Term Paper on The Financial impact the Banana Trade Wars had on Chiquita Bananas

The question of the way in which the European Union allows bananas to be imported is in front of a World Trade Organization settlement panel. The U.S. maintains the E.U’s practice segregat American companies. The arbitration panel in view of the issue has requested more information and so more time. The U.S. has been requested to make a further submission concentrate on the damage it call for to U.S. exports by the E.U’s banana import administration. As a result, the imperiled restraint of 100% tariffs on selected E.U. products imported into the U.S. has stayed lately. Chiquita Brands International Inc. has spent eight years looking in the direction of the deal. Swamped in a financial restructuring of its $862 million in debt that could land it in bankruptcy, the company carefully praised the resolution between the United States and Europe that ends the trade war over European banana quotas. The new order starts with more licenses going to Latin American countries, where Chiquita produce most of its bananas. Starting in 2006, importers to Europe will be charged a flat tariff, with no quotas. But even if Chiquita gets enhanced sales in Europe next year, it still is losing millions of dollars per year and is incapable to pay its debt.

But this could be too little too late. Chiquita stockholders sound to like the affect, as the stock price shot up 67 cents to close at $1.67. But bondholders, who have bought debt issued by Chiquita that now is in default, still command much of Chiquita's near future. The company is negotiating with those bondholders to interchange that debt for common stock, which would weaken the stake of current shareholders. If it rectifies Chiquita's balance sheet, the pact with Europe could benefit those bondholders first, since their debts come before any payment to shareholders.

Steve Warshaw, president and chief operating officer at Chiquita, maintains that the deal revive a portion of their market access in Europe, but the parent company still must undergo a balance-sheet restructuring. It has criticised the restructuring on the impact of the EU quotas. The company might see some increased sales starting after this year, but the larger benefit will come in future years as Chiquita's premium product gets more and more entrance. That capability to charge higher prices for premium bananas has long made Europe one of the most lucrative markets in the world. Since Chiquita were the most impaired by the quotas, this does provide some progress to their market access.

 

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