United Fruit Company

The United Fruit Company (1899–1970) was a major American corporation that traded tropical fruit (primarily bananas and pineapples) grown in Third World plantations and sold in the United States and Europe. Critics often accused the company 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."

The United Fruit Company was known as la frutera ("the fruit company") or Mamita Yunay ("Mommy United") in Central America, where it was most active. For much of the 20th century, it dominated the exportation of bananas from Latin America and maintained a virtual monopoly on the banana trade in certain regions. The company had a deep and long-lasting impact on the economic and political development of several Latin American countries.

Corporate 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 Meigg's business concerns in Costa Rica after Meigg's death in 1877. As an experiment, Keith had begun planting bananas along the train route in 1873.

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 km²) 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 insufficent 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 in the Caribbean coast of Colombia.

In 1899, Keith lost $1.5 million when the New York City broker Hoadley and Co. went bankrupt. He then travelled to Boston, Massachusetts, where he arranged the merger of his banana trading concerns 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. The result of the merger was the United Fruit Company, based in Boston, with Preston as president and Keith as vice-president. Preston brought to the partnership his plantations in the West Indies, a fleet of steamships (the "Great White Fleet"), and his market in the U.S. North-East. Keith brought his plantations and railroads in Central America and his market in the U.S. South and South-East. At its founding, United Fruit was capitalized at $11,230,000.

In 1901 the government of Guatemala hired the United Fruit Co. to manage the country's postal service. 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, who resigned as president of the company in 1951.

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 meatpacker John Morrel), 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 to bribe Honduran President Oswaldo López Arellano with $1.25 million, with the promise of another $1.25 million upon the reduction of certain export taxes. Trading in United Brands stock was halted and Lopez was ousted in a military coup.

After Black's suicide, Cincinnati-based American Financial, one of millionaire 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.

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.

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.

The Guatemalan government of Colonel Jacobo Arbenz Guzmán was toppled by covert action of the United States government in 1954, after the directors of 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, the directors of UFCO may have feared Arbenz's stated intention of purchasing uncultivated land from the company (at the value declared in tax returns) and redistributing it among Native American peasants. The American Secretary of State John Foster Dulles was an avowed opponent of Communism whose law firm had represented United Fruit. His brother Allen Dulles was the director of the CIA. The brother of the Assistant Secretary of State for InterAmerican Affairs John Moors Cabot had once been president of United Fruit. Arbenz's government was overthrown by Guatemalan army officers invading from Honduras, with assistance from the CIA (see Operation PBSUCCESS).

Ironically, the operation failed to benefit the company despite the new regime. The company's stock market value declined along with its profit margin. The Eisenhower administration proceeded with anti-trust 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.

Reputation

The United Fruit Company was frequently denounced by leftist leaders and intellectuals, who accused it of bribing government officials in exchange for preferential treatment, and complained that it exploited its workers, contributed little by way of taxes to the countries in which it operated, and worked ruthlessly to consolidate monopolies. Latin American journalists sometimes referred to the company as el pulpo ("the octopus"), and leftist parties in Central and South American encouraged the Company's workers to strike. Pro-Communist writers Carlos Luis Fallas of Costa Rica, Miguel Ángel Asturias of Guatemala, Gabriel García Márquez of Colombia, and Pablo Neruda of Chile, all denounced the Company in their literature.

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. Historical estimates place the number of strikers somewhere between 11,000 and 30,000. On 6 December, Colombian Army troops under the command of General Carlos Cortés Vargas opened fire on a crowd of strikers gathered in the central square of the town of Ciénaga. The military justified this action by claiming that the strike was subversive and its organizers Communist revolutionaries. The number of people killed in that incident is disputed: General Cortés himself estimated that 47 people had died, but Liberal Party congressman Jorge Eliécer Gaitán claimed that the toll was much higher and 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 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. (See Santa Marta Massacre).

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.

Today, successor companies of United Fruit have interests in Colombia, Costa Rica, Guatemala, Honduras, and Panama.

External links

Defunct agriculture companies of the United States | History of Honduras | History of Guatemala | 1899 establishments | The Banana Wars

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Corporate history

History in Central America

Reputation

Further reading

External links