Attracting encroachments to national sovereignty by rapacious Washington-connected multinational corporations and the meddling attentions of their powerful home country; stunting reform and economic development at every turn; breeding economic dependency; firmly controlled by foreign companies and giving little beneficiation to the country of production; upending and undermining political institutions; and not even sustainable.
These are ringing accusations which bring to mind one natural resource –oil. Certainly not the banana. This is somewhat understandable; oil more readily lends itself to the vilification touted in these bleak and cynical claims, and it has been the subject of visible conflict, with allegedly oil-motivated American interludes into Kuwait, Iraq and Libya being all too well known and well televised.
Nonetheless, it is one of the blights of modern political economic analysis, including those with a bent for “resource curse” theory, that in their discussion of the interaction of forces that have resulted in the paradoxical plights of some resource-rich countries, they tend to overlook one of the most important culprits, or perhaps better understood as a catalyst in a larger political process; the innocuous banana. And yet, perhaps just as much as oil, this energy source has been the fons et origo of many social, political and economic malaise in many underdeveloped countries who possess them.
This inevitable interaction with politics is only more obvious when we consider the economic significance of this product; bananas are the world’s fourth most consumed food crop, after rice, wheat and corn, with some 350 billion bananas consumed every year. Figures of this magnitude rarely rack up by market forces alone and nominally hint at a set of vested political and economic hands at work.
In this brief article, a slice of the long and storied history of the politically-derived banana’s impact on the economies of numerous states which were in possession of it, particularly regarding Latin America, the Caribbean and sub-Saharan Africa through the prism of the unholy alliances between big corporations and dictators, as well as the battle for market access.
Unholy Alliances: Dictators and Corporations
The South American country of Ecuador rarely finds itself on the top 3 list of any global rankings. Yet it occupies that very spot when it comes to world production of the banana. Some 18% of the bananas traded worldwide during the 1970s and 1980s originated from Ecuador, and this number expanded to 30% in the 1990s. Banana production and trade in Ecuador gives direct employment to an estimated 380 000 people. This tells something about the history and geography of this fruit on two particular points; why Ecuador and why now? The road to this present-day reality is an interesting and entangled one through which we gain insights into the nature of globalization as a performative process and its structures with implications far beyond Latin America.
In order to flourish, banana plants require rich soil, combined with 9 to 12 months of sunshine along with constant, heavy rains of to 80 to 200 inches a year. This is a demand level unmatchable by artificial irrigation if the given plantation is to compensate for the production costs and still have the ability to sell at the low price for which the banana is known. This gives us an important clue as to the Ecuadorian presence among the top producers in the world. But that is only a partial aspect on a bigger picture.
For one, how did the bananas get to Latin America, when they are said to be native to the tropics of South and Southeast Asia, and are likely to have been first domesticated in Papua New Guinea? And how did one particular variety of this fruit, the Cavendish, conquer the world market when there are thousands all across the world? The answer to these questions are political and are to be found in the early half of the nineteenth century.
The mass production of the banana such as we know today commenced specifically in the year 1834 and saw an explosion in the late 1880s and from the beginning reaped political consequences. Prior to the 1870s most of the land that bananas were grown on in the Caribbean had been previously used to grow sugar, and indeed before then bananas were virtually unknown in the United States. But this quickly changed and just 30 years later, Americans (then totaling at 70 million people) were consuming over 16 million bunches a year. Like all rapid expansions and enormous profits, this came at a high cost, and perhaps none bore it more than the producing populations.
The odyssey started in 1871 and, indicative of those twists of fate with which history is so littered, not with anything to do with agriculture but the construction of a railroad in Costa Rica overseen by an ambitious23 years-old Minor Keith, born in New York. The mega project sees hundreds lose their lives, including the lives of Keith’s two brothers. Bur Mr. Keith is undaunted. While building the railroad in Costa Rica he was also hatching a far grander plan. As construction made progress, he ordered the planting of bananas on the land easements to either side of the tracks. The bananas flourished and once the railroad was brought to completion it was possible to economically transport the bananas to Americans who were beginning to acquire a taste for the exotic fruit. By the next decade, Keith owned three banana companies. Keith then joined up with a Cape Cod sailor, Lorenzo Baker, and a Boston businessman, Andrew Preston. The three raised the necessary capital to establish the Boston Fruit Company. By 1899, the Boston Fruit Company and the United Fruit Company (UFCO) emerged – and in their wake formed the largest banana company in the world, with plantations all over Latin America and the Caribbean, including Colombia, Costa Rica, Cuba, Jamaica, Nicaragua, Panama and Santo Domingo. The company also owned 112 miles of railroad linking the plantations with ports. To complete their Charter company-like set up, and in order to protect their interests, they also owned some eleven steamships, known as the Great White Fleet and an additional 30 other ships under lease.
