My forum has been getting lots of abuse and low quality content from Bananastan. Is it reasonable for me to decide that I don't want any users or contributions from Bananastan anymore?
If the majority of users from Bananastan are a serious problem, and it's not feasible (or too strenuous) to use 'traditional' techniques (user-by-user basis), I would say it's perfectly acceptable to block Bananastan. Your site, your rules.
Of course, this is ignoring the technical challenges involved in doing this. It's insanely hard to block a geographic area, what with Tor and proxies and such. But if most users from Bananastan aren't prone to use such techniques, it's certainly possible and would likely have a noticeable effect if Bananastanians are as bad as you say they are.
Note also that I'm not considering political implications. It might be frowned upon by your current users that you're discriminating against Bananastan. Even your sane, rational explanation with statistics tends to not be heeded when 'discrimination' is involved. Sad but true. This is way past my field of expertise, though, and it's your decision whether you want to 'risk it'.
While you are free to implement whatever rules you want, one thing to bear in mind here is that it is highly likely that the users who are causing the problems are also the ones who will be most likely/willing/able to use proxies/TOR etc. to circumvent any country specific block that you implement.
So what this will achieve is that you will end up blocking legitimate users who cause no problems, but could make it harder for you to identify and deal with the disruptive and abusive users.
Basically it is your community, so you can decide whether to accept or not accept content from specific countries or users. If users from bananastan are causing more trouble than contributing in a positive way and it is not your main target (i.e. localized community) it is completely sane to block access for them.
Not all Bananians are the same. I know that there are a lot of Bananians which are quite annoying due to their lack of English and general education paired with their desire to articulate themself (might be a cultural thing), but to generalize this to all of them is quite racist (There! The R-Word! I said it!). Maybe you have some Bananians in your community which are constructive members and you don't even realize that they are from Bananastan because they fit in so well?
Also, keep in mind that those masses of users who spam your site with their Bananastan IP addresses might in fact be fewer actual people than you think. Bananistan has only one major ISP, and that IP uses dynamic IP addresses, so the same user can appear under lots of different IP addresses. Maybe you are in fact only dealing with one annoying user with many identities.
However, in the end it is your decision. It's your community, you make the rules.