Page 47 - Ecuador's Banana Sector under Climate Change

chapter 2: economic and policy analysis of the banana sector in ecuador and implications for social and environmental sustainability
The retail end of the supply chain mounted its market dominance through
the help of third-party certification bodies, selected by the retailers, to enforce standards and norms. In the 1990s, third-party certification schemes quickly became the choice mechanism to enforce private standards and norms. These standards go beyond the issues of safety and quality and include product attributes and benchmarks that are meant to enforce compliance by downstream operators and extract rents by the retailers and third-party certification providers. The perishability of the banana and the high degree of concentration at the retail sector level provide the latter with a powerful lever to enforce compliance with voluntary standards by downstream operators (Robinson, 2010).
Under this system of quality control and traceability, all risk is borne by
the exporters and producers. In the case of rejected bananas, the exporters
and producers are contractually liable for paying the damages at the Cost- Insurance-Freight price. As the exporters run the risk of ruining their reputation and losing their customers they, in turn, establish strict quality management and control systems in the banana chain with the producers. Farmers, in turn, are compelled to comply or run the risk of being excluded from the export market. Producers and producer groups or associations sequentially invest in internal quality management control. A banana producer organization would usually hire a technician for 30 members; the technician then visits the farmers regularly, assists them with production and packaging, and provides advice on quality and standards-related issues. Quality control is also carried out at the packaging station by the exporter’s staff (Roquigny et al., 2008).
The accredited certification bodies are located outside the producing country and are closely associated with retailers - their key customers. Producing countries, such as Ecuador, are struggling to localize this critical service provision domestically and internalize the revenues. While Ecuadorian and other Latin American producers are keen to encourage home-grown certification entities that meet international norms, they have yet to gain acceptance from the retail industry, which prefers to select certification providers close to the consumer market.
To be organic or Fairtrade-certified, producers must be inspected at least once a year by the certifier and certification is done at the farm level.6 The certification body transfers much of the cost of compliance to the grower. This means that
ventures. Del Monte is present in Cameroon and Dole Food Company in Cameroon and Côte d’Ivoire. Chiquita, Dole Food Company and Del Monte Foods Inc. have agreements or joint ventures with banana producers in the Philippines (Rabobank, 2001).
Fairtrade label certification is carried out under the auspices of the Bonn-based organization, Fairtrade International (FLO, 2009), which includes provisions allowing freedom of association by workers,
such as freedom to participate in farmer associations and cooperatives and engage in discussions
on wages and accommodation, occupational health and safety, prevention of child or forced labour. The Fairtrade label also includes some environmental criteria for bananas, such as the use of buffer zones and a ban on herbicides. Standards also stipulate minimum prices, set by Fairtrade International, plus the Fairtrade premium, and traders pay farmers in advance up to 60 percent of the value of the merchandise (FAO, 2003).
6
31