The United Fruit Company

This article is a detailed account of the United Fruit Company's (Chiquita's) history and what it means for modern corporate multinationals.



The effect of foreign direct investment (FDI) has been hailed by neo-liberal supporters as one of the greatest assets to our current economic system.  Thus multinational corporations (MNCs) are seen as assets that possess an invaluable ability to promote growth in developing nations (LDCs) through the utilization of FDI.  Ideally, MNCs can quickly generate wealth and growth from their “ability to invest freely around the world and their efficient use of the world’s resources” (Green and Luehrmann 126). Theoretically, when MNC’s invest in developing nations, by opening subsidiaries or branches in a host nation, the company is essentially creating jobs and expanding markets where they didn’t used to exist, hence engendering economic and national development.     

While this all sounds very nice, this ideal is still exactly that - an ideal.  MNCs are potentially actors independent of national sovereignty, and their focus is generally limited to producing profits for shareholders.  This makes MNCs largely unaccountable and also makes them, by definition, contrary to the goal of spreading wealth to everyone.  There is a thin, sometimes blurred line of when an MNC is actually helping an economy and when it is simply aggrandizing it’s earning.  It is this lack of clarity that necessitates this research.  

How can an MNC help develop an LDC while still acquiring the profits requisite for business, and when does this investment become imperial control, contrary to LDCs development?  To understand this question we must look no further than the most notable and infamous story of corporate multinational power of our time: the United Fruit Company (UFC), or ‘El Pulpo’ (the octopus) to the locals.  The saga of the United Fruit Company will prove that MNCs indeed can be highly beneficial to LDC development; however, these benefits can only be realized if the company is regulated in such a way that their power is limited so that they do not become an entity that actually hinders national development.  

The UFC had a modest beginning.  Its foundation can be traced back to three men who must be revered to be among the greatest business men in modern history for their skill in building a capitalist empire.  The first of the three are Captain Lorenzo Baker and Andrew Preston.  Baker began shipping Jamaican bananas to Boston near the end of the 19th century.   When he realized that the bananas were yielding unheralded profits, he increased his shipping runs and “in 1885, he formed the Boston Fruit Company with a banana salesman named Andrew Preston” (McCann 15).  Preston and Baker successfully filled the growing demand for bananas and profits were so good that “all the partners were very rich men before the end of the next decade” (McCann 16).  The growing capital allowed the company to expand its shipping fleet and before long the company had the largest independent navy in the world, dubbed the “great white fleet.”  The third founder was a man named Minor Keith.  Keith was not a banana man, but a railroad builder.  As a young man, Keith endeavored to Costa Rica to build railroads, and, with the help of the local government, Keith successfully connected the nation with the outside world.  However, after this, “both Keith and Costa Rica were deep in debt” (McCann 17) and the railroads were not paying for themselves.  To build the railroad, Keith had needed to purchase huge tracts of land, and eventually he realized that “the railroad required freight to survive and bananas for export fitted the bill” (Chapman 39). So Keith went about planting banana plantations on his unused railway land and by “1883 he owned three banana companies,” (McCann 17) all of which operated with high rates of success.  This put Keith in a strange yet welcome position: “he controlled two industries on which the nation’s future depended,” and this laid the foundation for the company’s future success (Chapman 40). All of this culminated in 1899 when “American entrepreneurs Minor Keith, Andrew Preston, and Lorenzo Baker merged interests and formed the United Fruit Company” (Bucheli 81).

“From the turn of the century until 1929, Keith built mile after mile of Central American railroad lines,” and was eventually responsible for the creation of the International Railways of Central America (IRCA) (McCann 17).   It was through these railways that United Fruit established its monopoly.  After being approached by the Guatemalan government, Keith agreed to finish building its national railroads, and to fund it he asked for “merely as much land as it would take to grow his bananas” (Chapman 55).   This became Keith’s model: “bananas would pay for the railway” (Chapman 55).  Thusly, the UFC acquired vast acreage of land in the countries in which it operated by providing technological improvement in exchange for plantation land.  

