The Influence of the United Fruit Company in Guatemala

The United Fruit Company (UFC) was a large, multinational American corporation that played a large role in the development of Latin America, particularly Central American nations such as Honduras, Guatemala, and Costa Rica throughout the 20th century.

Many Central American countries were ruled by dictators in the early 20th century that enacted favorable policies towards the United States in the hopes of economic investment and development.

Large corporations such as the United Fruit Company seized the initiative and used these policies to their advantage. The power and influence gained by the United Fruit Company would lead to economic exploitation of the countries, particularly Guatemala.

The United Fruit Company faced competition, but in several countries it was a virtual monopoly. It also relied on a single cash crop, the banana, that accounted for a vast majority of the exports and source of its wealth.

This type of arrangement led to the term “banana republic” to describe these countries. The outsized power accumulated by the United Fruit Company led to extremely stratified social classes with the wealthy landowning elite exploiting an impoverished working class.

In a process begun from the purchase of Alaska, the form of imperialism utilized by the United States was increasingly through economic means. The United Fruit Company exemplifies the harmful impact and destabilizing force a large corporation can play in a small country.

The Beginnings of the United Fruit Company

The United Fruit Company was formed in 1899 after a merger between Minor C. Keith’s banana business and Andrew Preston’s Boston Fruit Company. The new company controlled nearly 75% of the banana market in the United States at the time of its creation.

The company operated out of several different areas, though primarily in Costa Rica, Jamaica, and Panama. With the influx of capital and resources from the merger, the United Fruit Company began to buy out competitors in other countries such as Honduras, Guatemala, and El Salvador.

The banana trade needed refrigerated ships in order to bring back fresh bananas to the US market. The United Fruit Company cleverly designed these refrigerated ships to also have the ability to carry passengers.

These “banana boats” were essential to tourism in the region and also helped the company profit off the banana shipping. The “Great White Fleet” as it was called (not to be confused with the US Navy’s Great White Fleet) was registered in several countries in order to skirt United States shipping laws and taxes.

By controlling the plantations, railways, and refrigerated shipping, the company vertically integrated the entire operation for massive profits. This rivaled the Standard Oil and steel monopolies of the same era.

Through various buyouts and favorable treatment the United Fruit Company was the largest employer in Central America by 1930. In some countries, the company was even the largest land holder.

Before the United Fruit Company the banana was an expensive delicacy that few could enjoy in the United States. By the mid-20th century the banana had become a regular staple in the American diet – due to mass marketing campaigns and an affordable cost.

The United Fruit Company in Guatemala

While the United Fruit Company influenced many different countries, nowhere was this more apparent than in Guatemala. In the early 20th century, the country’s dictators practically invited the company to invest in the country.

The United Fruit Company was asked to manage Guatemala’s postal service in 1901, while also securing the rights to build and manage a railroad in 1904. Under the dictator Jorge Ubico in the 1930s, the United Fruit Company gained control of over 42% of the lands in Guatemala. It was also exempt from paying taxes and import duties.

As the single largest landholder and employer in the country, the company had a massive influence in policy and operations. It owned nearly all the banana plantations and was responsible for the entirety of banana exports, 77% of which went to the United States.

Loading bananas to railroad car / from Baker Library Historical Collections

While the Guatemalan leaders surely thought the company’s investment in railroads and land would benefit the citizens, this was not to be the case. The rail lines were completed, however independent farmers were not allowed to use them so as to stifle their competition.

In one case the UFC even completely destroyed a rail line in an area once they no longer had use for it, to ensure nobody else would profit off their work. The company also lobbied against the building of other public transportation networks in the country to increase the reliance on their managed rail services.

The United Fruit Company also worked in tandem with the dictatorial government to quash labor movements and ban workers from organizing.

The Guatemalan Revolution of 1944 would oust the dictator Jorge Ubico, and lead to the first democratically elected president in the country’s history: Juan Arevalo. The changes in store would not be favorable to the United Fruit Company.

The Background of the Guatemalan Coup of 1954

With the Arevalo presidency came many changes in Guatemala. Arevalo and his successor in 1951, democratically-elected Jacobo Arbenz, took charge and reformed education and healthcare in the country.

They also instituted a new labor code that improved worker’s rights, giving them the ability to organize and strike to improve their working conditions.

Land reform was a priority as well, with Arbenz in particular seeking changes. Only 2% of the population owned 72% of the arable land in Guatemala, and only 12% of the private land was being utilized. With a large population of a landless, poor working class, Arbenz passed “Decree 900” which sought to redistribute these lands.

The United Fruit Company in Guatemala chart

The United Fruit Company was a target throughout these reforms. The UFC owned 42% of Guatemalan land, yet only 15% of its land was being utilized. It was these huge tracts of unused land that Arbenz targeted to redistribute to the landless poor.

The Guatemalan government paid the United Fruit Company for these lands, at exactly what the company stated the value was on its tax records. The UFC was furious, as the company had been deliberately understating the value of its land to avoid paying more taxes.

With its power being challenged by the new democratic government, the United Fruit Company looked to the US government for support. Luckily for the company, the Secretary of State, John Foster Dulles’ law firm represented the UFC. In addition, his brother Allen Dulles was the director of the CIA and owned shares of the UFC and formerly sat on its Board of Trustees.

With the help of the CIA, the United Fruit Company began a massive disinformation campaign in the US, helping to shape public opinion and policy. It labeled Arbenz and his administration as succumbing to communist influences.

Despite there only being 4,000 registered communists in a country of 3 million people, the US suddenly feared that the Guatemalan government was catering to communism. Given the Cold War policy of the time, an intervention was imminent.

How the United Fruit Company Shaped the World

The CIA was given authorization to conduct a covert operation to remove Arbenz from power. Codenamed “Operation PBSUCCESS,” the 1954 operation utilized disgruntled former officer Carlos Castillo Armas to lead a coup d’etat and overthrow Arbenz.

The US-backed rebels quickly overthrew the army and government, primarily through various forms of psychological warfare. American pilots bombed various parts of Guatemala City,  though no US troops participated in the invasion. Arbenz subsequently resigned and flew to exile in Mexico.

The Castillo regime led to a huge step backwards for the country. He eliminated the agrarian reforms and US-based constitution and gave himself unchecked powers. His reliance on the military for support led to widespread corruption and he imprisoned thousands of political enemies.

Throughout all this the United Fruit Company regained its former lands and privileges, though did not profit off the coup. In fact, the coup proved disastrous for the company, as the corrupt regime proved to be a massive destabilizing force in the region that impeded business. The UFC would eventually merge with another company to stave off bankruptcy.

The Castillo policies would eventually lead to a 36-year Civil War in Guatemala that killed an estimated 200,000 civilians. The country is still emerging from the carnage to this day.

A 25-year old Che Guevara was in Guatemala at the time of the coup. Witnessing the US-backed invasion is thought to have convinced him that armed struggle was necessary to stave off imperialism.

The outsized political influence of the United Fruit Company shaped the modern world, in many ways for the worse.

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