In 1901, Guatemalan dictator, Manuel Estrada Cabrera granted to UFCO the exclusive right to transport postal mail between Guatemala and the United States. Thus came UFCO’s first entry into Guatemala in whose wake the country would be held custody to a fruit company. Ruled by a conservative dictator who would be a puppet to the UFCO, Keith judged Guatemala to have “an ideal investment climate”. He formed the Guatemalan Railroad Company as a subsidiary of UFCO and capitalized it at $40-million. Other countries in Central and South America also fell prey to the UFCO, which they called or “El Pulpo” (the Octopus), but no other state felt the weight of the UFCO more than Guatemala.
Why was Guatemala such an ideal investment climate for the UFCO? “Guatemala was chosen as the site for the company’s earliest development activities,” a former United Fruit executive once explained, “because at the time we entered Central America, Guatemala’s government was the region’s weakest, most corrupt and most pliable.”In Guatemala, United Fruit gained control of virtually all means of transport and communications. United Fruit charged a tariff on every item of freight that moved in and out of the country via Puerto Barrios. As if that were not enough, the company also managed to exempt itself from virtually all taxes in Guatemala for 99 years.
In 1944, the people of Guatemala overthrew the right-wing dictator then in power, Jorge Ubico, and held their first ever true elections. The man they elected president was Dr. Juan Jose Arevalo, a socialist. A new constitution was drawn up, partly based on the American version. At this time, in the highly class-divided Guatemala, only 2.2% of the population owned over 70% of the country’s land. Only 10% of the land was available for 90% of the population, most of whom were native Indians.
Most of the land held by the large landowners was unused. Jacobo Arbenz who succeeded Arevalo in another free election continued the reform process. Arbenz proposed to redistribute some of the unused land and make it available for the 90% to farm. This greatly unsettled the UFCO; the United Fruit was one of the big holders of unused land in Guatemala. The pressure mounted heavily against the UFCO and finally the company made its pleas and called on officials in the US government, including President Eisenhower and Secretary of State John Foster Dulles (whose former New York law firm, Sullivan and Cromwell, was a representative of the company), saying that Guatemala had turned communist and was susceptible to Soviet Union influence.
Fortunately for the fruit conglomerate, almost every major American official involved had a family or business connection to the company itself(Allen Dulles, head of the Central Intelligence Agency, had served on UFCO’s board of trustees while Ed Whitman, the company’s top public relations officer, was married to Ann Whitman, President Eisenhower’s private secretary). Thus with great zeal, the U.S. State Department and United Fruit, enlisting the talents of the PR genius Edward Bernays (a nephew of the pioneering psychoanalyst Sigmund Freud), embarked on a major public relations campaign to convince the American people and the rest of the US government that Guatemala was a Soviet “satellite”.
Upon Bernays’ suggestion, the company also arranged and offered to pay for the expenses of journalists who traveled to Guatemala to learn United Fruit’s side of the story, and some of the biggest outlets (and particularly The New York Times and The New York Herald Tribune) published accounts favorable to the UFCO.
The campaign was a resounding success and in 1954, with consent manufactured, the CIA engineered a coup, code-named “Operation PBSUCCESS”. The CIA set up a clandestine radio station to carry propaganda, jammed all Guatemalan stations, and hired skilled American pilots to bomb strategic points in Guatemala City. The U.S. replaced the democratically-elected government of Guatemala with another right-wing dictator that would again bend to UFCO’s will. The propaganda machine, meanwhile, portrayed the operation to the American audience as the removal of an unpopular leader and the ushering in of liberty and democracy; this has an eerily familiarity when looked at through the prism of America’s 2003 invasion of Iraq.
After his firm, Hubbard-Zemurray, experienced much success importing bananas from Latin and Central America and selling them in in New Orleans, Samuel Zemurray went to the Central American republic of Honduras to expand his company into banana production in the year 1910. Honduras was deemed well-suited for growing bananas due to its proximity to the equator. These were the seeds of what would eventuate into Cuyamel.