The founders’ plan was to create an “efficient monopoly;” “thus, United Fruit immediately set about eliminating its rivals” (Chapman 52).  The land amassed by the company spanned six countries and was basically a “giant farm of 250,000 acres,” however, the land was to be hoarded and “only a third of the land was tilled” at one time (Chapman 49). This meant that the company had acquired “over twenty times [more than] the amount of land it held under actual cultivation, a strategy designed…to limit the availability of land to competitors” (Moberg 150). Next, the company “secured marketing monopolies over independent Central American growers by paying them higher prices than its competitors could afford, thus depriving rivals of marketable fruit” (Moberg 149). United Fruit continued to purchase land “officially intended for peasant farmers” and also used its railways to manipulate the shipping of any other producer who might be exporting from the region.  In some countries Keith and United Fruit even took “full control of the railways,” paid “no taxes to speak of,” and therefore “effectively assumed control of the means by which much of the country’s economic life was conducted” (Chapman 57).  By now it had become increasingly apparent that United Fruit was succeeding in creating not only a monopoly, but a multinational imperial agent with potentially unlimited power.

1910 was the first year that United Fruit exhibited the extent of its power.  In that year, the UFC decided that “the Honduran banana industry was ripe for rationalization” (Chapman 61) and the company began exploring its options to develop its fertile lands.  Keith’s “railroad-for land scheme,” however, was turned down by the Honduran government.  Another man then, Sam Zemurray – who was indebted to United Fruit - went to Honduras (with mostly borrowed money) to begin a subsidiary branch on United Fruit’s behalf.  Zemurray “knew he needed the assistance of the local government,” because without “government concessions and permission to build rail lines, some certainty that he wouldn’t be taxed out of existence and relief from import duty on his equipment” his venture would have proved impossible (McCann 19). But just like Keith, Zemurray was given the cold shoulder.  Both men had been denied because at the time, Honduras was “heavily in debt to Europe” and the nation was in the midst of an agreement with the United States that allowed employees of J.P. Morgan Company to reside over the country’s banks in order “maximize and collect its tax revenues” in exchange for the money needed to pay off these debts.  “When Zemurray requested tax concessions, therefore, it was J.P. Morgan, that turned him down” (Chapman 71).  Zemurray responded with zeal; he arranged a meeting with three of his apparent friends: “Manuel Bonilla, a former president of Honduras; a famous soldier of fortune named “General” Lee Christmas; and Christmas’s genial protégé, Guy ‘Machine Gun’ Molony, a professional gun for hire” (McCann 20).  In the winter after this meeting, in 1911, the three men travelled to Honduras and teamed up with a “company of men and guns raised by Minor Keith from company plantations in Guatemala” (Chapman 72).  The conspirators “swept through Honduras in a matter of weeks.  The incumbent president stepped down, a new election was held, and Bonilla won an overwhelming victory” (McCann 20).  After this, Sam ‘the Banana Man’ had “no trouble getting his tax concessions and go-ahead to develop his lands” (Chapman 73).  Now, Zemurray had “cleared his debts – and United Fruit was soon hacking its way into the Honduran interior” (Chapman 74).  Effectively, the company had subverted a legitimate government in order to expand their industry – by 1911, United Fruit was stronger than nearly every sovereign government in the area which it operated.

After 1911, life became business as usual for United Fruit.  Chapman calls it the end of their “nice guy period,” (74) but for the better half of 50 years following the revolution in Honduras, the company enjoyed extended periods of economic successes that brought it enough power to rival that of many sovereign countries.  The company even had “its own labor laws and any [labor laws] its host countries might have had were suspended in United Fruit areas” (Chapman 75).  The management operated under direct orders from Minor Keith to “whip them as you see fit,” (Chapman 76) and this generally followed the idea that “the company settled things in its own manner” (Chapman 79).  The plantations were described as “’a vast feudal state’ composed of drab artificial settlements similar to factory towns” and in public opinion “this was progress” (Chapman 103).  However, plantation management equated to little more than what we would now call slavery.  The UFC provided basic necessities such as housing and a general store at which their employees could purchase goods with their meager earnings.  As a result, the company “was making even more of a profit from its own employees than it earned from an equal volume in banana markets”(McCann 40). Strikes and protests were not tolerated, and on any occasion of such the company would “appeal for help from the local military” (Chapman 82) and any movement for workers rights were dismissed as “the work of communists or anarchists and [the company] had troops” occupy the company land (Chapman 89).  Finally, company was not opposed to killing its own employees, nor was it opposed to “using every tax and bookkeeping gimmick they could get away with to minimize their obligations to the nations in which they operated” (McCann 41), thus aggrandizing its earnings.

