United Fruit

Question 1

Overview

Answer 1

• known as Chiquita: one of the most vilified American corporations operating in Latin America
• accused of being quintessential representative of US imperialism in that continent
• throttled competitors, dominated governments, ruined plants, exploited consumers
• economic imperialism: usage of power by a corporation of a strongly industrialized nation in relatively weak foreign country

Question 2

History

Answer 2

• established in Boston in 1899 after merger of several banana growing and transportation companies
• World’s first vertically integrated multinational in agrarian sector
• only way to assure that fruit would be harvested on time and would safely arrive with perfect rifening to final markets
• local planters could sell fruit to competitors
• bananas highly perishable so company needed a close coordination of all the steps involved

Overwhelming economic power in producing countries (whose economies depended mostly on banana exports controlled by UF) and was highly involved in host countries’ internal politics

Question 3

Bananas

Answer 3

industry that has shaped economies and societies of several countries in Central America and Caribbean (fate of banana industry and fate of Central American republics closely linked)

• by 1890 bananas were being sold in major American cities in individually wrapped tinfoil as luxury goods
• by 1914: cheap fruit, part of the basic diet of the urban working class
• 1930s: national mass consumption everywhere everytime. Today still the most widely traded fruit-

Question 4

Jacobo Arbenz in Guatemala

Answer 4

• democratically elected president who came to power in 1951 with a reformist program which included agrarian reform
• Guatemala was and still is one of the poorest nations in the Western Hemisphere
• although a large % lived in countryside, land distributed among a small number of owners (Guatemalan landowners and UF)
• peasant population terrible conditions
• victims of racial discrimination (Mayan population)
• 1954: Arbenz announced expropriation of uncultivated land for distribution among poor peasants (Guatemalan landowners, UF, and US government opposed this initiative for considering that the compensation offered was too low, Guatemala argued if they had not cheated in their tax returns, they would have received a larger compensation amount)

Question 5

UFC Reaction

Answer 5

• took advantage of scare of Cold War to gain support against Arbenz in the US
• hired an advertisement company to organize an anti-Arbenz campaign (Arbenz: moscow agent, represented a serious menace to security of US)
• Eisenhower administration approved a covert operation to destablizie Guatemala and overthrow Arbend ( US government approached Castillo, anti-arbenz guatemalan colonel, and funded a rebel army he organization, who invaded Guatemala and overthrew Arbenz, forced to exile) Shortly after the coup, the Eisenhower administration recognized new government
• UF problems with US government when Supreme Court sued them for violating Antri-Trust legislation (so it divested its Guatemalan holdings, which it sold to its competitor Standard Fruit (now Dole) and to several landowners)

Question 6

What makes this industry special

Answer 6

• production and consumption in diff. places
• labor intensive- unskilled labor
• product fragile: requires careful but fast transportation
• land intensive

Question 7

Why vertically integrate? Why not subcontract?

Answer 7

• importance of coordination
• reliability
• market control: risk of those planters selling to competitors

Question 8

How did the company vertically integrate?

Answer 8

main elements of the value chain the company controlled: plantations, railways, telegraphs, ships, distribution network

Question 9

Wouhd have Guatemala been better off if UF never set foot in the place?

Answer 9

UF good impact: creates export industry, builds infrastructure, builds hospitals, higher productivity than locals, link to global markets

Bad impact: damage environment, displaced people, support dictatorship, encourage wars and corruption, value not re-invested, stifles local entrepreneurship, linkages weak

Question 10

Arbenz strategy and his options

Answer 10

• income redistribution, land reform, break UF’s monopoly
• National banana company (but UF controls distribution and transportation)
  Alliance with other banana countries (but they distrust Arbenz)
  alliance with US rivals (cold war)
  alliance with national elite to create a local company (national elite distrcits Arbenz and lacks capital)
  Subcontracting agreement

Question 11

Was it worth for the US to intervene in Guatemala? Who was the winner of this action?

Answer 11

• all lost
• UF did not have its land expropriated, but lost them eventually to Anti-trust legislation
• Us government got rid a non-important threat, but became highly unpopular in Latin America
• guatemala was poor before and remained poor. Arbenz became an alcoholic and died in exile. Castillo became Guatemalan president under American support, but was eventually assassinated in power

Question 12

Did the US government make the region safer for American capitalism through these intervention?

Answer 12

• dangers of creating a negative reputation for American multinationals in host countries