But Cuyamel did not enter unchartered territory and the turf was already spoken for. The main player seeking monopoly status in the Honduras banana market besides was Vaccaro Brothers and Company. But both the Vaccaro firm and Cuyamel were eclipsed by the much larger United Fruit Company. Before United Fruit entered Honduras as a direct producer in 1910, the firm participated in the Honduras market by proxy through investments in both Zemurray’s and Vaccaro Brothers’ companies. Before United developed plantations of its own in the cities of Trujillo and Tela, it owned 60% of Cuyamel and 50% of Vaccaro. Even though the three companies were competitive against each other, they maintained some respective distance, and even pursued joint efforts in advertising and increasing banana agricultural outputs in Honduras.
Nevertheless, competitiveness seeps through. Zemurray had played an active role in Honduran politics since he first arrived in the country. In 1910, the administration of President Miguel R. Dávila had given the Vaccaro Brothers’ Company land for railroad construction and prohibited any other companies from building a competing railroad within 12 miles of the Vaccaro line. This had long displeased Zemurray, and he detested the Dávila government, having provided encouragement and money to a failed coup in 1908 against Dávila.
These concessions by the Dávila regime to Vaccaro further enrage Zemurray. He makes a concerted effort now to remove the regime, and has an accomplice in the person of former President Manuel Bonilla. Zemurray supplied weapons and transportation for Bonilla to launch a coup against Dávila. President Dávila fled, and Bonilla once again assumed the presidency of the nation, owing in large part to the direct intervention of Zemurray.
Shortly before Bonilla ascended to the presidency, Zemurray in 1911 transformed his company from Hubbard-Zemurray into Cuyamel Fruit Company. He acquired 5,000 acres of land for agriculture along the Cuyamel River in the northwestern extremity of Honduras, near the Guatemalan border. The firm took its new name either from this river or from the town of Cuyamel nearby. As a repayment for his support, Bonilla also granted Zemurray a concession to build a railroad between the town of Cuyamel, by the coast, and Veracruz, in the interior.
There were no more coups in the country through the end of the decade, but Zemurray’s Cuyamel Fruit was in fierce competition with Vaccaro and United. Further, Cuyamel’s development of a previously empty strip of land along the Guatemala-Honduras border almost led to an outbreak of war between the two states, but this was halted by US mediation.This incident of near-war strained relations between pro-Honduras Cuyamel and pro-Guatemala United, and this tension would not fully cool off until the two companies became one in 1929, when following the October crash of international financial markets, Zemurray sold Cuyamel to United Fruit in exchange for stock and retired, making UFCO the giant discussed in prior sections.
The Banana Wars: The Battle for the Banana Market
Africa’s banana market is a paradoxical reality. In the lowland of the Congo basin, farmers grow a greater diversity of bananas than anywhere in the world.In countries such as Uganda, Burundi, and Rwanda per capita consumption has been estimated at 99 pounds per year, the highest in the world. Uganda itself is the second-largest producer of bananas in the world after India. It is, however, one of the smallest exporters, the crops being used mostly for domestic consumption.
West African countries produce nearly all of Africa’s banana exports. Production in this region has grown rapidly over the past 15 years, now accounting for around 4% of the world banana trade. The vast majority of these bananas are sold in Europe, mainly in France and the UK, where an estimated 2.5 billion tonnes of bananas are peeled annually. But the African access raises questions and a myriad of issues about the nature of the international political economy than meets the eye.
Since 1975, African and Caribbean countries had had a quota of bananas to import into the EU market, enabling them to sell to Europe as many as they wanted to support. The official reasoning for this was that the European Union (then known as the European Community) hoped, that this would enable the economies of such developing countries to grow independently, without depending on overseas aid. Some economists, however, question the logic behind this.
To begin with, if the EU is concerned with the development of these countries and to free markets, it makes no economic sense to continue to subsidize their agricultural lobby with up to 50-billion euros per year. Secondly, the EU would remove barriers to a vast array of agricultural products from Africa – as it stands only bananas can be sold into the EU market without barriers to entry, and indeed disincentives are provided as seen in the imposition of 30% tariffs to unprocessed coffee but 60% to processed (that is job-creating) coffee from Africa.
