United Fruit Company - History in Central America

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. UFCO's policies of acquiring tax breaks and other benefits from host governments led to it building enclave economies in the regions, in which a company's investment is largely self-contained for its employees and overseas investors and the benefits of the export earnings are not shared with the host country.

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". The term Banana Republic was coined by American writer O. Henry.

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. UFCO had also destroyed at least one of those railroads upon leaving its area of operation.

In 1954, the democratically elected Guatemalan government of Colonel Jacobo Arbenz Guzmán was toppled by U.S.- backed forces led 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. United States Secretary of State John Foster Dulles was an avowed opponent of Communism, whose law firm Sullivan and Cromwell had represented United Fruit. His brother Allen Dulles was the director of the CIA, and 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.

Even as the Arbenz government was being overthrown, in 1954 a general strike against the company organized by workers in Honduras rapidly paralyzed the country and thanks to the United States' concern about the events in Guatemala, was settled more favorably for the workers in order to gain fuller leverage for the Guatemala operation.

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.