United Fruit Company

The United Fruit Company was a United States corporation that traded in tropical fruit (primarily bananas) grown on third world plantations and sold in the United States and Europe. The company was formed in 1899 from the merger of Minor C. Keith's banana-trading concerns with Andrew W. Preston's Boston Fruit Company. It flourished in the early and mid-20th century and came to control vast territories and transportation networks in Central America, the Caribbean coast of Colombia, Ecuador, and the West Indies. Though it competed with the Standard Fruit Company for dominance in the international banana trade, it maintained a virtual monopoly in certain regions, some of which came to be called Banana Republics.

It had a deep and long-lasting impact on the economic and political development of several Latin American countries. Critics often accused it of exploitative neocolonialism and described it as the archetypal example of the influence of a multinational corporation on the internal politics of the so-called "banana republics" (a term coined by O. Henry). After a period of financial decline, United Fruit was merged with Eli M. Black's AMK in 1970 to become the United Brands Company. In 1984, Carl Lindner, Jr. transformed United Brands into the present-day Chiquita Brands International.

Corporate history

Early history

In 1871, U.S. railroad entrepreneur Henry Meiggs signed a contract with the government of Costa Rica to build a railroad connecting the capital city of San José to the port of Limón in the Caribbean. Meiggs was assisted in the project by his young nephew Minor C. Keith, who took over Meiggs's business concerns in Costa Rica after Meiggs's death in 1877. Because he was looking for cheap food to give to his workers, Keith began planting bananas along the train route in 1873. Once the railroad was complete, he decided to transport bananas to his native country. It did not take him too long to see the success of his idea, but his ambition and greed led him to take advantage of the workers by paying them extremely low wages. The workers left when exposed to very low quality conditions. This was not exposed until years later, when the United Fruit Company took possession of almost all the lands in Guatemala.

When the Costa Rican government defaulted on its payments in 1882, Keith had to borrow £1.2 million from London banks and from private investors in order to continue the difficult engineering project. In 1884, the government of President Próspero Fernández Oreamuno agreed to give Keith 800,000 acres (3,200 square kilometers) of tax-free land along the railroad, plus a 99-year lease on the operation of the train route. The railroad was completed in 1890 but the flow of passengers proved insufficient to finance Keith's debt. On the other hand, the sale of bananas grown in his lands and transported first by train to Limón and then by ship to the United States proved very lucrative. Keith soon came to dominate the banana trade in Central America and along the Caribbean coast of Colombia.

United Fruit (1899 - 1970)

In 1899, Keith lost $1.5 million when the New York City broker Hoadley and Co. went bankrupt. He then traveled to Boston, Massachusetts, to participate in the merger of his banana trading company, Tropical Trading and Transport Company, with the rival Boston Fruit Company. Boston Fruit had been established by Lorenzo Dow Baker, a sailor who, in 1870, had bought his first bananas in Jamaica, and by Andrew W. Preston. Preston's lawyer, Bradley Palmer, had devised a scheme for the solution of the participants' cash flow problems and was in the process of implementing it. The merger formed the United Fruit Company, based in Boston, with Preston as president and Keith as vice-president. Palmer became a permanent member of the executive committee and for long periods of time the director. From a business point of view, Bradley Palmer was United Fruit. Preston brought to the partnership his plantations in the West Indies, a fleet of steamships, and his market in the U.S. Northeast. Keith brought his plantations and railroads in Central America and his market in the U.S. South and Southeast. At its founding, United Fruit was capitalized at $11,230,000. The company at Palmer's direction proceeded to buy or buy a share in 14 competitors, assuring them of 80% of the banana import business in the United States, then their main source of income. The company catapulted into financial success. Bradley Palmer overnight became a much-sought-after expert in business law, as well as a wealthy man. He later became a consultant to presidents and an adviser to congress.