Secondly, banana and pineapple production in Africa are dominated by two American multinational companies Compagnie Fruitière/Dole (a descendent of the Cuyamel company dealt with above) and Del Monte.In any case, US multinationals which control the Latin American banana crop hold 67% of the EU market and the US itself does not export bananas to Europe. This perhaps displays the extent to which the removal of barriers to access are motivated by US-EU alliance and not developmental concerns regarding Africa. The Caribbean is a different story, however.
Despite this, however, the US filed a complaint against the EU for further with the World Trade Organization (WTO) and, in 1997, won. The EU was instructed to alter its rules as a result. The chief outcome of this deal had been to protect banana farmers in the Caribbean from competition from Latin America, whose bananas are cheaper because they are grown on largescale, mechanised plantations run by giant USbased corporations.
After the WTO ruling, the US government continued to argue that free trade in bananas had not been restored, while the EU argue it has changed its rules. The US has then imposed a retaliatory range of 100% import duties on European products, “encompassing everything from Scottish cashmere to French cheese” as the Guardian then put it.
The US government was allegedly pressurized by powerful US multinational companies which dominate the Latin American banana industry. “The Bill Clinton administration took the “banana wars” to the WTO within 24 hours of Chiquita Brands, a powerful, previously Republican supporting banana multinational, making a $500,000 donation to the Democratic Party” according to journalist Patrick Barkham.
The banana wars came to a conclusion only in 2009 with an agreement between the EU and Latin American countries. The December 2009 agreement involved the EU reducing its tariffs on imported bananas from 176 euros ($224; £140) per tonne to 114 euros per tonne within eight years.
The Future and Sustainability of the Banana: A Challenge of Globalization
Like oil, the banana is not only problematic in its production and sale, but it may also not have much of a future; at least not as we know it. Researchers have declared the Cavendish to be potentially unsustainable and at risk of “imminent death.” This threat stems from the Panama disease; a deadly root fungus from the island of Taiwan. And since all Cavendishes are clones, if the fungus can kill one banana shrub, it can kill them all.
Of course the Panama disease is nothing new. It was identified at least as early as the 1950s, when it wiped out the Cavendish’s predecessor, known as the ‘Gros Michel’, or Big Mike. When the Gros Michel banana succumbed to the fungus, the Cavendish was found to be immune, at least until the fungus mutated and started its attack all over again. Starting in the 1990s, the Panama fungus began to work its way across Asia and Africa once again. The oceans have proven effective barriers for now, “but when someone with the fungus on their shoe can cross an ocean in a few hours,” National Geographic magazine warns“oceans provide little protection.”
The history of the banana has been one of deep politicisation, therefore; implicating it in the unfavourable destinies of multitudes. But the banana, and for that matter oil itself, is merely one among many problematic resources to reap these economic histories and contemporary consequences. Indeed its trysts with dictators, lobbyists and tariffs at the behest of seemingly malevolent multinationals says more about the politicised nature of international trade than the resource in question. Indeed very few resources, if at all, could undergo similar examinations and emerge unscathed to some degree or another.
The dimensions of BRICS geography
Harnessing continental distance for the developing economies may be the single most important mission for BRICS and the New Development Bank (NDB) in the coming decades. The BRICS+ framework offers a platform to scale up investment cooperation through bringing on board the regional development institutions in which BRICS countries are members.
There have been numerous attempts to bring all BRICS under one common denominator — a common feature that would explain the rationale for the emergence of such a grouping. Among the many common factors for BRICS countries the more popular was the growth potential, with predictions of a rising share for BRICS in the world economy being prevalent in the initial phases of BRICS evolution. Another vision was that the BRICS economies represent the leading emerging markets (EM) with some of the most liquid assets and sizeable markets in the EM universe. But over and above some of these unifying themes, there appears to be a less explored commonality among BRICS related to their geographical peculiarities. In fact, geography in terms of the size of BRICS economies, the distance that separates them and the regional roles of BRICS in their respective continental neighborhoods appears to be one of the most fundamental and long-term themes that determines the pathways of BRICS future cooperation.