However, “such events remained hidden from the people at home” and the UFC painted a façade of benevolence and philanthropy to ensure support from the homeland (Chapman 79).  In America, United Fruit opened children’s clinics and schools for Latin American and Women’s studies.  In host countries too, the company opened hospitals (though mostly for the company managers in those nations), saved and preserved the Mayan ruins of Quirigua, and opened an “independent school for tropical agriculture” known as the ‘Escuela Agricola Panamericana’(McCann 23).   The company’s personal navy, the Great White Fleet served image purposes as well.  The ships often doubled as cruise ships, taking wealthy Americans to lavish Caribbean and Central American resorts (some of which were owned by the UFC).  Advertisements read “every passenger a guest – from the moment of arrival” (United Fruit Company Steamship Services 9); however, McCann recalls that it actually operated under the motto “Every banana a guest, every passenger a pest” (McCann 34).  Finally, the general store at each plantation afforded the company the ability to “take with one hand and still maintain the appearance of giving with the other” (McCann 40).

So it went, anyone who “tried to compete had either been put out of business by the freight rates charged [to] them on Keith’s railway, or by United Fruit purchasing the favors of whichever dictator was in power” (Chapman 106).  Additionally, because of the depression many of the host nations had fallen deeply into debt. “The [host] states borrowed money from the company to keep national budgets afloat,” and this gave these nations a “new level of dependence on United Fruit” (Chapman 108).  At home the company maintained its image and provided the illusion of transparency with the foundation of the Middle America Information Bureau (MAIB).  This organization was “financed and run within the company and was intended to distribute information about that part of the world” (McCann 28). The MAIB was the creation of Edward Bernays, future PR rep for United Fruit and frivolous advocate of propaganda.  Thus, much of the information provided by the MAIB was not entirely true, and often times the information that was distributed worked in favor of the UFC.   And, because the company was so successful in creating an internationally powerful monopoly, whose host nations were economically dependent on the success of the company, all while maintaining a good public image, “United Fruit accounted for more than one-third of the world’s international commerce in bananas” by the early 1950’s (McCann 40).  This was the peak of the company’s power.

By this time the age of Joseph McCarthy had come to America and the bastion of capitalism that was United Fruit “instinctively sided with McCarthyism” (Chapman 122). Meanwhile, in Guatemala, a man named Jacob Arbenz was elected president.  Arbenz was of the ideology that “raising the standard of living through diversification and mechanization is greatly dependent upon changes in the distribution of the profits and/or the land,” and that, “the standard of living under these conditions [of Guatemala] cannot move strongly upwards without some changes in the distribution of profits or ownership.  Modernizing Guatemala thus required an attack on the concentration of land in a few hands.” (Schlesinger 40)  Problematically, this land happened to be in the hands of El Pulpo, the UFC. 

When Arbenz announced that his goal was to: “convert our country [(Guatemala)] from a dependent nation with a semi-colonial economy to an economically independent country” and that he wanted to make these changes “in a way that will raise the standard of living of the great mass of our people to the highest level…” (Schlesinger 52) the company was not pleased.   First of all, the company was there first, Minor Keith had built Guatemala’s railroads and the UFC’s two Guatemalan divisions “accounted for the lion’s share of the company’s tropical holdings” (McCann 45).  Arbenz’s plan was to expropriate nearly 200,000 acres of the company’s unused lands (the lands used to thwart competition) and return it to the local peasantry.  In return, United Fruit would be reimbursed for the value of the land as it was recorded in the tax books.  Sadly, the UFC’s old trick of saving money on taxes had come back to haunt them, and Arbenz offered the company about half a million dollars for the land, which the company valued at over $16 million.

