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Study: Higher Banana Prices Linked to Increased Armed Conflict
USAgNet - 06/14/2019

Experts often recommend that developing countries focus on high-value export crops such as fruits and vegetables. However, the effect of such practices on conflict-affected countries is not clear, and there is a risk that higher export revenue may lead to increased insurgent violence, according to a University of Illinois study.

The research focused on banana production in the Philippines and showed a correlation between higher banana prices and insurgent activity in certain areas, says U of I agricultural economist Benjamin Crost, who is a co-author of the study.

"The paper shows evidence that armed rebel groups in a country that exports bananas can fund themselves by extorting banana plantations, which means that the global banana trade can fuel civil conflict in producing countries," Crost says.

Crost and his co-author, Joseph H. Felter of Stanford University, obtained declassified data from the armed forces of the Philippines containing incident reports on encounters between the army and rebel groups in the field. They combined this information with data on banana prices, production, and location of plantations.

"We find that when the world market price of bananas goes up, the number of violent incidents and casualties increases in places that have banana production," Crost says. The data show that an increase in prices lead to a large increase in conflict in provinces where bananas are produced in large plantations with an area above 25 hectares (approximately 62 acres).

The Philippines is the world's fourth largest banana exporter, providing about 10 percent of the total export market. Bananas are the country's most important export crop, valued at about $470 million in 2011.

Almost all export bananas are of the Cavendish variety, which is well suited for shipping over long distances. Production mostly takes place on large plantations in Mindanao and the Vinayas, in the southern part of the country. The export market is highly concentrated and dominated by a small number of multinational firms.

The Philippines has several long-running conflicts between government and rebel groups. While the Islamic separatist groups on Mindanao are most well-known internationally, the most geographically widespread conflict is with the New People's Army, a Maoist guerilla group. They are active in most of the country, and typically carry out small-scale attacks on army outposts and police stations.

There is substantial anecdotal evidence that rebel groups fund their activities through extortion of banana plantations, Crost says. Direct data is not available, because paying off terrorists is illegal and companies may be prosecuted in the US and other countries. However, anecdotal evidence is abundant from anonymous sources, and from local media reports. The Philippine government estimates that the New People's Army collects over $28 million annually in extortion payments from the Mindanao region alone.

Large banana exporters are lucrative targets for extortion because their production is concentrated in a small area. "They are easy to disrupt, because if you blow up the processing plant it is going to cost the banana company a lot of money. If they can't get the bananas out they rot relatively quickly," Crost says.

If the price is high, the company stands to lose more money, and they are more likely to be willing and able to pay, Crost adds.

The increase in rebel violence can take both direct and indirect forms. Direct violence occurs when the company is extorted and doesn't pay, leading the rebels to carry out their threat, for example by blowing up a production plant. Indirect violence occurs when the company does pay, and the rebel group can fund more guns and troops to carry out other attacks.

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