In 1901, the government of Guatemala hired the United Fruit Company to manage the country's postal service and in 1913 the United Fruit Company created the Tropical Radio and Telegraph Company. By 1930, the Company had absorbed more than 20 rival firms, acquiring a capital of $215,000,000 and becoming the largest employer in Central America. In 1930, Sam Zemurray (nicknamed "Sam the Banana Man") sold his Cuyamel Fruit Co. to United Fruit and retired from the fruit business. In 1933, concerned that the company was mismanaged and that its market value had plunged, he staged a hostile takeover. Zemurray moved the company's headquarters to New Orleans, Louisiana, where he was based. United Fruit went on to prosper under Zemurray's management; Zemurray resigned as president of the company in 1951.

United Brands (1970 - 1984)

Corporate raider Eli M. Black bought 733,000 shares of United Fruit in 1968, becoming the company's largest shareholder. In June 1970, Black merged United Fruit with his own public company, AMK (owner of meat packer John Morrell), to create the United Brands Company. United Fruit had far less cash than Black had counted on and Black's mismanagement led to United Brands becoming crippled with debt. The company's losses were exacerbated by Hurricane Fifi in 1974, which destroyed many banana plantations in Honduras. On February 3, 1975, Black committed suicide by jumping out of his office on the 44th floor of the Pan Am Building in New York City. Later that year, the U.S. Securities and Exchange Commission exposed a scheme by United Brands (dubbed Bananagate) to bribe Honduran President Oswaldo López Arellano with $1.25 million, and the promise of another $1.25 million upon the reduction of certain export taxes. Trading in United Brands stock was halted and López was ousted in a military coup.

After Black's suicide, Cincinnati-based American Financial Group, one of billionaire Carl H. Lindner, Jr.'s companies, bought into United Brands. In August 1984, Lindner took control of the company and renamed it Chiquita Brands International. The headquarters was moved to Cincinnati in 1985.

Throughout most of its history, United Fruit's main competitor was the Standard Fruit Company, now the Dole Food Company.

Reputation

The United Fruit Company was frequently accused of bribing government officials in exchange for preferential treatment, exploiting its workers, paying little by way of taxes to the governments of the countries in which it operated, and working ruthlessly to consolidate monopolies. Latin American journalists sometimes referred to the company as el pulpo ("the octopus"), and leftist parties in Central and South America encouraged the Company's workers to strike. Criticism of the United Fruit Company became a staple of the discourse of the communist parties in several Latin American countries, where its activities were often interpreted as illustrating Lenin's theory of capitalist imperialism. Major Latin American writers sympathetic to more independence from foreign governments and corporations, such as Carlos Luis Fallas of Costa Rica, Ramón Amaya Amador of Honduras, Miguel Ángel Asturias of Guatemala, Gabriel García Márquez of Colombia, and Pablo Neruda of Chile, denounced the Company in their literature.

The business practices of United Fruit were also frequently criticized by journalists, politicians, and artists in the United States. Little Steven released a song called "Bitter Fruit" about the company's misdeeds. In 1950, Gore Vidal published a novel (Dark Green, Bright Red), in which a thinly fictionalized version of United Fruit supports a military coup in a thinly fictionalized Guatemala. This reputation for malfeasance, however, was somewhat offset among those who worked for it or in the regions it controlled by the Company's later efforts to provide its employees with reasonable salaries, adequate medical care, and free private schooling. In the 1960s and 1970s, the Company and its successor, United Brands, created an Associated Producers Program that sought to transfer some of its land holdings to private growers whose produce it commercialized. As the Company gradually lost its land and transportation monopolies, its status as a capitalist bête noire declined.

Diane K. Stanley, a former U.S. diplomat and the daughter of a Welsh-born employee of the United Fruit Co. in Guatemala, argues in the book For the Record: The United Fruit Company's Sixty-six Years in Guatemala, published in 1994, that the negative perception of the company's influence in Guatemala is largely undeserved, and could be due in part to the unwillingness of left-wing journalists and writers to critically examine the legacy of the administrations of Presidents Arévalo and Arbenz. According to her:

