INTERNATIONAL BUISNESS

ASSIGNMENT
(PGDM 2014-16)

Student

Bikash Majumdar (038)

Faculty Mentor Dr. Arindam Banik

Dated

24 June, 2015

QUESTION1. What role has politics played in the history of Chiquita Brands and its predecessor?
Chiquita Brands has a formidable history as a company which perhaps used political leverages excessively to
maintain uninterrupted supply of its product throughout the world. The countries in which Chiquita functions
have a history of high political instability, and heavy dependence on US economically. The history of these
countries is marred by autocrats, revolutions exterminated and a working population that survived in the
tumultuous environment and had insignificant access to basic needs of workers. The scale of operation was huge
and Chiquitas presence in these countries has been leveraged by US government for several deals; fact based
allegations reveal Chiquita and US government worked together in a two way give and take relationship.
Chiquita is the successor to the United Fruit Company, which began in 1899 as a merger between the Boston Fruit
Company and railroad companies owned by Minor Keith in Costa Rica. The United Fruit Company operated
throughout Latin America and the Caribbean, including Costa Rica, Honduras, Cuba, Nicaragua, Colombia,
Panama, Guatemala, and Ecuador. Chiquita has been involved in political, environmental, legal and labor
controversies in many parts of the world and has attracted more attention than any other foreign company in
Latin America as the archetypical representative of United States imperialism in Latin America.
The United Fruit Company was frequently accused of bribing government officials in exchange for preferential
treatment, exploiting its workers, paying little by way of taxes to the governments of the countries in which it
operated, and working ruthlessly to consolidate monopolies. Latin American journalists sometimes referred to
the company as el pulpo ("the octopus").
The EU politics against the non-European nations was very harsh and it had a great impact on Chiquita. On July 1,
1993, the EC had adopted a new banana import regime. Under the terms of the new regime, Latin American

banana imports above a 2 million metric ton ceiling would face tariffs so onerous that no firm, including Chiquita,
could afford to exceed the quota. Moreover, to administer the quota, the EC established a complex licensing
system that would grant Chiquitas EU based competitors the right to import a significant percentage of the 2
million metric tons permissible under the scheme.
The US government wreaks its political muscle on countries like Guatemala, Honduras, Costa Rica, Ecuador and
others which helps in exempting taxes and reduces the overall costs. So Chiquita took advantage of this and had
exempted several taxes for itself.
So the archaic method adopted worked for them for several decades and Chiquita grew powerful to such a level
that they became a threat to local banana industry of ACP region which were previous colonies of several
European nations. This threat from Chiquita was negated when the political leadership of EC took the decision of
waving off tariff on the import of bananas from ACP and created a ceiling on import of amount Chiquita could
bring in to Europe along with severe tariff rate of 20-30% ad valorem. The political leadership thought it
necessary to protect ACPs banana industry and thus kept out Chiquita. To fight it the company wielded all its
political power by helping Latin American and South American countries to file petition to GATT and moving USTR
for support.
Thus overall it is noticed that politics played a major role in companys history, right from initiation of the
company to its running head into Doles campaign for influencing political leadership in countries which went in
contract with EC, role of politics has been embedded deep in functioning of the company.

QUESTION2. What role has protectionism played in the global banana market?
Bananas and plantains are perennial crops that grow quickly and can be harvested all year round. Bananas fall
into two categories:
Cooking bananas, including plantains.
Sweet bananas, where the Cavendish sub-group is prominent, almost all bananas traded worldwide are
Cavendish.
Protection of the European banana selling companies by the EU has played a very significant role globally. Before
the EU policy, the global banana industry was dominated by the big US multi-nationals.
But on July 1, 1993, the EC had adopted a new banana import regime that established a Community-wide quota
on bananas imported from the Latin American countries where Chiquita sourced most of the fruit it sold in the
EC. This was all done to protect and safeguard Europes banana dealing companies which otherwise stood no
chance globally in front of the US MNCs.
The countries which were essentially the former colonies of Britain and France, were granted tariff-free access to
the EC market, while banana imports from other regions, including Latin America, faced a variety of restraints
that differed widely across each of the countries in the community. Imports from EC territories (Martinique,
Guadeloupe, the Canary Islands, Crete and Madeira), Like imports from ACP countries, were given duty-free
access to all markets within the Community.

