The United Fruit Company in Latin America

THE SASE STUDY OF

THE UNITED FRUIT COMPANY

IN LATIN AMERICA

A L IJLA.\MAG ASSOCIATION

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From the collection

ion of the

San Francisco, California

2006

V.

THE

UNITED FRUIT COMPANY
IN LATIN AMERICA

THE

UNITED FRUIT COMPANY
IN LATIN AMERICA

\ l\

BY STACY MAY AND GALO PLAZA

SEVENTH CASE STUDY IN AN NPA SERIES ON

United States Business Performance Abroad

United States Business Performance Abroad

First Case Study
SEARS, ROEBUCK DE MEXICO, S.A. May 1953. 88pp. $1.00

Second Case Study
CASA GRACE IN PERU. November 1954. 112pp. $1.00

Third Case Study

THE PHILIPPINE AMERICAN LIFE INSURANCE COM-
PANY. March 1955. 94pp. $1.00

Fourth Case Study

THE CREOLE PETROLEUM CORPORATION IN VENE-
ZUELA. December 1955. 116pp. $1.00

Fifth Case Study

THE FIRESTONE OPERATIONS IN LIBERIA. December
1956. 140pp. $1.00

Sixth Case Study

STANVAC IN INDONESIA. June 1957. 144pp. $1.00

Seventh Case Study

THE UNITED FRUIT COMPANY IN LATIN AMERICA.
June 1958. 316pp. Cloth bound $4.50; paper bound $2.00

Library of Congress

Catalog Card Number

58-12402

© 1958, National Planning Association

iv

ACKNO WLEDGMENT

This Case Study was made possible in part by funds
granted by the Carnegie Corporation of New York and
by the John Hay Whitney Foundation. These founda-
tions are not, however, authors, owners, publishers, or
proprietors of this publication, and are not to be under-
stood as approving by virtue of their grants any of the
statements made or views expressed therein.

CONTENTS

*

POLICY AND RESEARCH ADVISORY COMMITTEE MEMBERS x

LETTER FROM Jose A. Mora, Secretary General, Organization of

American States xi

AUTHORS' NOTE xii

PREAMBLE TO THE UNITED FRUIT COMPANY IN LATIN

AMERICA, by Eugene W. Burgess xiv

THE UNITED FRUIT COMPANY IN LATIN AMERICA,

by Stacy May and Galo Plaza 1

I. Brief History: Evolution of the Business 1

History of the Banana 2

The Banana Trade 4

Formation of the United Fruit Company 5

Railroads and the Banana Industry 8

, United Fruit's Competition 12

Samuel Zemurray and Cuyamel 15

Shipping, Communications, and Marketing 18

The Company in Perspective 19

II. The World Banana Market 24

World Banana Production and Consumption 25

International Trade in Bananas 30

The Valuation of the World Banana Market 37

III. The Consumer's Banana Dollar in the United States

and Canada 42

vi

Ocean Transportation 44

Importers' Handling and Margin 49

The Jobbers 53

Inland Transportation; Jobbers' Facilities,
Procedures, and Markups; The Jobber's
Plant; The Accountancy of Banana Jobbing

Operation of the Retailer 62

Summary of the Consumer's Banana Dollar 67

IV. Banana Production and Producers' Revenue 73

The Producing Countries 73

Banana Lands 79

The Relative Size of United's Holdings;
Company-Owned Acreage not in Cropland;
The Extent of United Fruit Control of
Banana Land

Banana Production 90

Clearing and Planting; Disease and Pest
Controls; Harvesting

Inland Transportation and Loading Aboard Ship. ... 96
The Banana Dollar in the Producing Countries 97

V. The United Fruit Company as an Integrated Operation 103

The Diversity of United Fruit Operations 104

The United Fruit Company as an Investment 108

United Fruit Company Earnings 109

Who Owns the United Fruit Company 114

United Fruit Contributions to Host Country Econo-
mies 117

Comparisons with Other U.S. Direct Investments in

Latin America 121

United Fruit Contributions Compared with Local

Agricultural Enterprise 123

The Stability of the Market 124

In Summary 136

VI. Contributions to the Several Local Economics 140

United Fruit's Net Contribution 141

Costa Rica . . 142

General Description; Land Problems at
Quepos and Limon; Problems of Develop-
ing Other Crops; A National Responsibility;
Sources of Funds; Uses of Funds; Other
Comparisons
Honduras . 151

