New Zealand’s largest company, the dairy cooperative Fonterra, is laying down the groundwork for the expansion of its operations in Southeast Asia, Australia and Latin America, where it has partnered up with Nestlé

Because of the way its economy is structured, New Zealand exhibits certain similarities with the food-producing countries of Latin America. Together with Argentina, Australia, Brazil, Chile and Uruguay, New Zealand forms the Global Dairy Alliance, which was created in 2002 and groups some 1.5 million producers, with a total annual production of 60 billion liters. In 2002, the six countries that make up the Alliance accounted for approximately 55 percent of all international dairy commerce.

The dairy sector’s leading company, the Fonterra cooperative group, has some 12,000 members and an annual turnover of 14 billion dollars. To finance the increasingly intense expansion of its operations outside New Zealand, Fonterra is seeking investors for some of the activities that are already underway, while at the same time getting ready to go public, with plans to be listed on the Stock Market by 2010, towards securing the funds necessary to carry out its conversion into a global company.

This growth and expansion process rests on a generalized rise in milk and milk byproduct prices, which favors transnational corporations such as Fonterra and Nestlé, and at the same time is detrimental to consumers, in particular the poorest consumers, as well as to many producers.

In the Latin American market, Fonterra operates through a strategic alliance with Nestlé, called DPA (Dairy Partners America), which acts as the basis for a number of joint ventures between the two transnational corporations in various countries throughout the continent. This alliance was formed in March 2002, when its two partners agreed to open the first five joint plants in Brazil, Venezuela and Argentina, in addition to a regional management center. As part of the agreement, Fonterra sold its powdered milk production in Venezuela, Dominican Republic, Peru and several countries of Central America to Nestlé.

In a second stage of cooperation under the DPA, as of July 2004 the companies launched a series of joint ventures in Ecuador, Colombia and Trinidad & Tobago. In Chile the cooperation extended only to four product lines –liquid milk, yogurts, desserts and juices–, as the local company Soprole’s second main partner, Fundación Isabel Aninat, refused to incorporate all of Soprole’s activities into the new association.  

The combined annual turnover of all the companies associated under the DPA amounts to more than 1 billion dollars. As these associations are organized nationally, they are adapted to the minimum labor laws in force in their respective country. In this way, the European transnational corporation, along with its New Zealand partner, creates a complex web of labor relationships per country and per sector, which enables them to divide the representation of the workers’ interests, with the aim of taking the maximum advantage of the synergic and labor cost reduction effects.

However, given this new impulse from Fonterra, some observations regarding the cooperative’s relationship with New Zealand’s dairy workers are in order. In April 2002, Fonterra, the IUF and the New Zealand Dairy Workers Union (NZDWU) signed a framework agreement regulating labor relations in the company. The agreement was endorsed a month later by the Director-General of the International Labor Organization (ILO), Juan Somavía, and the Prime Minister of New Zealand, Helen Clark, both in their capacity as witnesses.

In view of the Swiss transnational corporation’s policy of wiping out permanent jobs and replacing them with outsourced and subcontracted work, and of persisting in its refusal to accept the IUF as a valid interlocutor representing workers before the company throughout the world –to date it has only recognizes the IUF in Europe–, we feel the need to recall the main points of the agreement signed five years ago.

Among other commitments, Fonterra undertakes to respect the principles of ILO conventions numbers 87, 98, 135, 29, 105, 138, 182, 100 and 111, the freedom of association and collective bargaining, and the right to form and join trade unions. It also undertakes not to discriminate or take prejudicial action against any employees on the grounds of their being a member of a union or representing a union legitimately, and it commits itself to share any relevant information about the company while engaged in collective bargaining. The company shall provide healthy and safe working conditions for all its personnel and shall inform the unions if there are any major changes that may result in the loss of jobs. Further, it shall consult with the unions regarding options to minimize the impact of such terminations and mitigate the negative effects on any dismissed worker.

The Third Part of the agreement stipulates the appointment of a review committee with representatives from the workers’ organizations and the company, which shall meet at least once a year to monitor the application of the agreement. This part also includes a clause on “joint ventures,” which reads: “Fonterra will inform joint venture partners of Fonterra’s obligations under this agreement.”

As the association between Nestlé and Fonterra deepens, we will have to follow their activities closely, to see what their approach to labor will be in Latin America: that of cooperation, as suggested by Fonterra’s past conduct, or that of ignoring and fragmenting unions, which has characterized Nestlé. Meanwhile, we must not forget the cooperation agreement the NZDWU signed with the Argentinean Association of Dairy Industry Workers (ATILRA) and the IUF’s Latin American division, Rel-UITA, on November 22, 2005. One of the clauses of this agreement refers to monitoring compliance in Latin America with the April 2002 framework agreement mentioned above.