Minimum price for bananas: demagogy is destructive

Article in CajaSiete Blog. 23 March 2021

Leopoldo Cólogan


Leopoldo Cólogan at a banana plantation in Tenerife.

Demagogy is destroying us and reality is taking over. It goes without saying that anyone involved in the production of any kind of product needs to sell it for more than the costs of production and make a profit in order for it to be worth it.

It is also true that it is essential to ensure that basic necessities are affordable for people and that good food does not become a luxury accessible to the few.

This was something that previous generations learned when, at the end of the Second World War, the price of basic necessities was not affordable for everyone and producers had to cover their costs. The CAP, i.e. the Common Agricultural Policy of what was then known as the European Economic Community, now the European Union, was created to address this situation.

This, combined with the Marshall Plan, led to the creation of a large new world market where people who initially had no access to basic necessities had now become an affluent society with more exacting consumer demands. This resulted in higher production costs in the European Union, much higher than in other parts of the world, where production, employment, environmental and food requirements are not as high, and therefore have lower production costs.

This meant that producing goods in the EU’s primary sector was no longer worthwhile from a cost perspective, given that it was not possible to compete with non-EU production, and that European production was insufficient to meet market demand.

In light of this, previous generations felt that the European Union could not fully depend on third countries or regions for basic necessities and that European production had to be preserved. At the same time, fertile land and the social, economic, landscape and environmental benefits had to be maintained, given that in a situation of need it would take five years to bring the land back into production if required. This is why the primary sector was declared strategic and essential for the European Union, and why Community aid was introduced – not to maintain the price but as a loss of income – because it is based on the premise that the primary sector is in deficit in the European Union, and European producers need two types of income, one from the sale price and the other from aid.

This is even more serious in the case of bananas from the Canary Islands, as they compete with large banana producers from outside the European Union, such as Ecuador and Cameroon, where production costs are much lower than those of the Canary Islands and volumes are not comparable. The European Union therefore encouraged the creation of producer organisations so that European producers, large and small, could organise themselves for harvesting, sorting, storage, packaging and marketing in order to generate greater volumes and improve the efficiency of their production and transport costs as well as the traceability required by the European Union.

"[...] enforcing a rule that banana producers must at least be paid a price above their costs all sounds very well and ideal, but it is demagogic because it does not reflect the reality of their market and their competition."

In view of this reality, especially as this is a perishable product of varying quality, enforcing a rule that banana producers must at least be paid a price above their costs all sounds very well and ideal, but it is demagogic because it does not reflect the reality of their market and their competition.

What is more, modifying a system that has been shown to work insofar as it has maintained the level of production in the Canary Islands over all these years, and doing so in the midst of a global pandemic hardly seems the most responsible thing to do even if the intention is good. This is what is being done with Royal Decree Act 5/2020 of 25 February, which introduces certain urgent measures in the area of agriculture and food and added Article 12, by amending Act 12/2013 of 2 August, on measures to improve the functioning of the food supply chain.

It is vital for the survival of the banana sector in the Canary Islands that, at the very least, this sector should be excluded from the application of the aforementioned article in the legislation currently being drafted for its development, as recently requested by the Canary Islands Parliament.

This is not a time when structural changes should be made that involve modifying a system in a strategic sector that works, which is under the umbrella of a Protected Geographical Indication (PGI), the Canary Island Banana, and which particularly affects the outermost European regions, such as the Canary Islands, which are very vulnerable and where other very important sectors, such as tourism and those associated with it, are suffering a great deal from the pandemic.

The inappropriateness and exceptional nature of the timing is evidenced by the fact that the recent Royal Decree Act 5/2021 of 12 March on extraordinary measures to support business solvency in response to the COVID-19 pandemic has once again extended the deadline for debtors in a state of insolvency not to have to apply for insolvency proceedings until 31 December 2021. From that date onwards the two-month period for doing so will begin to run, where applicable, because demagogy is destructive and reality takes over. Instead of helping, the sale of the product is made even more difficult.