Vll

Flood Fallow; Contract Farms; Research
Center; Standard Fruit and Steamship
Company; Impact on the Local Economy;
Stable Contribution

Panama

Contribution to the Economy; Comparisons
With Other Activities; United Fruit's Con-
tribution to Development

Guatemala 162

Contract Operations; Land-Use Problems;
International Railways of Central Amer-
ica; Contribution to the Economy

Ecuador 169

United Fruit Share; Problems of Ecuado-
rian Producers; Contribution to the Local
Economy

Colombia 175

Brief History; Possible Future Pattern;
Contribution to the Local Economy

In Summary 180

VII. The Company's Record in Social Welfare 183

Housing 184

Health and Sanitation 187

Education 190

Agricultural Training 192

Commissaries and Food Services 194

Summary 197

VIII. Labor Relations and Public Relations 200

Labor Relations 200

The Labor Force 205

Community Development and Morale 209

Public Relations 211

Relations with Governments in Host Countries 213

In Summary 216

IX. Summary and Outlook 219

Major Findings of the Study 220

United Fruit Company Contributions to
Countries of Production; Appraisal of the

viii

United Fruit Company as an Investment ; The
United Fruit Company Record in Social
Welfare, Labor, and Public Relations;
Why the Image Is Blacker Than the Record

Indications of Future Trends 243

Future of the World Banana Market; Persist-
ence of Large-scale Integrated Organization;
Future Position of the United Fruit Company
in Bananas; Future Programs for Using
Abandoned Banana Lands; Gradual Emanci-
pation from Extraneous Services; The Prob-
lem of Company-Government Contracts

The Significance of this Case Study 249

ALBUM OF DOCUMENTARY PHOTOGRAPHS

The Setting between 80-81

Economic Contributions to Host Countries between 144-145

Employees and their Families between 208-209

APPENDIX NOTE 251

APPENDIX TABLE 255

THE POLICY COMMITTEE'S STATEMENT 257

NPA BOARD OF TRUSTEES 263

NPA's PUBLICATIONS POLICY . . 264

IX

POLICY COMMITTEE MEMBERS
CHARLES J. SYMINGTON, Chairman:

Chairman of the Executive Committee, Symington Wayne Corporation,
N. Y. C.

WAYNE C. TAYLOR, Vice Chairman:

Heathsville, Virginia

FRANK ALTSCHUL

Chairman of the Board, General American Investors Company, N. Y. C.

HARRY A. BULLIS

Chairman of the Board, General Mills, Inc., Minneapolis, Minnesota

CLINTON S. GOLDEN

Solebury, Bucks County, Pennsylvania

LUTHER H. GULICK

President, Institute of Public Administration, N. Y. C.

MARION H. HEDGES

Washington, D. C.

DAVID L. LUKE, JR.

President, West Virginia Pulp & Paper Company, N. Y. C.

DONALD R. MURPHY

Director, Editorial Research, Wallaces9 Farmer and Iowa Homestead,
Des Moines, Iowa

CLARENCE E. PICKETT

Honorary Sec., American Friends Service Committee, Philadelphia,
Pennsylvania

RESEARCH ADVISORY COMMITTEE MEMBERS
ROY BLOUGH

Graduate School of Business, Columbia University, N. Y. C.

LEONARD S. COTTRELL, JR.

Social Psychologist, Russell Sage Foundation, N. Y. C.

EDWARD S. MASON

Dean, Graduate School of Public Administration, Littauer Center, Harvard
University, Cambridge, Massachusetts

EUGENE W. BURGESS, Director of Research:

University of California, Berkeley, California

FRED SMITH, International Relations Adviser,

Business Consultant, N. Y. C.

ORGANIZATION OF AMERICAN STATES

men,. . IOLIVI* . nun . emit fflSamfM ttMiMM . HAIT, . HOHOU.AS . .t.ico

COIOMIA • COSTA MC* • CUM . DOMINIC** BfiBllSU «ICAtACgA . MMMA . fA.ACUAr . rtlu

tlfUlUC . ICMAOOI . USAlVAOOl WHWmill . MWIMT .

GENERAL SECRETARIAT

PAN AMERICAN UNION
Washington 6. D. C.. U. S. A.

May 23, 1958
My dear Mr. Symington:

I appreciate your sending me a copy of the text of your latest case study in the
series relating to United States business operations abroad. I also note with in-
terest, that in the preparation of this volume. "The United Fruit Company in
Latin America" you had the good fortune of securing the services of Mr. Galo
Plaza, my friend of many years standing, as co-author.

