The Controversial History of United Fruit

Harvard Business School professor Geoffrey Jones, an expert in business history, discusses the overthrow of President Jacobo Arbenz of Guatemala in 1954 in a U.S.-backed coup in support of the United Fruit Co. (now Chiquita Brands International). Jones examines the impact and role of the company in the Guatemalan economy in his case, “The Octopus and the Generals: The United Fruit Company in Guatemala” (co-author: Marcelo Bucheli).

TRANSCRIPT

BRIAN KENNY: You’re listening to one of the most famous commercial jingles of all time performed by singer Patti Clayton in 1944. Patti gave voice to the animated Miss Chiquita Banana, a curvaceous cartoon in a bright red dress who balanced a bowl of fruit on her head while dancing the Salsa. At its peak, the Chiquita banana jingle was played up to 346 times a day on radio stations across America, making Miss Chiquita a household name long before she danced into living rooms on televisions in the 1950s. In the coming decades, she would help to make bananas the most popular fruit in the United States, but what Americans didn’t know about the cheery looking fruit with the iconic blue sticker was the upheaval it left in its wake.

Today, we’ll hear from professor Geoff Jones about his case entitled, “The Octopus and The Generals: The United Fruit Company in Guatemala.” I’m your host, Brian Kenny, and you’re listening to Cold Call, recorded live in Klarman Hall Studio at Harvard Business School.

Geoff Jones is a historian who studies the evolution, impact and responsibility of global business. He has written extensively on the business history of emerging markets in Latin America and elsewhere, but we’ll stick with Latin America today because that’s where this case takes place. Thank you for joining me today, Geoff.

GEOFF JONES: My pleasure.

BRIAN KENNY: Glad to have you back on the show. We’ve had you here a few times before, so we’ll continue exposing these cases about business history because there are so many lessons that we can learn today, obviously, from what’s happened in the past, so I think people will really enjoy hearing about the United Fruit Company, which is today known as Chiquita. Many of us have bananas every day. In fact, I read a statistic that said Americans eat up to 30 pounds of bananas a year. That sound right?

GEOFF JONES: I’m afraid it probably is, yes.

BRIAN KENNY: That’s a lot of bananas. I have one a day, so I’m contributing to that. Maybe you can start, as we always do, by helping us to open up the case. How does the case begin?

GEOFF JONES: This case begins in a very dramatic way. It’s June 1954, and President Jacobo Arbenz, who was the first democratically-elected president in history of Guatemala, is hearing news that rebel troops have invaded to overthrow him. Later on in the case, we hear he is going on to make a speech saying that the United States is helping to overthrow his government in the interests of a banana company.

BRIAN KENNY: As a business historian, I’m curious how do you decide to write about this particular case?

GEOFF JONES: As you mentioned, my course that I’m currently teaching deals with the rise and fall and rise and fall again of globalization, so I’m always looking for key turning points and key moments. The overthrow of Arbenz by the CIA was a central moment in the tortured relationship between the United States and Latin America. It came to symbolize and crystallize Latin American resentment against the overbearing power of the United States. The event leads fairly directly to the Cuban Revolution five years later on and to decades of anti-American populism in Latin America, so it’s a really key moment in the history of globalization.

BRIAN KENNY: Why don’t we go back to the late 1800s and tell us about the origins of the United Fruit Company.

GEOFF JONES: Well, it’s a very Boston story, appropriately enough. United Fruit is formed in 1899 by the merger of two Boston banana companies. Bananas are a tropical fruit, so they’re not grown in the continental United States, and so what you have from the middle of the 19th century is these Boston guys going in search of a regular supply of bananas from Central America and the Caribbean. It’s quite a difficult task, and they end up establishing plantations, building railroads, and creating shipping lines all designed to find a source of bananas which they ship into Boston and the rest of the United States.

BRIAN KENNY: Was there a market even for bananas at that time?

GEOFF JONES: If you go back like to 1850, almost nobody in the United States had even seen a banana.

BRIAN KENNY: What were the economic conditions in Central America like at this time?

GEOFF JONES: I think it’s fair to say that Central American and Guatemala are in an absolutely horrible condition. Historically, it was the home of the ancient Mayan civilization, so it had once been one of the most advanced civilizations on Earth. It went into decline and then, when the Spanish overran the area in the 16th century, they created a society in which a small white elite dominated society and the economy and ruled over the descendants of the Mayans who were in terrible conditions of poverty and illiteracy employed virtually as slaves. Things got even worse in the early 19th century when the Spanish colonial regime was overthrown, and this white elite established themselves entirely running the country. What we see in the 19th century is a series of despotic, corrupt dictators ruling and exploiting the country. At the time United Fruit enters, the dictator in question is called Manuel Estrada. He’s murderous, he’s corrupt, he’s brutal, and he’s quite crazy. He’s a follower of the ancient Roman cult of Minerva so, in this desperately poor country, he builds all these like Roman temples all over the place. He’s the guy who gives the first banana concessions to United Fruit.

BRIAN KENNY: Wow, so they already start sort of in the shadow of that. What were some of the challenges that they encountered early on as they started to set up their business?

