IUF
Uniting Food, Farm and Hotel Workers World-Wide

The Powdered Milk Trail From Europe to the Dominican Republic

Arla Foods, formed in 2000 through the merger of MD Foods (Denmark) and Arla (Sweden), is Europe's largest dairy company, with an annual turnover of over 5 billion euros. Headquartered in Denmark, Arla is a cooperative owned by Swedish and Danish dairy farmers, with subsidiaries outside Europe in the Middle East, Asia and the Americas.

Arla's dumping abroad of powdered milk (thanks to the system of EU export subsidies) and its impact on farmers and workers (including IUF members) in the countries exported to, has been the subject of recent articles in the journal of the Swedish Food Workers' Union M�l och Medel. In the April issue, union journalist Gunnar Brulin followed the trail of Arla Foods milk powder to the Dominican Republic and back to company headquarters in Denmark. The version which follows is slightly edited.

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Arla Foods' two new Swedish milk powder plants will be ready at the end of the year at Vimmerby and Visby. New, much-needed jobs will be created, but there are also questions about where and how the milk powder should be marketed. M�l och Medel has followed the controversial milk powder Milex across the Atlantic to the Dominican Republic to see what happens when it arrives in the poor Caribbean island. Arla Foods now say that they are prepared to invest locally after 50 years of dumping.

You can find all the well-known milk powder brands - Milex, Alaska, Nido, Nutra, Ultra Milk, Anchor - on the shelves in the new supermarket in San Francisco de Macoris. There are countless milk powder brands on the market, but the reality behind these brands is a small number of very large transnational companies.

Bernabel Matos walks us along the shelves, points to the products and explains:

Milex comes from Arla Foods in Denmark and is the biggest. Nido is a Nestl� brand. Nestl� now imports its milk from Argentina, but it used to be produced locally. We made the milk powder here in San Francisco de Macoris.

Bernabel is the president of the IUF-affiliated Nestl� union Sitracodal. He is a very energetic man who is passionate about the issue of milk production - or, more precisely, by the injustices behind it. Wealthy countries - the EU and the USA - can afford to protect their own production. Poor countries, however, cannot.

That is unjust. On top of that, however, companies based in the rich countries like Arla Foods use unfair methods to drive local producers out of the market. The Swedish-Danish dairy company receives export subsidies to sell its surplus milk in the Dominican Republic. This is the meaning of dumping.

Bernabel is understandably concerned about this dumping. Two years ago his fellow workers were hit by it when Nestl� decided to stop milk powder production at its plant in San Francisco de Macoris. Twenty-eight dairy farmers could no longer deliver milk and 20 workers � members of his union � lost their jobs. In a country like the Dominican Republic this was a human disaster.

Anchor is produced by Fonterra, continues Bernabel, still walking along the shelves. It comes from New Zealand, and is marketed by Nestl�.

Just over a year ago Fonterra signed a cooperation agreement with Nestl� to sell dairy products in North, Central and Latin America. That was the end of milk powder production in San Francisco de Macoris. Production simply couldn't be saved, as imports were cheaper.

We go into town to the union office. It is well organised and has the basic equipment. A computer connected to the internet makes it possible to communicate easily and gain access to the news. The IUF regional organization for Latin America, Rel-UITA, is very important for the Nestl� union.


Bernabel Matos, president of the IUF-affiliated Sitracodal.

Through the Rel-UITA web site they have access to information about what is happening within transnational companies in Latin America and on a global level. Bernabel, who is a member of the Rel-UITA executive committee, has written articles on local milk production and the impact of imports.

The IUF gives us the strongest support, says Bernabel. "We are able to get more strength from the International than from our own national trade union movement, because, regrettably, it is still very much divided.

Sitracodal union secretary Samuel Santana, who is a machine operator, joins us after work. He informs us that the plant was built 34 years ago. The union has existed for 32 years. The plant has 150 employees, of which 120 are union members. The remaining 30 are white-collar workers who, according to national legislation, are not allowed to join a union. The union has achieved one hundred percent unionization, and they are proud of this.

In previous issues, M�l och Medel has published articles on Arla Foods' milk dumping and how this has driven thousands of small farmers out of the market. It isn't illegal, but it is quite clearly immoral (although Arla Foods management has been rerluctant to admit this). Arla Foods management has also found it difficult to admit that the attention given to the dumping issue in Sweden, Denmark and the Dominican Republic has in any way influenced its decision to invest locally in the Dominican Republic.

At the request of the IUF secretariat in Geneva, the Arla Foods European Works Council has raised the dumping issue with corporate management. Within the framework of IUF trade union development projects, the Swedish Food Workers' Union Livs and the LO/TCO International Council have assisted the Dominican food workers' federation Fentihabeta with organizing union study circles. In practice this means, among other things, monitoring Arla Foods management to ensure that it sticks to its promise to invest locally, either by building its own plant or by buying the plant of the Italian company Parmalat.

The Dominican Republic is suffering from a severe and deepening economic crisis. The local currency has been steadily losing its value against the dollar for a year now. There are constant power cuts, fuel shortages and no money to buy imported goods. Purchasing power is being steadily eroded.

It would be quite justified to lay much of the blame on the current government and it will probably be voted out in May, says Bernabel, but it has tried to take some positive measures. One is the legislation on a general health insurance scheme, which has not yet come into force because the government still hasn't got the funds needed to implement it.