In response, Bernays’s PR department released the “Report on Central America” which stated that communism had “already gained a foothold in Guatemala,” and that the goal of “Arbenz and his regime was to seize the Panama Canal” (Chapman 129).  Although this report was by-and-large a fabrication, the American media ate it up and anyone influential who wished to be spared by Sen. McCarthy simply accepted the report as fact.  This report directly led to the state department’s ‘Operation Success’, the mission to overthrow the Guatemalan government.  The project was spearheaded by the Dulles brothers, who had personal connections with the company and top-level positions in the state department.  Bernays had been “drip-feeding United Fruit’s views into the veins of public opinion,” (Chapman 136) since Arbenz had taken power; and when the time came for the CIA to displace Arbenz, United Fruit “appointed itself the news agency of the war” (Chapman 141).  Operation Success succeeded without much struggle and Arbenz was replaced by American puppet Casillo Armas.  During the “war” Armas was “housed, fed and watered on a United Fruit plantation” (Chapman 141).   By 1955 the United Fruit Company had successfully displaced its second democratically elected government; this time, however, the UFC used its unregulated imperial power to influence the CIA to do the company’s dirty work.

While “Operation Success” succeeded in bringing down the “oppressive” Arbenz regime, it also had some unintended consequences that would change United Fruit’s fate forever.  After Arbenz was sacked, widespread protests erupted throughout Latin America, where people had come to view the US as an imperial overlord.  The state department recognized this and decided that the only way to prevent further communist influence from seeping into Latin American culture was to “educate them and lead them along the right path” (Chapman 147). Following that reasoning, the state department decided that what their neighbors needed was “more capitalism,” not more land, as Arbenz had intended (Chapman 150).  This decision would subdue the UFC.  

After years of avoiding anti-trust lawsuits and, basically, any form of government intervention, the UFC finally lost the support of the state department.  In their eyes, it was institutions such as United Fruit that were “inciting revolution,” (Chapman 148) and were leading many in those countries to resort to the ideals of people like Che Geuvara who believed that the “only way forward for Latin America” was by means of “armed struggle” (Chapman 144).  Thusly, ‘Operation Success’ can be understood as the US’s plan to undermine Arbenz’s land reform but also as its plan to rid the area of the perceived imperialism that was the United Fruit Company.  Hence, “in 1958 a US court ruled against United Fruit in an antitrust case…[and] the pacific coast plantations were sold and the Atlantic-coast plantations eventually parceled out to United Fruit’s competitors” (Forster 220).  Fundamentally, the US decided that achieving the US brand of peace and prosperity would “be easier if United Fruit, in its manifestation as ‘octopus’, was not blocking the way” (Chapman 147).

The US’s fears materialized when Castro took power in Cuba.  Castro’s government even stated that the company “represented ‘yanqui’ imperialism for as long as most people could remember” (Chapman 154); and accordingly the company’s Cuban plantations were burned and United Fruit recorded estimated losses of about $60 million as a result of the Cuban revolution.  However, since ‘Operation Success’ had been such a triumph the state department decided that similar actions could be taken in Cuba.  This developed into what would become the Bay of Pigs debacle, which directly led to the Cuban Missile Crisis.  Two ships from the Great White Fleet were present at the Bay of Pigs.  

At the same time as these fiascos, the company faced other financial difficulties.  Because they had spent so much time focused on external events in Guatemala and Cuba, the company failed to diversify and expand its markets.  It had not conglomerated with any other successful companies nor had it been akin to the problem that bananas were becoming less profitable and more prone to disease.  As a result, “markets were static and costs were exploding” (Chapman 152). The company lacked the brilliant leadership that had founded it at was now close to losing everything thanks to the ‘betrayal’ of the state department.   In addition to this, the company’s image had been destroyed.   Because the company provided much of the information that justified the US’s invasion of Guatemala, and because this information had been largely falsified, “journalists reflected, didn’t like what had been done to them and resolved ‘never again’” (Chapman 151). It was for this reason that United Fruit and its PR department became largely untrustworthy in the eyes of Americans. 

In an attempt to thwart the redistribution of company land, United Fruit had the “revelatory idea of giving people their own land.” They thought that if they “turned over plantations to the locals, this would stop their complaining” (Chapman 161), and both the anti-trust lawyers of America and the disgruntled laborers of the banana lands would be placated.  After all, the company still owned Keith’s railroads, and the “new ‘independent’ producers [would] still need to get their bananas shipped and sold and wouldn’t be able to do so without United Fruit” (Chapman 162). But, this maneuver proved to be futile as the series of anti-trust cases that had attacked the company following its affairs in Guatemala judged that the company’s “monopoly over Minor Keith’s railroad [was to be] take away” (Chapman 169).  

