Globalized Fruit, Local Entrepreneurs. Douglas Southgate

these difficulties did not prevent the British government from insisting that all debts be settled. Stepping in to resolve the dispute, U.S. officials arranged for J. P. Morgan to buy the old bonds for 15 percent of their face value. The Wall Street tycoon then issued five million dollars in new securities to the Honduran government, which agreed to meet its financial obligations by instituting a tax on exported bananas to be collected by U.S. customs officials stationed in the country’s ports.²⁶

      By adding a penny to the cost of every bunch of Honduran bananas, this arrangement put Cuyamel, which lacked agricultural holdings elsewhere, at a competitive disadvantage vis-à-vis United Fruit, which had a large operation in Honduras but also grew or purchased fruit in other countries where exports were not taxed. Zemurray protested, including in person to the U.S. secretary of state, though to no avail. Unwilling to knuckle under, he then recruited and financed a small band of mercenaries to topple the government in Tegucigalpa, with which he had a number of quarrels.²⁷ The government fell and its successor rescinded the export tax and other elements of the arrangement with Morgan and the U.S. government—an arrangement few Hondurans supported.²⁸ Cuyamel and Zemurray subsequently prospered.

      Big Mike’s Vulnerabilities and a Corporate Coup

      In a political and economic history of Central America, Victor Bulmer-Thomas wonders how U.S. fruit companies “could have resisted the temptation to meddle in (the region’s) internal politics” during the early 1900s.²⁹ At the time, however, their actions in places such as Honduras aroused little public comment in the United States, where banana sales continued to grow rapidly. Instead, U.S. observers were impressed mainly by the companies’ ability to supply perishable goods reliably to customers across great distances. The difficulties of this task are illustrated in John Steinbeck’s East of Eden, which is set in California’s Salinas Valley during World War I, when a failed attempt to transport lettuce in ice-cooled boxcars to New York City almost ruins the story’s protagonists. Well aware that shipping bananas from the Caribbean Basin to the United States was even harder than enterprises of the sort depicted in Steinbeck’s novel, authors during the first part of the twentieth century were unstinting in their praise of all that firms like United Fruit were doing to the benefit of U.S. consumers.³⁰

      What was not understood a hundred years ago was that the environmental underpinnings of the banana business were fragile. Practically all the fruit imported by the United States was of the same cultivar: Gros Michel, which translates from French as Big Mike. Moreover, the standard practice in the industry, today as in the past, has been to propagate bananas asexually, which means there is no genetic variation from plant to plant.³¹ Agricultural estates encompassing hundreds or even thousands of hectares planted to a genetically identical crop represent monoculture on a scale that would have awed a pharaoh. Factor in tropical heat and humidity, and banana plantations comprise an ideal arena for microbial mayhem.

      The opening salvo in the microbes’ assault on the tropical fruit business occurred in the 1890s, when the leaves on large numbers of banana plants in Panama started wilting and then dying and falling to the ground. The culprit turned out to be a single strain of a soil-borne fungus, Fusarium oxysporum Schlect. f. sp. cubense (FOC), against which the Gros Michel had no resistance at all.³² Tens of thousands of hectares planted to that variety were lost during the next six to seven decades. Not until the late 1950s was Standard Fruit able to solve the problem by planting a disease-resistant banana variety called Cavendish, which the company’s scientists had spent many years developing.³³

      For much of the twentieth century, however, the primary response of United Fruit and its competitors to Fusarium Wilt—or Panama Disease, as the malady was known for many years after it was first detected and as many in the banana industry still call it—was not to undertake the sort of research and development that leads to better varieties. Instead, they moved their operations to places not yet infected by the FOC fungus. Some tropical countries, most notably Ecuador, gained from this relocation. But when thousands of hectares were locked up as reserves, which could be cleared and brought into production if and when existing plantations had to be abandoned because of Panama Disease, the results could be disadvantageous for host nations. Thomas McCann, who spent his career at United Fruit, admitted that real estate acquisition by his former employer went well beyond what was required for “shifting plantation agriculture”—to use a term coined by John Soluri, a historian of the banana industry.³⁴ In 1952, the industry leader

      owned or controlled three million acres of land. Only 139,000 of those acres were actually planted in bananas; the rest were euphemistically carried on the books as “reserves,” although one of the most important reasons they were held was to guarantee that they would not become farmland for our competitors.³⁵

      Due to strategic behavior of this sort, competition was stifled in a key sector of the Central American economy as well as the banana industry as a whole.

      Territorial acquisition could even provoke international conflicts. A case in point was a dispute that arose in 1915 over a productive region on the border between Guatemala, where United Fruit had secured extensive territorial concessions in 1906, and Honduras, which was always the leading source of bananas for Zemurray’s firm. Each of the two governments rattled sabers occasionally at the urging of private interests, and U.S. mediation was needed twice during the next thirteen years to avert declarations of war.

      Final resolution of the dispute had to wait until 1929, when the Boston Brahmins who had assumed control of United Fruit after the departure of Baker, Keith, and Preston decided to deal once and for all with the company’s pesky rival. A merger was proposed, which Zemurray accepted on being offered 300,000 shares of United Fruit stock.³⁶ The buy-out made him the firm’s leading investor, which distressed him enormously as the value of his holdings shrank. Worth $31,500,000 (or $105 per share) when the merger was effected, in early 1930, Zemurray’s stake in United Fruit had lost more than 90 percent of its value by December 1932, when shares in the company were being bought and sold for $10.25. The stock collapse was in large measure the result of poor corporate administration, not simply a consequence of the Great Depression.

      In January 1933, Sam the Banana Man traveled to Boston for one of the most storied confrontations in the annals of U.S. business. According to Mc-Cann, “Zemurray presented an incisive review of the company’s mismanagement.” The patrician chairman of the board responded by smiling thinly and drawing attention to his stockholder’s accent: “Unfortunately, Mr. Zemurray, I can’t understand a word you say.” The former immigrant stepped out of the room, but only to return a few moments later clutching the majority share of proxies he had collected beforehand. “You gentlemen have been f---ing up this business long enough,” Zemurray informed the board slowly and precisely. “I’m going to straighten it out.”³⁷

      The investing public was more than pleased; the price of United Fruit stock shot up, doubling during the fortnight after the corporate coup.³⁸ Confidence in Zemurray’s leadership turned out to be entirely justified. For example, he had learned from conversations with the company’s ship captains prior to the January 1933 takeover that all vessels had been ordered to cruise at half speed. While this measure reduced expenditures on fuel, it also caused much more fruit to spoil while in transit, so the policy was reversed and all ships were authorized to travel at full speed soon after United Fruit’s old president and former chairman of the board were sacked.³⁹ Changes of this sort not only had a positive impact on United Fruit’s bottom line, but probably saved the company from going under in the 1930s.

       Latin Americans Take On El Pulpo

      Just as United Fruit acquired agricultural land and strove to dominate its commercial rivals, every firm in the industry sought to exercise tight control over agricultural labor. Wages offered by the multinationals and benefits such as food sold in company stores at below-market prices and medical care provided free of charge in company hospitals were superior to the rural norm in countries such as Ecuador and Honduras.⁴⁰ But at the same time, unionization was opposed vigorously.

      Transnational firms did not win every battle with organized labor. For example, plantation workers in Honduras struck successfully