Your series of studies to date has clearly shown that United States enterprise
is being moved more and more by a growing sense of social responsibility in its
activities abroad and that it has demonstrated how profitable operation, on the
one hand, and general economic improvement and development, on the other, can
be mutually accelerative.

Economic and social development throughout the Americas is one of the funda-
mental objectives of the Organization of American States and its various organs.
Your case studies reflect the many areas in which United States business enter-
prise has contributed to these ends in particular countries in Latin America.
I call attention especially to such constructive steps as are exemplified in the
founding of the Escuela Agricola Panamericana al Zamorano, Honduras, by the
President of the United Fruit Company in 1942. This is but one of many instances
in which the foresight of enlightened business leaders has resulted in practical
measures and in the type of collaboration which is bound to strengthen the bonds
of inter- American economic, social, and cultural relations.

Sincerely yours,

ose A. Mora
tary General

Mr. Charles J. Symington

Chairman, Policy Committee for NPA Case Studies

National Planning Association

230 Park Avenue

New York 17, New York

TM Oriimtition of Amncin Stltil originated in 1190 ll till fifll Internilionil Conference ol Amencin Stilts. IIS dttimtu* Chitlti «is U|*td II tht Hulk
Conleience in 1941. Us put post it to ichitvi ID Ofdtr ol ptict ind justice, promote Amencin lolidinly. itienjtnen colllboritio* inon| Iht Membei Stilts. 1*4
dfllfid ineit so»trei(My. ifldtpt fldtnct ind leinloiill mtltrity. Ire Pin Amtncin Union is Ihl ctnlnl. ptimmml oijin and Generil Secielitnl ol Ikl Ol|««{|liOB.

XI

AUTHORS' NOTE

JL HE AUTHORS of this report share a deep conviction that there
is need for an ever-increasing degree of understanding and collabo-
ration between the citizens of the Latin American republics and of
the United States. Trade exchanges excepted, the flow of capital
from the United States to Latin America in the form of direct private
investments has been the most important factor in the economic
interrelationships of the two areas. In addition to their evident
contribution to development, there is growing recognition that direct
private investments have exerted a very large influence upon the
volume and structure of United States-Latin American trade.

When we were invited by the National Planning Association to
report upon the United Fruit Company's operations in Latin America
as a case study of this type of investment, as a condition of our
acceptance, we asked for assurance of full access to all relevant
accounts and reports of the company. This assurance was given
by the management of United Fruit, and was carried out not only
in letter and spirit by the company's representatives in Boston and
in the field, but with a generosity and freedom that has earned
our respect as well as our sincere gratitude.

We owe an equal debt to numerous government officials, including
heads of state, in the six countries in which our field studies were
centered. They gave unstintingly of their time and in many cases
provided special compilations of unpublished economic data that
were a necessary background against which United Fruit's impact on
local economies could be measured. An equal measure of generous and
gracious response and cooperation was afforded by private citizens
of the six countries — by businessmen, independent banana, growers,
members of the company's work force, labor union officials, and others
too numerous to catalog. And the debt multiplies to include the help
of U.S. officials in Washington and in the embassies abroad, to
officials of the Organization of American States who made available
to us the findings of their own forthcoming study of the banana
industry, to officers of United Fruit's competitors, and to jobbers
and retailers whose establishments we visited.

All of these gave us their help in a measure that far transcended
the accepted amenities of social courtesy. We acknowledge their
assistance with gratitude and with a deepened awareness of the
meaning of inter-American cooperation.

xii

We wish, also, to record our indebtedness to the following who
assisted us directly upon various phases of this study: William
Butler, who accompanied us on our field trips, contributed valuable
advice in planning the study, and wrote one chapter; John Gillin,
Miguel Albornoz, and Miss Lilo Linke who conducted field investi-
gations under Galo Plaza's direction; and Shaw Livermore, Ferdinand
Mehrlich, and Miss Erika Teutsch who carried out specific research
assignments or assisted with statistical calculations and editing with
Stacy May.

A large measure of any worth that the study may have is due to
the help we have received as recorded above, but the authors assume
full and joint responsibility for what has been presented.

