For the first time in over a decade, multinational banana grower Standard Fruit Company is cutting back operations in Costa Rica, blaming the drastic 30 percent reduction on a surplus of bananas that has affected the international market since April.

Late last week, the company announced that it will not renew contracts for some 6 million boxes of bananas it purchases from 11 independent producers. It also announced the closure of two more of its own farms; two were closed earlier this year.

"The situation is grave. That's why we are taking this measure," said Juan Carlos Rojas, Standard's legal manager. "No company is obligated to do what's impossible."

The price paid to producers per box of bananas in the U.S. dropped from $11.13 to $7.77 in the past year, according to the Consejo Institucional Bananero, a legal association of the country's producers. The drop is due to the excess of fruit being diverted to the U.S. because of quota restrictions imposed by the European Union.

Although the multinationals have taken other steps to increase productivity in recent months, measures which prompted nearly 100 workers to march on the capital in late September [TT, Sept. 24], Standard's decision to scale back operations is the first real sign that the "so-called crisis" is real.

Banana growers say the crisis has hit Costa Rica harder than other countries because companies here invest more in social benefits for their workers and in environmentally friendly technological advances. The result is an increase in costs over other banana-producing republics, such as Ecuador.

After Ecuador, Costa Rica is the world's second largest exporter of bananas. In a country of 3.8 million residents, the banana industry generates approximately 140,000 jobs. Last year it exported 115 million boxes of bananas at a value of $663 million - $90 million more than the year before.

Depending on the source consulted, the number of workers who will be out of jobs because of Standard Fruit Company's scale-back ranges from 1,500 to 4,000.

"The impact of the reduction will depend on whether or not the independent producers are able to find other markets for their bananas," said Ministry of Foreign Trade Vice-Minister Anabel González. "If they do, the impact will be small. Nevertheless, we are hoping that Standard Fruit Company will reconsider."

Rojas downplayed the impact of the reduction in operations, noting that Standard still buys more than 10 million boxes of bananas from 14 other independent producers. The last time the company significantly scaled back operations was in the mid-'80s, he said.

González said the ministry doesn't fear similar reductions from other multinationals, adding that the government is more worried that the crisis could erode the competitive edge of independent producers. To this end, the ministry is looking into borrowing funds from the National Banana Corporation (CORBANA) to stabilize the sector.

Enrique Vásquez, spokesman for Chiquita Brands in Costa Rica, confirmed that Chiquita is not contemplating scaling back operations. In response to banana workers who deny that the industry is facing a crisis, he said, "The fact that exports last year were probably the best in history doesn't mean that there's not a crisis."

Just last month, Standard, Chiquita and Del Monte announced they would begin paying local producers 35 cents less per box. At the same time, the latter two companies implemented massive salary cuts and eliminated many benefits that banana workers have historically enjoyed.

Asked whether he expects the crisis to end, Rojas said much will depend on whether the European Union will open the market to more bananas. But it's unsure what will happen, since the quotas were imposed as the result of conscientious consumers. The best thing the Costa Rican government can do to help the industry is support a single-tariff regime, he said.

"All the '90s have been difficult, although not as bad as the crisis now," said Rojas. "Because of changes in the European Union regime, nobody knows what's going to happen in the European market. Quotas changed in '93, they changed again in '94 and they will change again in 2000. There is no security for banana producers."