GEOFF JONES: The easiest challenge is politics because these states all had governments, but they were easily bribable and corruptible, and you could just get concessions if you just give them enough money, so that’s fine. A much bigger challenge was logistical. Bananas are harvested when they’re green but, as soon as they’re picked, they start turning yellow as starch turns to sugar. You wait too long, and the banana is ruined, so the business depended on creating a supply chain that worked perfectly from picking the banana to shipping the banana to the United States to get it in the hands of consumers. If you get anything wrong, you’ll have a lot of rotten bananas. Shipping was quite crucial, which is why United Fruit created a giant shipping fleet, the Great White Fleet which, at one point, was the biggest shipping line in the world. The third problem was, as we began by talking, people didn’t know what a banana was, so the company has to start persuading people to eat these bananas if they can get them to it. They invest heavily in teaching materials for schools, all sorts of ways to introduce the banana to people. One of the most interesting things they did is joining forces with Kellogg, the cereal company, and they persuaded Kellogg to put pictures of bananas on their Corn Flakes to show people they went very well together. The message, all the way through, was that bananas were a very healthy fruit. Just like drinking milk, eating bananas, you’d be a lot healthier. It works very well. It’s a very brilliant marketing campaign, and it convinces Americans to eat bananas.

BRIAN KENNY: The jingle that we played at the top of the show is actually an educational song. She’s telling listeners when they should eat the bananas, right?

GEOFF JONES: Absolutely. I mean eating bananas is not a natural thing to do. People are persuaded eating bananas is a healthy thing to do, a very sophisticated marketing campaign.

BRIAN KENNY: Tell us, what were the conditions like for the people who worked on the plantations at that time? Was United Fruit taking care of their employees?

GEOFF JONES: The conditions of the indigenous in Guatemala were horrible even before United Fruit arrived so, in some respects, United Fruit improved their conditions. They provided housing. They provided basic schooling. They provided basic medical facilities, which was quite important because the bananas are grown in malaria-infested areas. That said, they did this with highly restrictive conditions. For example, workers were not given money. They were paid in vouchers, which you then had to use on the plantation shops. By the interwar years, you have an increasingly militant labor movement trying to protest against these kind of conditions.

BRIAN KENNY: How did they fare? Did they make any progress?

GEOFF JONES: It was, in the interwar years, extremely hard to make progress because you have these brutal governments which put down any sort of movement, particularly any sort of movement which even hints at association with the Communist party which had now emerged, so the United Fruit is fully supported by the regimes in the area.

BRIAN KENNY: What was the competitive landscape like in the banana industry? United Fruit wasn’t the only player in this game.

GEOFF JONES: No. For a time, it’s almost the only player when you get this merger between the two Boston companies, but it’s an attractive business, so you get new entrants. The most important new entrant was Sam Zemurray. He’s an immigrant from Russia. He sees the banana, and he has a vision that that’s the basis for an amazing empire, so he starts selling bananas along the train lines in New Orleans. By the 1920s, he’s got into Honduras and establishing a large plantation business, and he becomes a formidable competitor to United Fruit.

BRIAN KENNY: The case focuses on Guatemala, so I was curious in reading it, the banana industry was spread sort of throughout Central America at this time, so they were in Honduras, as you mentioned, and Guatemala and other places. Why did you focus on Guatemala for the case?

GEOFF JONES: It’s absolutely true. United Fruit is highly diversified. In some countries, there are legal or other restrictions which stop United Fruit actually owning plantations. In those countries, like Costa Rica for example, it will buy bananas from growers and then do all the rest, all the transportation. In Guatemala, its involvement is a lot deeper. It has huge plantations. It becomes the largest company in the country. It owns all the infrastructure like trains but also radios, communications infrastructure, and shipping, and it comes to account for 75% of the country’s banana exports. Almost the only thing the country exported was bananas, apart from some small coffee, so it’s a hugely dominant influence even though, elsewhere, it was also dominant.

BRIAN KENNY: There’s a central character in the case. Jacobo Arbenz. I would love if you could talk about sort of what led to his rise and the role he plays in the case.

GEOFF JONES: Jacobo Arbenz is not one of the landed elite. His father was a Swiss immigrant who eventually commits suicide in his youth. His mother was a Guatemalan but not one of the top elite, so he does what a lot of people do in many places. He joins the Army as a way for social mobility. By 1930s, there is growing resentment among the … you could call them the urban middle class, how the top-landed elite totally dominate the place. In the early 1940s, he takes part, as a young captain, in a military coup to overthrow the last dictator. The coup is successful, and he’s then part of this new generation of military who attempt to begin a process of reforming Guatemala. They make racial discrimination a crime. They legalize trade unions, and they set up free and fair elections. The very first one is 1951 when he stands as the candidate and wins the vote.

BRIAN KENNY: This is where the United States starts to get involved in ways that maybe they hadn’t been earlier on in the company’s history. You mentioned before the CIA is involved in significant ways. Can you talk about why the U.S. government was so concerned about the political affairs in Guatemala?

GEOFF JONES: A key concern of Arbenz is to move away from the feudal nature of Guatemalan society. What he’s concerned to address is land reform, so he actually copies the American-imposed land reform on Japan, which involves expropriating unused land and giving it to the peasants. He’s trying to create-

BRIAN KENNY: That’s pretty controversial, yeah.

GEOFF JONES: …a fairer society. That is unfortunate, from the American perspective, because United Fruit is a leading company, but it’s more unfortunate that it comes to be seen as influenced by the Communist party. This is the height of the Cold War. The newly-elected Eisenhower administration is at the forefront of fighting the Cold War. The Secretary of State, John Foster Dulles, who sees the fight between the United States and Communism as a battle between good and evil, and so the United States becomes progressively concerned that we’re seeing here a Communist takeover of the country. On the other hand, it must be said that the shaping of this concern is heavily influenced by Sam Zemurray and United Fruit. Zemurray hires a guy called Edward Bernays who is known as the father of public relations and who’s very instrumental in persuading women to smoke in interwar America for example. He’s a brilliant guy, and he sets to work using all the powers of public relations to convince policymakers in Washington that we’re looking at a Communist takeover of the country. That was lighting a fire in the minds of people like President Eisenhower and Secretary of State Dulles.