In terms of the centrality of geography as a defining and unifying feature of BRICS there is the simple fact that BRICS are among the largest countries by territory in the world. In particular, Russia is the largest country with a landmass of more than 17 million squared kilometers, with China taking the 3rd position, Brazil and India taking the 5th and 7th spot respectively. Furthermore, the top three spots in the world in terms of the number of countries that border the respective economies are taken by BRICS economies — China and Russia hold the number one spot with 14 border countries, while Brazil and India take the #3-4 ranking with 10 border countries each. Four BRICS economies also take the top 4 positions in the world in terms of the length of the border with neighboring economies. The number one spot is taken by China, followed by Russia and then Brazil and India.
Another way to picture the uniqueness of BRICS geography is the sheer distance that separates its members. If the distance were to be measured on the basis of the separation between the respective capitals, then the greatest distance among the two BRICS economies would be between Brazil and China — nearly 17000 km. The distance between Russia and Brazil is nearly 11700 km. These distances are several times higher than the longest separations of capitals within the EU (Warsaw-Lisbon separation is 2760 km) and still notably greater than the most extreme spatial separations in the developed world (London-Canberra is 10545 km and the New York — Canberra route is just over 10000 km).
But perhaps the most important common feature among the BRICS economies is that they serve as crucial regional hubs for their continental neighbors, particularly developing landlocked economies. Indeed, each BRICS economy neighbors several landlocked developing economies — in many cases these are some of the largest landlocked economies in the world. In the case of Brazil this is Paraguay and Bolivia. In the case of South Africa it is Botswana as well as Zimbabwe and Lesotho. In the case of India it is Bhutan and Nepal. In the case of China and Russia the two largest landlocked economies in the world — Kazakhstan and Mongolia — are in-between economies for the two largest countries of Eurasia (China and Russia). In Russia’s case there are also the landlocked CIS economies that border Russia (Belarus, Armenia, Azerbaijan). In all these cases, BRICS economies can potentially serve as outlets to the ports and global market routes for the respective landlocked economies that are their regional partners.
What do all these geographical factors mean for the vectors of economic cooperation among BRICS? The unprecedented spatial separation means that the intensity of trade among the BRICS economies will be limited by the gravity of distance (in line with the indications of the “gravity model” of international trade — the greater the distance and the smaller the size of the two economies, the less will be the intensity of bilateral trade). But at the same time there is tremendous scope for connectivity projects in view of the size of the BRICS countries and the needs for transportation connectivity in the regions of BRICS presence, most notably with respect to the land-locked countries.
The scope for connectivity projects for BRICS economies may be magnified to the scale of the landmass of the developing world via the BRICS+ platform uniting Africa, Latin America as well as Asia. This BRICS+ platform represents a formidable land mass that is significantly less connected via transportation compared to the part of territory occupied by the developed world. If in the case of BRICS+ the total land mass is nearly 100 million squared kilometers, in the case of the developed economies this is around a third of the land mass of the BRICS+ countries.
Harnessing continental distance for the developing economies may be the single most important mission for BRICS and the New Development Bank (NDB) in the coming decades. The BRICS+ framework offers a platform to scale up investment cooperation through bringing on board the regional development institutions in which BRICS countries are members. Accordingly, regional development banks, regional financing organizations together with NDB can act in concert in advancing sustainable development and connectivity across the Global South.
In sum, the two dimensions of BRICS geography, namely the intra-continental and the inter-continental expanses of the developing world, determine the pathways for future BRICS cooperation. The enormous intra-continental distances for BRICS can become an asset and an opportunity-set for advancing South-South cooperation through connectivity projects. At the same time, the scale of inter-continental divides points to the need to advance towards a Global South FTA, a project that is increasingly expedient given the rising tide of protectionism in the world economy.
from our partner RIAC
China’s economic slowdown and its implications for the rest of Asia
China’s economy has slowed down considerably since the past year. The key reasons for China’s slow growth are its stringent lockdowns, to achieve its objective of a zero covid policy. Here it would also be pertinent to point out, that many of Chinese President Xi Jinping’s policies especially tightening of credit for the real estate sector had an adverse impact on the real estate sector and the economy as a whole (according to estimates, real estate counts for 29% of the country’s Gross Domestic Product (GDP). A number of Chinese real estate developers have been downgraded by Moody’s. A number of companies, including Evergrande are part of the B3 category, which denotes “speculative and are subject to high credit risk’.
In August 2022, Chinese Premier Li Keqiang while commenting on the slowdown said:
‘A sense of urgency must be strengthened to consolidate the foundation for economic recovery’
There is a growing realisation that a further slowdown could lead to serious social problems, the stringent lockdowns have resulted in growing unemployment.