These strict policies against the non- European countries allowed European banana companies to flourish and
caused heavy losses to Chiquita and other US based banana companies. EU protected and safeguarded its
interest with such stringent policies.
International trade in bananas follows, to some extent, a regional pattern. For the sake of simplicity, world
banana trade can be split into three international trading systems.
In the first system (The Americas), the US, Canada and those Latin American countries which do not cultivate
bananas source their fruit in Latin America. The second system, Europe, includes the whole European continent
and countries of the former USSR on the demand side, and countries of Latin America, West Africa and the
Caribbean on the supply side. The third trading system, Asia, consists of Asian and Near East countries and their
suppliers, mainly the Philippines and Ecuador. Banana Exporting Countries such as Ecuador is the largest exporter
of bananas in the world. Exports expanded from one million tonnes in 1985 to 3.6 million tonnes in 2000. Costa
Rica is the second largest exporter (in 2000) after Ecuador. Bananas are the single largest agricultural export.
Colombia Bananas in Colombia are the third most important agricultural export. Over 90 percent of the
Cavendish bananas produced in year 2000 were exported. Banana crops in Colombia occupy approximately 7
percent of the total area planted to fruit crops.
Latin American Countries namely Guatemala, Honduras and Panama have banana as an important source of
employment and exports earnings. Aggregate production in these countries was relatively stagnant in the last 15
years (1985-2000) due to weather-related events, industrial disputes, crop diseases, increasing production costs
and depressed banana prices. Banana imports are concentrated in two main markets: the United States (a free
market) and the European Union.

QUESTION3. What should Linder do about the EUs banana policy? How should Bob Dole respond
to Linders request?
We can see the role of protectionism in 2 ways, the economic and the political. Politically is a good defensible
role, it enables small local business to expand without aggressive competition and allows them to stay in a
comfort zone to grow on their own way.
Europe is not a producer of banana, but instead is a big consumer so in the economic aspect these extra
regulations, the prohibitions and the extras fees only make the product expensive for the consumer, because this
cost wise automatically added to the sale price. Also it makes inefficient the local production because without
competition there are no natural incentives to raise the efficiency and with shortage the product price also can be
establish at a higher value.
This protectionism is not viable on the long run because it weaken the local economy and not encourages
competence, but most important it affects directly the consumer. From this case we can learn a couple of things,
how to grow fast and how not to handle
Companys issues in the politics.
One way to grow fast a company is to be allied with the government, however they should watch out to do the
thing within the law margins because once youre in politics is too easy to corrupt and take advantages of the
political power like what happen to the United Fruit Company.
Other lesson is that government dont always do economic policies, they do political policies that will affect the
economy but will be good at the population point of view. Like the banana policy is good only to the eyes of the

local producers but in the long run it will affect the local economy, and this unfair competition that is made by the
government it will not last in the long run in a market environment.
About the EUs banana policy, Lindner and Chiquita as a company had already realized that the 301 process, even
if successful, could only produce results in the medium to long term.
Lindner had very few options.
1. Shifting output to less restricted markets in North America and Asia was a possibility
2. There were emerging markets in the former Soviet Union and Eastern Europe
3. Seek to increase its investment in ACP production as a hedge against market restrictions in the EU which its
other US based competitors, Del Monte and Dole, were doing
4. Try acquiring smaller EU distributors in order to obtain import licenses, a move that would allow the
company to sell more product into the European market
5. Try to put pressure on EU to change its policy by using its political connections in the US which Chiquita had
already done in the past
6. Bob Dole, Kansas state Senator, had already went to bat vigorously for Lindner and Chiquita, attempting on
several occasions to sway the Latin governments most actively involved in implementing the Framework
Agreement. Among the measures Dole sought were legal provisions that would have stripped Colombia of
the aid it receives under U.S. programs designed to reduce the international flow of illicit drugs and a bill
that would have required Colombia and Costa Rica to undo the Framework Agreement or lose preferential
access to the US market.
7. The senator was also active in keeping the banana issue on the front burner at USTR. Dole reportedly
sought to link passage of the GATT bill with action on behalf of Chiquita.
8. Bob Dole tried his best to safeguard the interest of Chiquita and took up the issue politically in the US.

Bob Dole, Kansas state Senator, had already went to bat vigorously for Lindner and Chiquita, attempting on
several occasions to sway the Latin governments most actively involved in implementing the Framework
Agreement. Among the measures Dole sought were legal provisions that would have stripped Colombia of the
aid it receives under U.S. programs designed to reduce the international flow of illicit drugs and a bill that
would have required Colombia and Costa Rica to undo the Framework Agreement or lose preferential access
to the US market.
The senator was also active in keeping the banana issue on the front burner at USTR. Dole reportedly sought
to link passage of the GATT bill with action on behalf of Chiquita.
Bob Dole tried his best to safeguard the interest of Chiquita and took up the issue politically in the US.