At this point, the company had lost the very essence of what had made it an empire.  It no longer dominated the means of transportation, shipping, and marketing throughout the banana nations and most of the company lands that were to be hoarded away from competition were being redistributed out to exactly that competition.  Furthermore, growing sentiments against United Fruit forced the company to negotiate with unions and resultantly the formula used by United Fruit for efficient production had been destroyed.   This all culminated in 1973, when a banana disease crippled the United Fruit crop, and another company, named Standard Fruit (now known as the Dole Corporation), who had been keen to develop new strains of disease resistant banana was less affected by the plague.   “For the first time, [the UFC’s] sales fell behind that of another company” (Chapman 171).  Two years later, the then chairman of United Fruit, Eli Black, killed himself in the wake of dwindling stock values and a pervasive negative image of the company.  The company still remains today, as Chiquita, but was never again able to achieve the glory and success it once had; and “El Pulpo” became little more than another banana producer in the land of ‘Banana Republics.’

Thus concludes the saga of the United Fruit Empire.  Upon first glance, the company appears to be nothing short of an imperial institution that proliferated nothing more than its own profits and power.  After all, for nearly 75 years, the company acted independently of almost any sovereign influence and was even responsible for the violent overthrow of two legitimate national governments; in my opinion this is sufficient evidence to classify the company as a corporate empire. That being said, the actions that were taken by United Fruit can be understood as being fully representative of what any unregulated corporate empire would do under similar circumstances.  By this logic, the conclusion must be made that the problem was not the company itself, but the structures under which the company had developed, that allowed the monopoly to become an imperial power. This is verified by the fact that in the face of government intervention, the company collapsed.  

Basically, the story of United Fruit teaches us that multinationals can only effectively contribute to the development of LDCs when they are instituted under conditions that minimize the probability of corporate imperialism. (A corporation becomes imperial when it attains enough power to engage in manipulating foreign affairs in such a way that it is profitable for that company.)   For, not all of the actions of the UFC (as with most MNCs) were entirely bad, and some of its actions must be regarded as invaluable to the development of the ‘Banana Republic’ nations.

Probably the most important contribution from the company to these nations was the construction of their railroads.  These railroads connected the countries to each other and to the rest of the world (most notably the United States).  Had these railroads never been built, further development would have proved nearly impossible and the growth of new industry and trade would have been stifled due to technological disadvantages.  Furthermore, at the time, none of these nations were completely stable and none had the means or money to support such an endeavor.  After all, it was the Guatemalan government who approached Minor Keith to build the railways in exchange for banana land, not the other way around.  These people needed a railroad, and to build a railroad, they needed the United Fruit Company.

Beyond the railroads, United Fruit also contributed to these nations in a number of ways.  First of all, they provided plantation jobs for many unemployed or impoverished locals.  These jobs gave their employees a newfound freedom; they could work to sustain themselves and could use their earnings to buy manufactured goods (just like in America) from the company store.  This began to socialize these people into the institution that is capitalism and finally included them into what has become a globalized movement.  The company also prided itself upon its ongoing philanthropic efforts: it opened many hospitals and some schools in these nations, preserved archeological ruins, and in times of disasters, often started or contributed to relief funding for the victims.  Furthermore, the company helped stabilize many national governments where strife had often triumphed over rule of law (however, the legitimacy of their means is questionable).  As a bonus, while helping in these ways, the company was unimaginably successful in producing returns for its shareholders.  Therefore, when United Fruit is viewed in this light, the potential benefits of MNCs in developing nations are obvious.