Most accounts about the banana company have also failed to describe the significant contribution that United Fruit made to Guatemala's human and economic development. In addition to providing employment to tens of thousands of workers and paying them the nation's best rural wages, the Company also offered its employees excellent medical care, rent-free housing, and six years of free schooling for countless children. By clearing and draining thousands of acres of jungle that are today among the country's most productive farm lands, United Fruit converted Guatemala into a major banana producer, thereby ending the country's unhealthy dependence on its exports of coffee. The Company's pioneering work in eliminating malaria and other tropical diseases early in the twentieth century also demonstrated that Guatemala's sparsely inhabited coastal areas offered rich, previously unexploited agricultural zones. Ultimately, the taxes and salaries that the United Fruit Company paid, and the millions of dollars of foreign exchange earnings that it annually generated, impacted in an important way on Guatemala's economy.

Stanley also argues that while the company did orchestrate "an effective media campaign against the Arbenz government, it is clear that the Eisenhower administration was intent on ousting what it considered to be a Communist beachhead that threatened U.S. national security. Spurred on by John Foster Dulles, his vehemently anti-Communist secretary of state, President Eisenhower would have moved to depose Arbenz even if the United Fruit Company had never operated in Guatemala."

History in Central America

The United Fruit Company (UFCO) owned vast tracts of land in the Caribbean lowlands. It also dominated regional transportation networks through its International Railways of Central America and its Great White Fleet of steamships. In addition, UFCO branched out in 1913 by creating the Tropical Radio and Telegraph Company. One of the company's primary tactics for maintaining market dominance was to control the distribution of banana lands. UFCO claimed that hurricanes, blight and other natural threats required them to hold extra land or reserve land. In practice, what this meant was that UFCO was able to prevent the government from distributing banana lands to peasants who wanted a share of the banana trade. The fact that the UFCO relied so heavily on manipulation of land use rights in order to maintain their market dominance had a number of long-term consequences for the region. For the company to maintain its unequal land holdings it often required government concessions. And this in turn meant that the company had to be politically involved in the region even though it was an American company. In fact, the heavy-handed involvement of the company in governments which often were or became corrupt created the term "Banana republic" representing a "servile dictatorship".

UFCO had a mixed record on promoting the development of the nations in which it operated. In Central America, the Company built extensive railroads and ports and provided employment and transportation. UFCO also created numerous schools for the people who lived and worked on Company land. On the other hand, it allowed vast tracts of land under its ownership to remain uncultivated and, in Guatemala and elsewhere, it discouraged the government from building highways, which would lessen the profitable transportation monopoly of the railroads under its control.

In 1954, the democratically elected Guatemalan government of Colonel Jacobo Arbenz Guzmán was toppled by U.S.- backed forces lead by Colonel Carlos Castillo Armas who invaded from Honduras. Assigned by the Eisenhower administration, this military opposition was armed, trained and organized by the U.S. Central Intelligence Agency (see Operation PBSUCCESS). The directors of United Fruit Company (UFCO) had lobbied to convince the Truman and Eisenhower administrations that Colonel Arbenz intended to align Guatemala with the Soviet Bloc. Besides the disputed issue of Arbenz's allegiance to Communism, UFCO was being threatened by the Arbenz government’s agrarian reform legislation and new Labor Code. UFCO was the largest Guatemalan landowner and employer, and the Arbenz government’s land reform included the expropriation of 40% of UFCO land. U.S. officials had little proof to back their claims of a growing communist threat in Guatemala, however the relationship between the Eisenhower administration and UFCO demonstrated the influence of corporate interest on U.S. foreign policy. The American Secretary of State John Foster Dulles was an avowed opponent of Communism whose law firm of Sullivan and Cromwell had represented United Fruit. His brother Allen Dulles was the director of the CIA, and was a board member of United Fruit. United Fruit Company is the only company known to have a CIA cryptonym. The brother of the Assistant Secretary of State for InterAmerican Affairs John Moors Cabot had once been president of United Fruit. Ed Whitman who was United Fruit’s principal lobbyist was married to President Eisenhower's personal secretary, Ann C. Whitman. Many individuals who directly influenced U.S. policy towards Guatemala in the 1950s also had direct ties to UFCO. The overthrow of Arbenz, however, failed to benefit the Company. Its stock market value declined along with its profit margin. The Eisenhower administration proceeded with antitrust action against the company, which forced it to divest in 1958. In 1972, the company sold off the last of their Guatemalan holdings after over a decade of decline.