A number of steps have been taken to prevent the slowdown, such as Real Estate Sector and steps for Small Medium Enterprises. In August 2022, the Chinese government offered support to the tune of US $29 billion to Chinese real estate developers so that they can complete stalled projects and deliver them to home buyers. Earlier this year, China’s government announced that it would provide fiscal concessions and tax exemptions to MSME’s to small businesses in China. One of the key factors behind this course correction by Xi Jinping was the 20th national congress of the Communist Party will be held from October 16, 2022 (Xi Jinping is likely to secure a third-term and also consolidate his hold over the party and consolidate his position as the most powerful leader after Mao Zedong)
Challenges still persist for China’s economy
Reports of multilateral agencies clearly point to China’s growth in 2022 being well below earlier estimates and targets. According to a World Bank Report, growth in 2022 for the Asia-Pacific region is likely to be a little over 3% (3.2%), while China’s growth is likely to be 2.8%. China had targeted a growth of 5%, and even multilateral agencies had estimated that the country would grow at over 5%
An Asian Development Bank (ADB) report which estimated that China’s growth will be a little over 3% states that ‘developing’ Asia (which includes Cambodia, Bangladesh, Nepal, Myanmar, Sri Lanka etc) will grow at over 5% and highlights a significant point, that the last time China grew slower than the rest of Asia was in 1990, when China grew at below 4% (3.9%) and the rest of the region grew at 6.9%. Emerging Asian economies which include China, India, Indonesia, Thailand, the Philippines and Vietnam are likely to grow at 4.3% in 2022 and 4.9% in 2023 again a drop from earlier estimates.
It would be pertinent to point out, that a number of foreign investors in China have also complained about the lockdowns and restrictions. While in the short run, it is unlikely that they will shift their operations in a big way, they are likely to look for alternatives.
In contrast to China, the rest of the region has benefited from easing out covid19 restrictions. Says the ADB report:
‘Easing pandemic restrictions, increasing immunization, falling Covid-19 mortality rates, and the less severe health impact of the Omicron variant are underpinning improved mobility in much of the region’
Can ASEAN and South Asia benefit from China’s slowdown?
The case of Association of South East Asian Nations (ASEAN) countries is especially important, because their policies with regard to covid have been fundamentally different from that of China. Opening up of borders has given a boost to the tourism sector in the region — especially Malaysia and Thailand. This is important, because tourism accounts for a significant percentage of the GDP of these economies. Here it would also be pertinent to point out, that a number of companies have moved out of China, in the aftermath of covid 19, with Vietnam being a favoured destination due to its geographical location and other economic advantages (some companies have also moved to other ASEAN nations as well as India).
Even the stock markets of these countries have been doing reasonably well. In April 2022, analysts from JP Morgan and Goldman Sachs had picked Indonesia, Vietnam and Singapore as their favourite markets, while last month Credit Suisse said its favourite market in the region was Thailand.
In conclusion, while there is no doubt that China has been driving economic growth not just in Asia, but globally, it is unlikely that its economic challenges are likely to reduce in the short run. It is not just covid, but Xi Jinping’s economic policies which have been responsible for the slowdown. The biggest beneficiaries of China’s covid19 policies as well, as it’s slowdown in the longer run, would be the ASEAN region — especially countries like Vietnam and Indonesia — along with South Asian nations – especially India and Bangladesh who with investor friendly policies could attract more companies seeking to relocate from China.
Russia Struggling to Explore Africa’s Market
Building on post-Soviet relations with Africa, Russia has been struggling for strategies on how to establish economic footprints, promote investment and deepen cooperation in Africa. Despite the road map adopted at the end of the first Russia-Africa summit held in October 2019, little has been achieved since then.
Late September, the Regional Chamber of Commerce and Industry welcomed the participants to another round of conference under theme: “Russia-Africa: Prospects for Cooperation” held in St. Petersburg. That gathering featuring a few interested Russian enterprises was part of a series of steps brainstorm and discuss opportunities, developments and challenges with regards to the preparation of the forthcoming Russia-Africa summit planned for July 2023.
Additionally, the goal of this St Petersburg conference event was in line with the priorities on how to engage with credible investors who can partner with the government and private sector to exploit the market. It discussed the possibilities of strengthening partnership between Russia and Africa, as well as issues related to export/import, logistics and peculiarities of working with African partners.
