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Cutrale’s labor record could impede bid for Chiquita
Fyffes, with 7 percent of the banana market, would control nearly 30 percent if it manages to acquire Chiquita.  Photo: Neil Hall/Reuters


“Cutrale has a whole series of actions against it, fines surrounding labor rights issues in the last few years alone and going back. It’s certainly worrying from a worker rights standpoint.”
– Alistair Smith, Banana Link


On Aug. 11, the Brazilian groups Cutrale and Safra announced a $625 million takeover offer for Chiquita Brands International Inc.

The poor labor rights record of fruit producer Cutrale Group could become an issue in the Brazilian company’s bid to acquire Chiquita Brands International Inc.

“It’s something that Chiquita should worry about,” says Alistair Smith, international coordinator for Banana Link, a UK-based campaigner for sustainable trade. “Cutrale has a whole series of actions against it, fines surrounding labor rights issues in the last few years alone and going back. It’s certainly worrying from a worker rights standpoint.”

Cutrale and investment firm Safra Group publicized their $625 million offer on Aug. 11, five months after Chiquita initiated a merger process with Ireland's Fyffes PLC that would create the world's largest banana seller. Chiquita controls 22 percent of worldwide supply, and Fyffes 7 percent. 

The Brazilians are offering Chiquita shareholders a 29 percent premium to Fyffes, but the US company will need to also factor in the business risk from Cutrale Group’s poor worker-rights record. 

Infractions date back many years, with Bloomberg reporting in 2006 that Cutrale became the world's top orange juice producer by violating US trade rules, breaking labor laws, and colluding to fix prices.

More recently, a 2013 report from the United Services Union (Ver.Di), an international trade union, and the nonprofit Christian Initiative Romero (CIR), both based in Germany, alleged that the company often resorts to threats and intimidation in dealing with its 15,000 workers, who receive some of the lowest wages in the food sector. In February 2013, the government fined Cutrale for unfair dismissal of pregnant women. 

Three employees died in fires at Cutrale's juice plant in Conchal in 2011 and 2012. “Working for Cutrale is bad for your health and a risk to life and limb,” one employee said in the report. 

Chiquita has its own record of allegations of human rights violations. 

In 2007, the company pleaded guilty in a US court to making payments to a Colombian paramilitary group, which led to thousands of Colombians subsequently suing Chiquita over related human rights abuse allegations. 

The case was dismissed in late July by a US appeals court, which reportedly lowered the legal risk for a takeover bidder such as Cutrale, according to Bloomberg News. 

Chiquita may now be assessing the same risk in merging with Cutrale. 

Cutrale, which already exports to 90 countries and accounts for 30 percent of global orange juice production, is seen to be motivated by Chiquita’s prestigious global brand and high-margin fruit drinks business, and less by the US company’s banana portfolio, according to Giovanni Anania, an economics professor at the University of Calabria in Italy.

As Monitor Global Outlook reported in March, Brazil’s unfavorable weather patterns and limited free-trade agreements have caused Brazilian banana producers to reduce exports and focus on domestic consumption. 

That's contributed to Brazilian banana exports plummeting 60 percent over the past decade to 95,700 metric tons in 2012, even while global gross banana exports hit a record high of 16.5 million tons in 2012, according to UN data. 

Cutrale may be looking to secure control of the global banana market amid rising international demand, argues Manitra Rakotoarisoa, an economist in the trade and markets division at the United Nations Food and Agriculture Organization.

 While the price of a banana in Brazil is currently above the free-market average due to trade barriers and controls, that could change as Brazil's bounty of land and labor slowly sees improved infrastructure and advanced technologies that could allow the nation to become a competitive banana exporter.

“This offer may be a sign (or an anticipation) that Brazil’s autarky price will sometime drop below world price. Nobody knows when exactly this will happen but if one day Brazil, through an acquisition like Chiquita-Cutrale, can overcome major trade barriers (policy, costs), the impact on the banana international market will be big,"
 Mr. Rakotoarisoa tells MGO by e-mail from the FAO’s headquarters in Rome. 

“There is no reason not to expect that Banana export will one day thrive in a country like Brazil where local demand remains high,” 
he says.

Cutrale is already active in the US with plants and plantations in Florida. Its clients include multinational groups such as Nestlé, Coca-Cola, and Parmalat.

Officials from Chiquita declined to comment, referring MGO to a press statement that said the Charlotte, N.C.-based company and its financial advisers Goldman Sachs and Wells Fargo Securities “will carefully review and consider the offer.”

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