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* Growers had wanted pay cut, workers say
* Banana industry struggles with strong currency
* Agreement includes housing, education benefits
By Helen Murphy
BOGOTA, June 19 (Reuters) - Colombian banana workers on Wednesday reached agreement with growers to avoid a strike, clinching an increase in wages and improved social benefits that prevented a protest that could have choked supply of the fruit to Europe and the United States.
The world's fourth biggest banana exporter, Colombia has struggled to maintain almost 150,000 workers across the industry as a strong local currency made labor costs expensive and overseas sales cheap in dollar terms.
Producers at some 288 farms in northwestern Uraba wanted to slash peso-denominated costs, while workers called for their wages to be increased by 8 percent.
In a past-midnight agreement, the workers managed to get a 4 percent pay rise for the first year and an inflation-linked increase for the second, according to Sintrainagro, which groups agriculture workers including those in the banana sector.
"They say they are in crisis, they say salaries should be reduced 43 percent and that can't happen," said Guillermo Rivera, president of Sintrainagro, before the deal was reached.
Negotiators for plantation owners grouped in an association called Augura were not immediately available for comment.
The strike had been set to begin early on Wednesday. Negotiations had collapsed earlier this month between Augura and as many as 18,000 banana workers represented by Sintrainagro.
The strike would have prevented the daily export of as many as 234,000 boxes of the fruit, worth some $2.3 million, Sintrainagro said. Banana exports represent about 30 percent of overseas agriculture sales, without counting coffee.
The agreement also improved housing and education benefits for the workers.
The peso has strengthened steadily over the last decade, with a respite in 2008, from about 2,800 pesos per dollar at the end of 2003, prompting heavy lobbying by exporters and industrialists.
Strong currencies hit exporters the most since salaries, pensions and health benefits are paid in local currency but overseas buyers pay for the bananas in devalued dollars.
Still, a 9 percent increase in the peso last year has been mostly reversed in 2013 after efforts by the government and central bank weakened the currency about 7 percent since the beginning of the year.
The peso closed on Tuesday at 1,904.35 per dollar.
The government wants to devalue the peso further, to about 1,950 per dollar to reduce pressure on the economy, a level that would help banana growers.
The bulk of the banana industry is based in Uraba, an area in western Antioquia province that has suffered decades of bloodshed by right wing paramilitary groups and Marxist rebels from the Revolutionary Armed Forces of Colombia.
More than half the residents live in poverty, raising concerns that if pay is reduced workers could shift away from the banana plantations and into crime gangs that traffic cocaine toward the Caribbean Sea.
President Juan Manuel Santos has made it a priority to cut unemployment across the nation's mostly rural expanse, bringing the national jobless rate down to 10.2 percent from 11.2 when he took office in August 2010.
Colombia is the fourth biggest exporter of bananas behind Ecuador, Costa Rica and the Philippines. It sells about 80 percent of its production to Europe and the United States.
While banana exporters have not been impacted hard by the debt crisis in Europe, its biggest market, the sector is threatened by events that have brought drastic government spending cuts, forcing families to trim expenses on basic goods as well as luxury items.