Vice President of the Chamber of Commerce and Industry of the Russian Federation Vladimir Padalko welcomed the participants via video link from Moscow. In the video, Padalko emphatically reminded that “preparations for the second Russia-Africa summit, scheduled for July 2023 in St. Petersburg, are in full swing and we should come to it with concrete results in the form of agreements ready for signing.”
According to him, the Coordinating Committee for Economic Cooperation with African Countries should focus on conducting business missions that would identify specific areas for conducting business cooperation with African countries. It is necessary to help Russians to learn what the African market is, so that they are not afraid of taking investment risks in Africa.
Padalko said that the prejudices that Russians have regarding Africa should be overcome. He referred to his own experience, emphasizing that the first trip to the African continent made him change his mind significantly about the opportunities offered by cooperation with Africa. Russia is trying hard to improve its commercial relations with its African partners. In 2009, it established the Coordinating Committee for Economic Cooperation with sub-Saharan Africa to assist in promoting Russian business interests in Africa.
Senator Igor Morozov, Chairman of the Coordinating Committee for Economic Cooperation with African Countries, called for increasing the pace and level of cooperation with African countries through, as he put it, “bringing small and medium-sized businesses to Africa.”
According to him, Russia is far behind in its activity on the African continent from such countries as the United States, Britain, China, France and even India and Turkey. These countries are developing a network of technology parks, working in the continental free trade zone, participating in the development of the infrastructure of African countries, the construction of roads, bridges and railways.
Senator Morozov noted that “Russian business does not have the tools to enter Africa and, above all, in the field of the banking system. No other banks give guarantees to Russian business. According to him, African countries are interested in the supply of agricultural machinery, and in this sense, the Kirov Plant in St. Petersburg may have good opportunities. And in this sense, we should take an example from our Belarusian friends.”
That was not the first time analyzing the development of business and trade elations with Africa. The African market is competitive and complex, therefore Russian business needs to work thoroughly and systematically in it in order to achieve success. It is necessary to help interested businesses willing to navigate African realities, find a niche for their work, learn about the conditions for entering certain markets.
According to Morozov, there is really the need for a specialized investment fund to support entrepreneurs. In general, with the prospect of working with African partners for many years, more serious state support is needed, and finally suggested that it is necessary to return to barter trade and concessions, which will make it possible to obtain minerals from Africa.
“We need to develop our international payment instruments – sanctions are already being imposed against the Mir system,” he said. A great deal of hope is being placed on the working group for developing new mechanisms in currency regulation and international settlements led by Kremlin aide Maxim Oreshkin, “which is supposed to work out these mechanisms soon,” Morozov said.
“We need to see how we will work within the framework of national currencies” and use them for settlements with African countries, he said. “We need to work in this direction, understanding that SWIFT will never again be [the main system for interbank payments] for us,” Morozov, who also serves on the Federation Council’s Economic Policy Committee, said.
Talks on options for settlements between Russia and African countries in the current economic circumstances are already being held, but “we shouldn’t get ahead of events. African central banks are already beginning to come [to Russia]. Everyone understands that we are leaders in grain exports, leaders in sunflower oil, mineral fertilizers, and it is necessary to settle up,” Morozov.
Other options for settlements could be barter and concessions. The outlook for cooperation and possible Russian projects in Africa, Morozov said Russia can offer its competencies in hydropower, electric passenger transport, automobile manufacturing, farm machinery and pharmaceuticals. Afrocom operates with the support of the Russian Chamber of Commerce and Industry, the Federation Council and government institutions, according to the committee’s website.
Associate Professor Ksenia Tabarintseva-Romanova, Ural Federal University, Department of International Relations, acknowledges huge existing challenges and perhaps difficult conditions in the current economic cooperation between Africa and Russia. Creating African Continental Free Trade Area (AfCFTA) is the most important modern tool for the economic development of Africa, and this is unique for exploring the market and to get acquainted with the opportunities that it offers for business cooperation.
She, however, maintains that successful implementation requires a sufficiently high level of economic development of the participating countries, logistical accessibility, developed industry with the prospect of introducing new technologies. This means that in order for African Continental Free Trade Area to effectively fulfill its tasks, it is necessary to enlist the provision of sustainable investment flows from outside. These investments should be directed towards the construction of industrial plants and transport corridors.