In the hope that this report might contribute to the methodology
of studying an important field, in addition to throwing light upon
one company's operations abroad, we have tried to employ objective
measurement to the greatest practicable degree and to spell out sources
and procedures that might be useful to others embarking upon com-
parable undertakings. We realize that this imposes upon the reader
a greater burden than many who are interested mainly in the study's
findings may be willing to assume. Accordingly, tempering our zeal
with mercy, we recommend that those who would prefer to go directly
to conclusions without the pain of sifting evidence should turn to
Chapter IX. That chapter summarizes the major findings of this
study, with some indication of where, in earlier chapters, the reader
may find a fuller exposition of issues about which his curiosity may
have been aroused.

Xlll

PREAMBLE

TO

THE UNITED FRUIT COMPANY
IN LATIN AMERICA

T

HIS SEVENTH STUDY in the National Planning Association's
series on United States Business Performance Abroad turned out to
be a much more ambitious project than we intended when the
United Fruit Company first agreed to cooperate in a study of its
operations abroad. Subsequent inquiry indicated that it would not
be meaningful to restrict the study of the company's banana operations
— which are its principal operations — to a single country. However,
it seemed unreasonable from the point of view of research and cost
to include every country in which the company had banana operations.
The solution seemed to point to studying the company's banana
business in the six banana-producing countries in Central and
South America (Colombia, Costa Rica, Ecuador, Guatemala, Hon-
duras, and Panama) that produce 60 percent of the world's banana
tonnage and 90 percent of U.S. imports of this exotic fruit.

Happily, this six-nation limitation lent itself at least to partial
geographical and cultural similarity in coverage. In addition, it
facilitated concentration in this study on the company's banana
operations which account for over 60 percent of its gross sales and
85 percent of its gross profits before taxes. Without these obviously
minor limitations, the study could not have been sufficiently simplified
for presentation in this series. Neither the authors nor officials of
United Fruit, however, feel that the frank appraisal of the company's
banana activities in the six nations — as reflected in this study —
would be modified if all of its operations outside the United States
had been included for study.

The National Planning Association is grateful for the wholehearted
cooperation of the United Fruit Company in releasing for publication
much factual information supplied from its own records. Employees
throughout the company here and abroad were uniformly courteous
and helpful to the authors in their search for facts. Much credit
also should be given to the many individuals in governmental and
private posts in the six countries studied, as well as to officials of the

xiv

Organization of American States and the U.S. government, who
gave so generously of their time and knowledge to the authors.

United Fruit has been a factor of varying influence in the economic
life of several friendly, but small, republics in Central America.
At times its banana operations in some of these countries have been
brought to public attention, and not always in a laudatory way.
The National Planning Association received full encouragement from
the company in giving adequate coverage of United Fruit's principal
business — bananas — and in extending its inquiry beyond the formula
utilized in this series up to now. The authors in this study have
related much more than a story of a rough road to success — they
also provide a painstaking economic and social analysis of the banana
business in the Western Hemisphere.

6ou4

6

Eugene W. Burgess
Director of Research
May 1958

xv

*

THE

UNITED FRUIT COMPANY
IN LATIN AMERICA

by

Stacy May and Galo Plaza
*

Brief History: Evolution of the Business

JL HIS IS the story of how, over a relatively short period of time, a
highly perishable tropical fruit has become an important item in world
trade. It is the story of how an implausible product, which was being
introduced into the United States as a curiosity a little over 80 years
ago, is today carried by the millions of stems, on more than a hundred
fast refrigerated ships, from farms in the tropics to markets in the
United States, Canada, and Europe, to become a common foodstuff in
almost every household.

Our study concerns primarily the United Fruit Company as a
producer and exporter of bananas. It explores the world banana market,
the basic economics of banana growing and distribution. It focuses
particularly on the role of United Fruit in the banana industry, its
impact on producing countries, its problems and future trends, not
only with respect to production and marketing of the fruit, but also

in its relations with governments, its labor force, and with public opin-
ion, both in the United States and Latin America.

The study concentrates on what has happened since 1950. But in
order to better visualize the company's present activities, one must
look back and examine how the banana came to occupy its present
important place in international commerce and how United came
to exercise its present predominantly important place in the world
trade of bananas and, particularly, in the American trade. It is not
a simple success story from the beginning; it is more than that. It
is a story of dreams and ambitions, of struggle and despair, of mis-
understanding and even of hatred, of trial and error; all of this against
the backdrop of sodden humidity, heat nightmares, tropical rains,
hurricanes, and murderous yellow fever, dysentery, and malaria. It is
also the story of improvement through experience ; it is the saga of the
rise of stout-hearted men, big as Ulysses in their achievements. It
could be written as a romance, its pages bathed in the clean salt spray
of the tropical seas as flying fish scatter before the bows of graceful
Yankee clipper ships. But our task is the more prosaic one of recording
facts as we found them.