Another positive reform is the Act on milk regulation. A national council, Conaleche, was set up to regulate and develop the dairy industry. The objective is to reduce the country's imports of milk powder, among other products. An automatic mechanism will be introduced to support the price of local milk to guarantee a minimum price to producers.

It is not been possible to implement this reform either. The economic crisis has resulted in increased costs for the dairy companies. The two big ones, Rica and Parmalat have not been able, or have refused to pay, the minimum prices the dairy farmers are entitled to according to the law.

One reason for the financial difficulties of domestic dairy plants is the competition with subsidised milk powder imports from the EU. The situation is absurd. On the one hand the EU has helped fund a major agricultural project, Prolino, aimed at increasing domestic milk production. On the other, the EU subsidizes exports by Arla Foods and other dairy companies who contribute to driving that same production out of the market. Milk production has gone into a deep decline, affecting not only small farmers but big ones as well.

One very big producer who has now sold his cattle is Ces�ere Conteras. He used to have a herd of 600 head and about 40 employees, but was no longer able to make a profit with the company. After 50 years as a milk producer he gave up and dismissed his workers - a measure he concedes is to criminal in a country like the Dominican Republic where there is such a shortage of jobs. "It was the toughest decision I have ever made", he says, "but I had no choice. I can't run a company with a loss."

Josel�n Rodriguez Conde, another major milk producer in San Francisco de Macoris has chosen to bypass the dairies which pay so badly. He has started selling and distributing fresh, chilled unpasteurized milk directly to the customers.

The milk is picked up from his "Finca Sandiego" with four small pick-up trucks and taken into town. It is delivered morning and night at set times and venues. There is a large sign indicating that the milk must be heated before drinking to prevent contamination. This fresh milk is much cheaper than milk powder and it is the only milk that poor people are able to afford in times of economic crisis.

We leave San Francisco de Macoris and return to Santo Domingo. The road is lined with rice fields. Rice is expensive and is imported nowadays. Production has come to a standstill. The same applies to coffee, where the crops have failed. Fruit however is still being exported successfully.

Mejia Arcala, the company which imports the Milex milk powder from Arla Foods, is located in one of the suburbs. There is a big warehouse with 350 employees.

Ballardo Meija, vice CEO and son of the firm's founder, says that even under optimum conditions the country's milk production has never exceeded 350 million litres per year. This meets the needs of only 20 percent of the population. The remaining 80 percent also need milk.

If our company, Nestl� and others did not import milk, it would be terrible, because this is a hot country; we can't produce enough to meet the needs of the people.

He defends imports and thinks that EU subsidies for dairy exports are a legitimate kind of aid to agriculture. The Dominican government adds 20 percent in import taxes, he says, thus bringing in needed revenues.

Besides, I have good news. Arla Foods and our company, Meija Arcala, are going to set up a joint venture and build a dairy plant buying milk directly from the farmers. We are doing this in order to consolidate our sales here in the Dominican Republic and to promote Dominican milk producers, so that they become as efficient as the Swedish and Danish producers. Write that in your article in Sweden, he says with a big smile.

The national dairy council Conaleche has its offices in the center of Santo Domingo. Conaleche director David Cueto confirms that Arla Foods and Meija Arcala are going to invest in the country and launch their own production.

He has visited Denmark and spoken to Arla Foods management to explain that the company should have its own production in the country and not only export milk powder. Milex is the market leader and a brand that Dominican milk producers need to make use of.


He confirms that imports are needed since the country is unable to produce all the milk it needs. But he also feels that there is a problem, since imports undermine domestic production.

All peoples must be guaranteed their own food supply within their own country, he says. In the long term, the Dominican Republic must be able to produce its own milk.

When I interview by telephone Jais Valeur, Sales Director of Arla Foods Ingredients at the company's head office in �rhus, Denmark, he says: We need export subsidies and a milk surplus in Europe, otherwise we will have to import milk during parts of the year. He doesn't agree that his company's sale of milk to the Dominican Republic constitutes dumping. Dumping, he claims, is when you enter a market, sell your product and then leave. Arla Foods has been active in the sector for over 50 years.

Some countries have natural conditions for milk production. Europe does not. If we want to produce milk in quantities sufficient for doing without imports, we need a certain surplus. We also want agriculture to be sustainable from an environmental point of view. It then becomes more expensive, so we rely on subsidies to be able to sell our surplus. But we have quotas and therefore we limit our production. We exercise great responsibility, much more than the USA. The Dominican government will be increasing its imports from the USA by another 8 percent.

"What would happen if the EU export subsidies and other support were removed?" I ask.

Countries with natural export conditions like New Zealand and Argentina would take over. For Arla Foods it would mean that we would have to reduce our milk powder production in Denmark and Sweden and get milk powder from our plant in Argentina. It would make no difference for the Dominican Republic, but for Sweden and Denmark this would mean a cut in milk production and fewer jobs in the dairy industry.

Couldn't you use the surplus for some other purpose? To develop new products, for instance?

We are already working hard on that.

Why is Arla Foods only now � after 50 years � going to invest in the Dominican Republic and start its own dairy there?"

This has nothing to do with the debate in the media. For a long time we've been examining the possibility of setting up a joint venture with our import firm Mejia Arcala. Arla Foods needs to develop a long-term export policy, because many EU subsidies will be reduced or removed entirely over the coming three years.

Will you be buying the existing Parmalat plant or building a new facility?

We're considering both options. The intention is to produce UHT milk. The conditions for producing milk powder aren't present - Dominican milk production is too small for that. There will be close cooperation with local milk suppliers but not in the form of a cooperative.