United Fruit Company
United Fruit Company
In 1870 Captain Lorenzo Dow Baker made an experimental import of bananas he bought in Jamaica for a shilling and sold them in Jersey City for $2 a bunch. After this success, Baker joined Bostonian entrepreneur Andrew Preston (1846–1924) and created the Boston Fruit Company. This company owned a large fleet of steamships that, with time, became the largest private fleet in the world: the Great White Fleet.
In 1899 another Bostonian entrepreneur, Minor C. Keith (1848–1929), approached Preston and Baker and proposed to merge their company with his business. Keith had built railways in Central America and Colombia, owned lands in those countries, and was also involved in the banana export business. They agreed, and on March 30th, 1899 the United Fruit Company was born.
EARLY COMPANY HISTORY
The new company had Preston as president and Keith as vice president. Their diverse interests and skills were complementary: Keith had his railroad network and plantations in Central America, plus the market in the U.S. Southeast, and Preston grew bananas in the West Indies, ran the Great White Fleet, and sold to the U.S. Northeast. As the company grew, Keith continued with his railroad projects in Central America.
Bananas came to satisfy a demand for fresh fruit that could not be fulfilled by U.S. domestic production. These were years of precarious refrigeration systems and industrial food-elaboration processes. The U.S. market consisted of seasonal fruits produced domestically, so access to a tropical fruit available year-round was welcomed by consumers. Before the 1880s, Americans had never heard of bananas. In the 1890s, the fruit was being sold in major U.S. cities in individually wrapped tinfoil packages as a luxury good. By the 1910s they were considered a cheap fruit, part of the basic diet of the growing urban working class. After the 1930s Americans could find bananas in any grocery store or supermarket across the country at any time of the year.
United Fruit needed to assure a steady output of bananas to its consumer market in the United States. This was a difficult task because of the very nature of bananas, which rot quickly and easily. Given that they could not be produced in the consumer markets, the company developed an impressive production and distribution network between the tropical Caribbean and the United States that included plantations (with health and housing infrastructures), railways, ports, telegraph lines, and steamships. In 1900 United Fruit owned 212,394 acres of land; in 1954 it owned 603,111 acres scattered in Central America and the Caribbean. The company also established the Fruit Dispatch Company, a subsidiary in charge of distributing bananas in the United States. United Fruit was a major shareholder of the Hamburg Line, a German shipping company, and also bought 85 percent of the shares of the British banana import and shipping company Elders and Fyffes, assuring United Fruit a privileged position in the British market. By 1928 United Fruit had bought 99 percent of Elders and Fyffes's shares. In 1913 the company also created the Tropical Radio and Telegraph Company to keep in constant communication with its ships and plantations. Additionally, the Great White Fleet developed a refrigeration technology that facilitated the long-distance transportation of the fruit. Finally, United Fruit quickly eliminated its smaller competitors such as the Atlantic Fruit Company and Cuyamel Fruit Company.
BANANA INDUSTRY IN CENTRAL LATIN AMERICA AND THE CARIBBEAN
The company's expansion was facilitated by an environment friendly to foreign business in Central America. Before World War II United Fruit counted on dictatorships that repressed labor unionism and gave generous concessions in terms of land grants and tax incentives. In some of the countries in which United Fruit operated it was the major employer and the largest investor in infrastructure, and it made possible the international marketing of the country's main export. Countries such as Guatemala, Panama, and Honduras depended on bananas for more than 60 percent of their total exports. Because of this, the local governments encouraged the company's operations in their national territories.
The operations of United Fruit in Central America and the Caribbean have been highly controversial. The immense control the company had on these small republics' national economies, its labor conflicts in several countries, and its involvement in local politics (the company has been accused of conspiring against governments that were not on the company's side), have led many scholars and fiction writers, such as Gabriel García Márquez (b. 1928) and Miguel Angel Asturias (1899–1974), to portray United Fruit as the quintessential representative of U.S. imperialism in the region. A smaller and less influential group of scholars have tried to defend United Fruit's role in creating an export infrastructure and generating jobs in poor countries.
After World War II United Fruit faced serious threats that forced it to change its internal structure from a producing company to a marketing one. The rise of nationalistic governments and stronger labor unionism in Latin America made its investments in the region riskier. In 1954 Guatemalan president Jacobo Arbenz (1913–1971) attempted to expropriate some of the company's lands, the Honduran banana workers went on the biggest strike in the country's history, and the U.S. government sued the company for failing to comply with antitrust legislation. These events made United Fruit's shareholders think that land ownership in Latin America increased the company's risks, so in the 1960s the company gradually got rid of its plantations and railroads and concentrated its efforts in the international marketing of bananas.
CHANGE SINCE THE 1950s
In the late 1950s and early 1960s, in the biggest technological change in the banana industry, the multinationals replaced the Gros Michel banana with Cavendish, a new variety that was more resistant to disease and more productive. However, Cavendish bananas had a very weak skin, and the companies had to build air wires to transport the bananas from the plantations and cardboard plants to make the boxes in which the bananas were exported. By the late 1960s all the bananas traded by United Fruit were Cavendish.
Demand for bananas decreased in the U.S. market after the 1950s due to the availability of processed fruit, so United Fruit diversified its operations to processed food in the 1960s. This transformation went further when the company merged with AMK Corporation and created a food conglomerate in 1970 called United Brands Company. In 1989 this conglomerate changed its name to Chiquita Brands International. In 2001 Chiquita filed for bankruptcy after the huge losses it had sustained as a result of the European Union's restrictive banana-import policy that discriminated against Latin American bananas (exported mostly by Chiquita), and the debt it had accumulated to finance the creation of new plantations in anticipation of a big market that never materialized in the formerly Communist European countries. Filing for bankruptcy permitted Chiquita a steady recovery between 2002 and 2004.
Adams, Frederick U. The Conquest of the Tropics. New York: Page, 1914.
Bucheli, Marcelo. Bananas and Business. New York: New York University Press, 2004.
May, Stacy, and Plaza, Galo. United States Business Performance Abroad: The Case Study of the United Fruit Company in Latin America. Washington, DC: National Planning Association, 1958.
Read, Robert. "The Growth and Structure of Multinationals in the Banana Export Trade." In The Growth of International Business, ed. Mark Casson. London: Allen and Unwin, 1983.
Striffler, Steve, and Moberg, Mark. Banana Wars: Power, Production, and History in the Americas. Durham, NC: Duke University Press, 2003.