. Without that, he says, there isn't going to be any future at all.

"Myself, I have always been of a farming family, and I love farming. But today people find it very difficult to save."

"I think if there was a good farming programme with roads and trucks and a good price for the product, then we could persuade the boys and girls who are leaving school to come and work on the farm. At present there is not much for children growing up in farming."

And talking to the children back at the house, it is clear that the older ones see very little point in staying. Beresford even asks me if I can help him get started in the capital Kingston.

It is futile to explain that he will have little chance of a job there and that Coolshade is a much more attractive place than Kingston.

The one argument that might just sway him - that he will earn more money in the countryside - is probably not true. People in England and the USA want their bananas from Jamaica - what they don't want to do is pay Beresford to stay in Coolshade to grow them.

"And until there is more money," says Icilda, "Things will just get worse. Things are really bad in Jamaica right now because the American dollar has been devalued and the price of everything is going up. It is only through the mercy of God that we survive each passing year."

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