But, as we know, these positives are heavily overshadowed by the darkness that surrounded the corporate empire.  For years, its employees labored in ultra-hierarchical slave-like conditions in which the individual was valued far less than the crop he was producing.  Rather than negotiating with unions or listening to protests of the community, the company preferred to simply “purchase the favors of whatever dictator happened to be in power,” and when these governments were uncooperative the company simply replaced them with a cooperative government.  Additionally, United Fruit constantly utilized propaganda to preserve its positive image at home and overseas.  However, after years of oppression and manipulation, these nations came to depend on the company and journalists came to disbelieve and resent the company.  Thus United Fruit became a direct target and a means of mobilization for violent revolutionaries throughout its sphere of influence; additionally its imperial manipulation was a direct catalyst for events such as the Bay of Pigs debacle.  All of these issues necessitated state intervention into the company’s activities.  

Therefore, we can attribute the collapse of the United Fruit empire to two factors: the intervention of the U.S. state department and the failure of the company to innovate.  Because United Fruit spent so much time involved with displacing governments and hoarding lands (essential using their imperial power), they failed to produce disease resistant bananas (like Standard Fruit) or to conglomerate with horizontally related companies; and this ultimately preceded their demise.  

From all of this we, as a global community, can learn a number of important lessons about corporate multinationals and their effect on developing nations.  Most importantly, institutions must be set up in a way that assures that no company will ever acquire power similar to United Fruits’.  When a company is unregulated, and thus allowed to develop into a monopoly, the lack of competition causes a failure to innovate and leaves the door open for exploitation.  If there is no regulation, slave-like conditions are sure to follow, for such conditions produce the greatest capital.  Also, when a private corporation endeavors to manipulate foreign institutions and governments, it will be seen as an imperial external force attempting to take advantage of the people whom it is employing.  This de-legitimatizes the company not only in the eyes of the locals, but also in worldwide public opinion; engaging in such policy is directly correlated with inciting violent, revolutionary ideas among disgruntled communities. Finally, when a company is allowed to control public opinion through propaganda, it gains some form of control over its home government and this opens the door for event such as the Bay of Pigs which, in turn, can lead to even more catastrophic international events.

The story of United Fruit is most helpful in providing us with a model for how MNCs can be highly favorable for the development of a LDC while still returning profits.  First of all, the company must be subject to strict anti-trust regulation by laws of both the home and host nations.  This will ensure that a monopoly (in the form of a corporate empire) does not ensue, that workers will be treated fairly, and that the company will not destabilize the political climate.  Furthermore, when a company is regulated by a fair and legitimate government, it will not have the ability to cause violence, which is absolutely contrary to the development of a LDC.  Secondly, the company must favor innovation over imperial power.  If a company does not innovate it will eventually run out of money and any development that could have been contributed to an LDC will remain un-contributed.  Therefore, it must be concluded that any company which assumes the form of a corporate empire will always eventually fail. Finally, an MNC must have transparency. It cannot succeed while the using propaganda, for lies will eventually be discovered and the company’s image will be ruined.  When there is transparency there is little likelihood of corruption of host and/or home governments, and international embarrassments such as the Bay of Pigs can thusly be avoided.   Only after these circumstances are enforced can a corporate multinational like United Fruit be viewed as beneficial towards 3rd world development. 

-Publius



Works Cited:

Bucheli, Marcelo. "United Fruit Company in Latin America." Banana Wars. Duke UP, 2003. 80-101. Print.

Chapman, Peter. Bananas. Edinburgh: Canongate Books Ltd., 2007. Print.

Forster, Cindy. ""The Macondo of Guatemala": Banana Workers and National Revolutions in Tiquisate." Banana Wars. Duke UP, 2003. 191-227. Print.

Green, December, and Laura Luehrmann. Comparative Politics of the Third World. 2nd ed. Boulder, Colorado: Lynne Rienner, 2007. Print.

McCann, Thomas P. An American Company: The Tragedy of United Fruit. New York: Crown, INC, 1976. Print.

Moberg, Mark. "Responsible Men and Sharp Yankees: The United Fruit Company, Resident Elites, and Colonial State in British Honduras." Banana Wars. Duke UP, 2003. 145-70. Print.

Schlesinger, Stephen, and Stephen Kinzer. Bitter Fruit. Garden City: Doubleday & Company, INC, 1982. Print.

United Fruit Company Steamship Service, United Fruit Company Steamships. Cruises o'er the golden Caribbean. United Fruit Company Steamship Service, Passenger Department The Company, 1927.