Company holdings in Cuba, which included sugar mills in the Oriente region of the island, were expropriated by the 1959 revolutionary government led by Fidel Castro. By April 1960 Castro was accusing the company of aiding Cuban exiles and supporters of former leader Fulgencio Batista in initiating a seaborn invasion of Cuba directed from the United States. Castro warned the U.S. that "Cuba is not another Guatemala" in one of many combative diplomatic exchanges before the failed Bay of Pigs invasion of 1961. Despite significant economic pressure on Cuba, the company was unable to recoup cost and compensation from the Cuban government.

Banana massacre

One of the most notorious strikes by United Fruit workers broke out on 12 November 1928 on the Caribbean coast of Colombia, near Santa Marta. On 6 December, Colombian Army troops under the command of General Cortés Vargas opened fire on a crowd of strikers gathered in the central square of the town of Ciénaga. Estimates of the number of casualties vary from 47 to 2000. The military justified this action by claiming that the strike was subversive and its organizers were Communist revolutionaries. Congressman Jorge Eliécer Gaitán claimed that the army had acted under instructions from the United Fruit Company. The ensuing scandal contributed to President Miguel Abadía Méndez's Conservative Party being voted out of office in 1930, putting an end to 44 years of Conservative rule in Colombia. The first novel of Álvaro Cepeda Samudio, La Casa Grande, focuses on this event, and the author himself grew up in close proximity to the incident. The climax of García Márquez's novel One Hundred Years of Solitude is based on the events in Ciénaga, though the author himself has acknowledged that the death toll of 3,000 that he gives there is greatly inflated.

General Cortés Vargas, who issued the order to shoot, argued later that he had issued the order because he had information that U.S. boats were poised to land troops on Colombian coasts to defend American personnel and the interests of the United Fruit Company. Vargas issued the order so the US would not invade Colombia. This position was strongly criticized in the Senate, especially by Jorge Eliécer Gaitán, who argued that those same bullets should have been used to stop the foreign invader.Template:Citation needed

The telegram from Bogotá Embassy to the U.S. Secretary of State, dated December 5, 1928, stated: “I have been following Santa Marta fruit strike through United Fruit Company representative here; also through Minister of Foreign Affairs who on Saturday told me government would send additional troops and would arrest all strike leaders and transport them to prison at Cartagena; that government would give adequate protection to American interests involved.”

The telegram from Bogotá Embassy to Secretary of State, date December 7, 1928, stated: “Situation outside Santa Marta City unquestionably very serious: outside zone is in revolt; military who have orders "not to spare ammunition" have already killed and wounded about fifty strikers. Government now talks of general offensive against strikers as soon as all troopships now on the way arrive early next week.”

The Dispatch from US Bogotá Embassy to the US Secretary of State, dated December 29, 1928, stated: “I have the honor to report that the legal advisor of the United Fruit Company here in Bogotá stated yesterday that the total number of strikers killed by the Colombian military authorities during the recent disturbance reached between five and six hundred; while the number of soldiers killed was one.”

The Dispatch from US Bogotá Embassy to the US Secretary of State, dated January 16, 1929, stated: “I have the honor to report that the Bogotá representative of the United Fruit Company told me yesterday that the total number of strikers killed by the Colombian military exceeded one thousand.”

The Banana massacre is said to be one of the main events that preceded the Bogotazo, the subsequent era of violence known as La Violencia, and the guerrillas who developed during the bipartisan National Front period, creating the ongoing armed conflict in Colombia.Template:Citation needed

References

• Jason M. Colby, The Business of Empire: United Fruit, Race, and U.S. Expansion in Central America (Cornell University Press, 2011).
• Bucheli, Marcelo (2005). Bananas and Business: The United Fruit Company in Colombia: 1899-2000. New York: New York University Press. ISBN 9780814799345. 
• Stanley, Diane K. (1994). For the Record: The United Fruit Company's Sixty-six Years in Guatemala. Guatemala City: Editorial Antigua. ISBN 99922-722-0-1. 
• Thomas, Hugh (1971). Cuba: The Pursuit of Freedom. New York: Harper & Row. 

