Chile, World Bank to Compensate for Fruit Ban Losses

The government of Chile and the World Bank have pledged financial backing to compensate for losses that resulted from the Bush Administration’s five-day ban on Chilean fruit, officials representing Chilean exporters and U.S. importers announced Thursday.

While details of the plan have not yet been worked out, the promise of financial incentives will enable retailers and others in this country to destroy fruit that accumulated during the embargo and clear the system for incoming shipments from the South American nation, they said.

“The reason for removing the fruit from the system is the spoilage caused by delays, not because the fruit is adulterated,” Ronald Bown, executive director of the Chilean Exporters’ Assn., said at a press conference. “It would take too much time, too much money and too much manpower to inspect and clear the fruit for return to market. When Chilean fruit returns to the U.S. market, we intend to provide only the premium quality the U.S. consumer has always demanded.”

‘Empties Pipeline’

Bown estimated that economic losses for exporters and importers from the ban last week would total about $240 million, and officials representing U.S. importers said about 3 million cases of fruit worth as much as $75 million will have to be destroyed.

They said prices for consumers may be “slightly higher for the first few days” after Chilean fruit returns to grocery store shelves but predicted that “the market will return to normal” once the supply reaches its usual volume.

“When you remove this amount of fruit, it totally empties the pipeline, so that when you return fruit, the initial demand will be very, very strong,” said George F. Carstens, president of the American Produce Assn. “We are a supply and demand economy, so the initial impact of the first few days may be slightly higher in terms of prices to retailers--which may or may not be reflected in prices to consumers.”

The ban was imposed by the Food and Drug Administration March 13 after two red seedless grapes containing puncture marks and minute traces of cyanide were discovered in a shipment that arrived in the port of Philadelphia, which receives more than half of all Chilean fruit exports. The inspections that found the tainted grapes were conducted after an unidentified caller telephoned the U.S. Embassy in Santiago, threatening to poison fruit headed for the United States.

The ban emptied store shelves across the nation of all fruit of Chilean origin and threatened critical damage to the Chilean economy. The United States purchases more than half of Chilean fruit exports.

Last Friday, the FDA announced that it would return Chilean grapes and other berries to the market under a new, enhanced inspection system here, coupled with increased security measures in Chile. However, the FDA said fruit that already had left U.S. ports for distribution to markets before the embargo would have to be destroyed.

Under the agency’s new procedures, inspections have increased to 5% of fruit, or a minimum of 15,000 cases from each vessel, whichever is larger. Earlier this week, the FDA announced that it also would begin to permit the return of Chilean pears and nectarines after inspection. Since the discovery of the two cyanide-tainted grapes, no further contaminated fruit has been detected.

Bown said that, despite “losses in the hundreds of millions,” the American consumer “is ready to buy fresh fruit from Chile.” He said importers are now reporting back orders of between 500,000 and 1 million cases and “the orders continue to arrive.”

Fruit exports are the second largest source of foreign exchange for Chile. At wholesale, Chilean fruit sold in the United States amounts to nearly $1 billion annually, of which $500 million is returned eventually to the Chilean economy. More than 10,000 fruit orchard owners in Chile have been affected by the FDA ban, along with Chilean packing and shipping facilities, all employing an estimated 250,000 workers, for at least a part of the year.