No one has summed up more forcefully the contrast between past
and present attitudes of those responsible for the banana industry than
Samuel Zemurray. This was in a statement attributed to him shortly
after he first became associated with the United Fruit Company as
Managing Director in 1932 after a long career as one of the most
colorful banana pioneers and one of United's most formidable rivals. In
his reference to the past he clearly was speaking of banana pioneers
generally rather than of the company he had just joined when he said:
"I feel guilty about some of the things we did ... all we cared about
was dividends. Well, you can't do business that way today. We have
learned that what's best for the countries we operate in is best for the
company. Maybe we can't make the people love us, but we can make
ourselves so useful to them, that they will want us to stay." This frank
and deeply felt expression of attitude is still dominant today. Through
mutual understanding between the company and the people and their
governments, a new, clear and mutually profitable relationship is
evolving.

HISTORY OF THE BANANA

THE BANANA'S HISTORY goes back thousands of
years. Rumphius, who has been called the greatest botanist before Lin-

naeus, in his Herbarium Amboinense, written in shadowy antiquity,
mentions that the banana even then was of venerable lineage. It is a
recognized fact that man has used the banana as a food staple for
thousands of years. It was one of the first fruits grown by primitive
agricultural peoples.

The banana is often referred to in ancient Hindu, Chinese, Greek,
and Roman literature. Mention of the banana is found in various
sacred texts of oriental people. Chief of these writings are two Hindu
epics, the Mahabharata, the work of an unknown author, and the
Ramayana of the poet Valmiki, and there also are references in certain
sacred Buddhist texts. These chronicles describe a beverage derived
from bananas which Buddhist monks are allowed to drink. Yang Fu,
a Chinese official in the second century A.D., wrote an Encyclopedia of
Rare Things, in which he describes the banana plant. This possibly is
the first mention made of the banana in Chinese texts. The Greek
naturalist philosopher Theophrastus wrote a book on plants in the
fourth century B.C. in which he describes the banana. His book is
considered the first scientific botanical work extant. The Roman nat-
uralist Pliny the Elder describes the banana plant in his Historia
Naturalis written in 77 A.D. He mentions Theophrastus as his source
of information. Modern archeologists have found the banana depicted
in ancient ruins such as the Buddhist temple of Bharhut dating from
the second century B.C. and the Javanese monument to Buddha
erected in Borobodur in the year 850 A.D.

The exact origin of the banana is not entirely clear. Dr. Herbert
Spinden1, anthropologist, wrote: "The first home of the edible banana
was in all probability the humid tropical region of Southern Asia,
which includes Northeast India, Burma, Cambodia and parts of South-
ern China, as well as the large islands of Sumatra, Java, Borneo, the
Philippines and Formosa. Here, the seedless varieties of the true do-
mestic banana are commonly found growing wild, although perhaps
they have merely escaped from cultivation." From the East the banana
was most likely introduced to Egypt and Africa by early eastern trad-
ers. The banana variety that predominates in contemporary world
trade, the Gros Michel, was probably first brought to the New World
by a French botanist, Frangois Pouat, around 1836. The old Spanish
chroniclers state that upon the arrival of the Conquistadores in the
New World's tropics, they found platanos or cooking bananas as early
as 1504, the date the city of Santo Domingo, the first capital of Spanish
America, was founded on the island of Hispaniola.

1 Quoted in Charles Morrow Wilson, Empire in Green and Gold, Henry Holt &
Co., Inc., New York, 1947, p. 13.

Oviedo in his Historic, General e Natural de Indias assigns to Friar
Tomas de Berlanga, Bishop of Panama and discoverer of the Gala-
pagos Islands, credit for introducing the first plantings of true fruit
banana types from the Canary Islands to Santo Domingo in 1516:
"There is a fruit here, called platanos, but in truth they are not . . .
nor did they used to be in the Indies, but were brought hither. One
hears on all sides that this special kind was brought from the islands of
Grand Canaria in the year 1516 by the Reverend Friar Tomas de Ber-
langa of the Order of Predicadores to this city of Santo Domingo,
whence they spread to the other settlements of this island and to all
other islands peopled by Christians and they had even been carried to
the mainland and in every port they have flourished . . . ."