Further reading

• Bucheli, Marcelo (2005). Bananas and Business: The United Fruit Company in Colombia: 1899-2000. New York: New York University Press. ISBN 9780814799345. 

• Bucheli, Marcelo (July 2008). "Multinational Corporations, Totalitarian Regimes, and Economic Nationalism: United Fruit Company in Central America, 1899-1975". Business History 50 (4): 433–454. doi:10.1080/00076790802106315. 

• Bucheli, Marcelo (November 2005). "Banana War Maneuvers". Harvard Business Review 83 (11): 22–24. 
• Bucheli, Marcelo; Geoffrey Jones (2005). "The Octopus and the Generals: The United Fruit Company in Guatemala". Harvard Business School Case (9-805-146). 
• Bucheli, Marcelo (Summer 2004). "Enforcing Business Contracts in South America: The United Fruit Company and the Colombian Banana Planters in the Twentieth-Century". Business History Review 78 (2): 181–212. The President and Fellows of Harvard College. doi:10.2307/25096865. 
• Bucheli, Marcelo. Entrepreneurship and Global Capitalism 2. Edward Elgar, 342–383. .
• Bucheli, Marcelo (2006). From Silver to Cocaine: Latin American Commodity Chains and the Building of the World Economy, 1500-2000. Duke University Press. ISBN 9780822337669. .
• Bucheli, Marcelo (2003). Banana Wars: Power, Production, and History in the Americas. Duke University Press. ISBN 9780822331964. .
• Bucheli, Marcelo (2006). Encyclopedia of American Business History. Facts on File. ISBN 9780816043507. .
• Bucheli, Marcelo. History of World Trade Since 1450. Macmillan. .

• Cepeda Samudio, Álvaro (1962). La Casa Grande. 
• Chapman, Peter (2007). Jungle Capitalists. Canongate. 
• Chapman, Peter (2007). Bananas: How the United Fruit Company Shaped the World. Canongate Books Ltd.. 
• Chomsky, Aviva. West Indian Workers and the United Fruit Company in Costa Rica, 1870-1940. Louisiana State University Press. 

• Fallas, Carlos Luis (1940). Mamita Yunai. 

• McCann, Thomas P (1987). On the Inside. Beverly, Massachusetts: Quinlan Press.  Revised edition of An American Company (1976).
• McWhirter, Cameron; Michael Gallagher (May 3 1998). "How 'el pulpo' became Chiquita Banana". The Cincinnati Enquirer. 
• Neruda, Pablo. Canto General.  "La United Fruit Co."
• Schlesinger, Stephen; Kinzer, Stephen (1982). Bitter Fruit: The Untold Story of the American Coup in Guatemala. 
• Striffler, Steve (2002). In the Shadows of State and Capital: The United Fruit Company, Popular Struggle, and Agrarian Restructuring in Ecuador, 1900-1995. Durham, N.C.; London: Duke Univ. Press. 
• Vandermeer, John; Perfecto, Ivette (2005). Breakfast of Biodiversity. Oakland, California: Institute of Food an Development Poliy. ISBN 0-935038-96-X. 

External links

• United Fruit Historical Society Chronology of United Fruit by Marcelo Bucheli and Ian Read
• "Our Complex History", from the Chiquita Brands International 2000 Corporate Responsibility Report
• Banana Republic: The United Fruit Company
• Financial Times Article on United Fruit's legacy in Latin America: "Rotten Fruit"
• Bibliography on United Fruit extensive biography from the United Fruit Historical Society, Inc.
• Documentary Propaganda on United Fruit
• Chiquita Banana Protest Information on the company's corruption
• Why Bananas are a Parable For Our Times by Johann Hari, The Huffington Post, January 7, 2009
• From Arbenz to Zelaya: Chiquita in Latin America - video report by Democracy Now!