Speaking earlier in an interview discussion, Tabarintseva-Romanova pointed to the fact that Russia already has vast experience with the African continent, which now makes it possible to make investments as efficiently as possible, both for the Russian Federation and for African countries. In addition, potential African investors and exporters could also explore business collaboration and partnerships in Russia.
Local Russian media, Rossiyskaya Gazeta also published an interview with Professor Irina Abramova, Director of the Institute of African Studies under the Russian Academy of Sciences, focusing on the economic cooperation with Africa. In this interview, Abramova reiterated explicitly that Russians have to do away with negative perceptions and attitudes toward Africa. The change in attitudes has to reflect in all aspects of the relationship with Africa and Africans.
“In Russians’ minds, Africa is synonymous with backwardness, poverty and hunger, which is not true at all. It is currently one of the most promising regions for foreign investment. In fact, it is a tiger ready to pounce. Africa today is in the same situation that China was in the 1990s. Today, China is the world’s number-one economy in purchasing capacity, a strong power which largely determines global development,” she explained.
“Africa is the zone where all big players overlap since its geographic location between the east and the west puts it at the peak of controversy and big game between all players, meaning between Europe and America, on the one hand, and China, India and other countries, on the other. And if Russia poses as a superpower it will lose its global influence without indicating its position in Africa as well,” she said.
According to her, seven African countries specifically Egypt, Algeria, Morocco, South Africa, Tunisia, Nigeria and Sudan, account for nearly 90% of Russia’s trade. “At the same time, China is present in almost all African countries. Millions of Chinese work in Africa today. It is a good moment for Russia now, because Western partners are trying to impose their values on the Africans, while China is dealing with its challenges at the expense of Africa,” the expert stressed.
The middle class is expanding very fast there, already amounting to 250-300 million people and this constitute a huge consumer market for products and services, according to her estimation.
Professor Abramova noted that it is a very good market for Russian products. The Chinese understood that long ago and are tapping the African market, having flooded it with their products, though Russia also has opportunities as it is fairly competitive in the energy, infrastructure and agriculture sectors, and exporting products such as fertilizers, trucks and aircraft supplies.
The fact that many prominent politicians and businessmen of the African continent graduated from Russian universities and speak Russian well contributes to strengthening of Russian-African relationship, the expert said, adding though that a new generation is about to take over in Africa, which is also reason why Moscow should maintain the existing solid social and cultural ties.
Senator Igor Morozov and Professor Irina Abramova are both members of the Kremlin’s Committee assigned the responsibility for coordinating and preparations for the next Russia-Africa summit in July 2023. Both Russia and Africa had problems finding a suitable African venue for the summit. The joint declaration adopted in Sochi says the summit be held every three years and the venue alternated between Russia and Africa.
Sampson Uwem-Edimo, President of the Nigerian Business Council and General Director of Trailtrans Logistic LLC, delivered a report “Nigeria as a Window to Africa” and further stressed that Russia does not have a common strategy on how to enter African markets, which exists, say, in China or France.
By removing barriers to trade in the region will create new entrepreneurial activities and spur innovations in technology. Now the African Continental Free Trade Area (AfCFTA) seeks to create better conditions for investment. On the other hand, Russian corporate directors most often have problems with their business in Africa. The key obstacles ranging from their inconsistencies in approach, poor knowledge of the local political and business environment. Russians must also invest more in R&D collaborations with their African partners.
According to him, while Russians hope for brisk business, many African business leaders today are still Western mind-oriented, have various support from the United States and Europe. But the practical reality, Russia could still steadily transfer technologies for local processing of raw materials as a catalyst for Africa’s development.
Uwem-Edimo noted that such former colonial powers as France and Great Britain, although they left their colonies, keep control panels in their capitals. The Nigerian businessman, who spoke in Russian, introduced the conference participants to the opportunities and vast potential of the African continent, focusing on Nigeria, which makes up 18 percent of the continent’s population – 240 million people.
President of the St. Petersburg Chamber of Commerce and Industry, Vladimir Katenev, also addressed the conference participants with a greeting. The moderator was Ekaterina Lebedeva, Vice-President of the St. Petersburg Chamber of Commerce and Industry Union, who called on representatives of the business community, in spite of the emerging challenges, to consistently work towards prioritizing Africa.
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