THE BANANA TRADE

FOOD HAS BEEN a major commodity in world

trade for a long time. Grain and fish were traded for pottery and
jewelry among the Greeks, the Phoenicians, and other early settlers of
the Mediterranean. As civilizations matured, and palates became epi-
curean, foreign foods were in high demand. The ancient Romans, at
the height of their civilization, imported jars of salted fish from the
Black Seas at high prices, causing old Senator Cato to complain in a
speech to the Senate that "Rome was the only city in the world where
such a jar of fish cost more than a yoke of oxen."

The banana, until the year 1866, was virtually unknown in Western
Europe and the United States. The first bananas were brought to the
States in the early nineteenth century by sea captains who, on return-
ing from voyages to tropical America had loaded as extraordinary
cargo bunches of the strange yellow tropical fruit. Carl B. Frank
started importing bananas from Colon to New York in 1866 from
plantations near the present Canal Zone. At the Philadelphia Centen-
nial Exposition of American Independence in 1876, bananas wrapped
in tinfoil were sold to intrigued buyers at 10^ apiece. Yet, today, less
than a century later, the banana is a staple in almost every home.

The banana trade, in its infant evolution, was hazardous and un-
predictable. Pioneering in the pestilent jungle lowlands, where bananas
grow, was heartbreaking because the jungle fights to reclaim its ter-
rain and only the strong survive. Lack of roads and transportation
made it doubly difficult. In Central America there was not even regu-
lar shipping service to the north before 1855.

4

In 1870, Captain Lorenzo Dow Baker, commander of the fishing
schooner Telegraph out of Wellfleet, Massachusetts, loaded as extra
cargo 160 bunches of bananas purchased for a shilling a bunch at
Port Antonio, Jamaica. Eleven days after the date of purchase the
Telegraph docked in Jersey City, where the bananas sold at two dol-
lars a bunch. Captain Baker's profitable sale in Jersey City led him
to believe that he could capture the consumer's taste with good tropi-
cal fruit in the same way the fruit had caught his fancy on the wharfs
at Port Antonio. So he continued to carry bananas as extra cargo from
Jamaica, unloading in the larger port of Boston. In Boston, Andrew
Preston, an agent of the small but respected produce firm, Seaverns
& Co., sold the bananas at a commission. Banana sales in Boston were
uniformly successful. Both Baker and Preston thought that increased
shipping and selling of bananas would prove a profitable independent
business. In 1876, Baker was a prosperous shipper and partner in the
Standard Steam Navigation Company. He persuaded Andrew Preston
and nine of his partners to form an independent fruit agency. So, in
1885, the Boston Fruit Company was founded.

Captain Baker settled in Jamaica where he supervised the shipping
and freighting of bananas to Boston on Standard Steam Navigation
Company ships. Preston, as Boston's sales manager, found new
markets for the increasing influx of bananas from Jamaica. The
Boston Fruit Company prospered, more ships were added to the fleets,
more markets were developed.

FORMATION OF THE UNITED FRUIT COMPANY

To MEET INCREASING DEMANDS for bananas in the
States, Baker and Preston realized they would have to look farther
abroad than Jamaica, Cuba, and Santo Domingo for their fruit sup-
ply. They had heard of Minor Keith, a railroad builder in Costa Rica,
whose companies — the Tropical Trading and Transport Company, the
Colombia Land Company, and Snyder Banana Company — had been
shipping bananas from Colombia, Costa Rica, Panama, and Nicaragua
to New Orleans.

The demand for bananas was growing steadily. By 1898, the total
importation of bananas from the American tropics was 16 million
stems. No more were imported only because this was the total product
available. Over a hundred firms were engaged in the importation of
bananas to the United States before 1899. During the early years,

when small cargoes were easily disposed of at ships' sides for high
prices, it was possible to operate at a profit even with the crudest and
most wasteful methods. As the demand grew and the marketing of
bananas expanded beyond the ports of entry, most of the small inef-
ficient firms, that had enjoyed temporary success, fell by the wayside.
At the time the United Fruit Company was founded, about 22 firms
remained in business, including the Boston Fruit Company, which
served the northeastern sector of the United States, and the Keith
interests that operated out of New Orleans.

Minor Keith, who had borrowed heavily on short terms from New
York and London financing companies in order to further railroad con-
struction in Costa Rica, ran into difficulties in meeting his obligations.
Matters were further complicated when the firm of Hoadley & Com-
pany of New Orleans, which had been his distributor for years, failed,
involving Mr. Keith in a loss of $1.5 million. Because of the failure of
his agent, Keith was compelled to make new arrangements for the dis-
tribution of his fruit and entered into negotiations with Preston, Presi-
dent of the Boston Fruit Company. The Fruit Dispatch Company,
which had recently been formed by Boston Fruit for the purpose of
expanding and expediting the distribution and sales of bananas, took
over the handling of some of Keith's fruit.

This business relationship grew into a consolidation of the interests
of the Boston Fruit Company and the companies controlled by Keith.
The motivation of the merger was not to eliminate competition. The
Boston Fruit Company, with production in the Caribbean islands and
marketing organizations in the northeastern United States, served an
entirely different sector of the country than that covered by Keith.
The latter's fruit came from Central America and Colombia and was
marketed throughout the South from New Orleans and Mobile. How-
ever, both saw the need for expanding production and a more efficient
system of marketing. Both had been victims of floods, drought, blow-
downs, and political upheavals. They realized that a more constant
and reliable flow of fruit from the tropics could only be obtained by
spreading their production base to a number of areas so that any local
disaster could be counterbalanced by a good crop elsewhere. These
were the obvious and logical reasons why these two noncompeting
groups of banana companies concluded negotiations and were con-
solidated into a single entity, the United Fruit Company.

Incorporated on March 30, 1899, under the laws of the State of New
Jersey, United Fruit had an authorized capital of $20 million. At the
first offering, only $1,650,000 was invested by the public, but within

6

one year a total of $11,230,000 had been subscribed. The company was
authorized under its charter to acquire by purchase or development
banana and other properties. Under this charter, United purchased the
property, business, and shares of the Boston Fruit Company and its
associated companies for $5,200,000, and from Keith and his associates
all the properties owned by the Tropical Trading and Transport Com-
pany, Ltd., the Colombia Land Company, Ltd., and the Snyder Ba-
nana Company for about $4 million.

The following were the first officers and directors of the new com-
pany:

President and Director .... Andrew W. Preston, Brookline, Mass.
First Vice President

and Director Minor C. Keith, Brooklyn, N. Y.

Second Vice President

and Director Lament G. Burnham, Boston, Mass.

Director T. Jefferson Coolidge, Jr., Manchester, Mass.

Director Kenneth K. McLeren, Jersey City, N.J.

Secretary Bradley W. Palmer, Boston, Mass.

Treasurer Charles A. Hubbard, Boston, Mass.

The organization of the United Fruit Company marked the end of
the era of pioneering, of risks and hardships, easy profits as well as
total failures, and the beginning of a new era that converted the
highly perishable tropical banana into an important item of world
trade.

The new United Fruit Company had 112 miles of railroad; 212,394
acres of land, of which 61,263 acres were in production; and a capital
of $11,230,000. After formation of United, the young organization
began developing and expanding other sources of supply. It bought
lands in Santo Domingo, Honduras, Guatemala, Panama, and Cuba,
and additional acreage in Nicaragua, Jamaica, and Colombia. By 1930,
its capital had increased to $215 million. Land was exceedingly cheap
in the vast undeveloped lowlands, and eager governments made avail-
able large tracts of jungle territories for the prospect of getting them
opened to profitable development through an enterprise that would
supply basic railroad and port facilities that could be furnished in no
other way.

On the home front, Preston developed additional markets in Boston
and surrounding areas. He established outlets in other ports along the
East Coast— Baltimore, Philadelphia, and New York. More ships

were added to the fleets and the company looked to Europe as another
market ground. By 1910, United was shipping its bananas to Europe.
Today, United Fruit is the major banana concern in the world, and in
1956 it sold almost 39 million stems in North America and Europe.

RAILROADS AND THE BANANA INDUSTRY

UNITED FRUIT PROBABLY would not hold its pres-
ent position as the major banana company in the world had it not
been for the ingenuity of Minor Keith. His uncle, Henry Meiggs, in
the 1850's had pioneered in the railroad industry in Chile and Peru.
Tomas Guardia, President of Costa Rica, in 1870 contracted with
Meiggs and Keith to build a national railroad from Port Limon on the
Caribbean to the mountain town of San Jose, the country's capital.

The construction of the railroad through the tropical jungles of
Costa Rica met with one disaster after another. Dysentery, malaria,
and other tropical diseases constantly cut down manpower. Meiggs
died of yellow fever; so did three of Keith's brothers, and Keith was
left to carry out the construction. Besides the ever-present toll of dis-
ease, food supplies often spoiled before reaching workers on inland
plantations, and shiploads of construction materials coming from over-
seas were nearly always delayed by storms at sea or lost on reefs and
shoals in the hazardous harbor of Port Limon. Minor Keith had mar-
ried the daughter of an ex-President of Costa Rica; he had an engag-
ing personality and made many friends. He was a good organizer and
a man with considerable financial experience; his ambition was to
build a railroad system through all of Central America. At his death,
his German biographer, Herman W. Bitter, referred to Keith as "the
uncrowned King of Central America."

Keith had completed only 60 miles of the railroad when he ran out
of funds. He was forced to find another source of income so that con-
struction could be carried on. Experimentally, he planted bananas in
the Zent Valley, back of Limon, for he had heard that the tropical
fruit had a market in the United States. He shipped the first harvest
of Zent Valley bananas via his railroad to Port Limon and from there
they were taken to New Orleans where they were promptly sold for a
profit. Highly encouraged, Keith began expanding his banana planting
and shipping, and in 1883 was supplying shipping companies in Costa
Rica, Panama, Nicaragua, and Colombia with bananas. With addi-
tional capital from banana sales, Keith pushed the railroad to com-
pletion in 1890.

8

Completion of the Costa Rican railroad, despite man-killing diseases
and swampy lands, may be compared to the engineering marvel of the
two North American Harmon brothers in constructing the Quito-
Guayaquil railroad in Ecuador. Keith looked to Panama as his next
railroad site, and United viewed Panama as another potential banana
development. Planting and railroad building in Panama were success-
ful. Soon Panama was producing millions of banana stems for export
by United Fruit. In Guatemala and Honduras, the company also
investigated possibilities and found in the Caribbean lowlands of the
two countries additional banana lands.

It is interesting to observe the close relationship between railroads
in Central America and the development of banana production. All
the Central American republics, at one time or another, dreamed of
building ocean-to-ocean railroads, taking advantage of the narrowness
of the continent in Central America. The immense financial success
of the Panama railroad, built in 1850, was an added incentive.

Some major railroads had been started before United Fruit came
into existence, but the roads were not completed and the dreams of
transcontinental railroads never came true. The fast-growing banana
business furnished abundant cargo for these railroads whenever they
traversed banana country and in some, cases the revenues from the
transportation of bananas saved the railroads from bankruptcy. Also,
United and other fruit companies built railroads for the handling of
bananas, freight, and people required for the banana industry. Thus,
economic reasons explain why most of the railroads' mileage in the
Central American countries is to be found on the coastal plains, where
bananas are grown, and why the banana industry has been closely
related with the operation of railroads in that area.

The construction of railroads was an indispensable and integral
part of the development of banana plantations in areas not previously
served by any form of land transportation. The United Fruit Com-
pany was interested in building railroads for the service of its banana
operations; the lines would logically follow the shortest good route
from the port or connecting line to the banana plantation. These rail-
roads were of utmost importance to the countries in tropical America
because they opened up undeveloped land and made possible its trans-
formation into banana plantations, which contributed substantially
to the national wealth in countries where mineral resources have not
been developed and agriculture is the chief source of income. Notably,
bananas contribute a large part of that income.

In Costa Rica, Keith built part of the international railroad, but
when banana growing overshadowed interest in railroad building across

the continent, he concentrated his efforts on rail construction in the
lowlands back of Port Limon. Early in the century, United Fruit built
the Northern Railway to serve its banana operations on the Atlantic
Coast. Later it acquired the right to operate the lines of the Costa
Rican Railway which then extended from Port Limon to San Jose.
The company has disposed of its interests in the Northern and Costa
Rican railways on the Atlantic Coast, and now has only local banana
railroads on the Pacific Coast.

Honduras also had high hopes of a transcontinental railroad as a
means to encourage the setting up of a federation of Central American
republics and to cash in on the growing traffic from the East to the
California gold fields. An attempt was made to float a loan for this
purpose as far back as 1853, but not much resulted from these efforts
until 1867-70, when a 50-mile road was built from Puerto Cortez
on the Caribbean Coast toward the interior. Banana interests, during
the Bonilla regime, obtained authorization to set up the TELA Rail-
road Company and the Trujillo Railroad Company, and in compen-
sation received government land. In 1924, out of some 400,000 acres
of land controlled by United in Honduras, about 175,000 had been ob-
tained as compensation for railroad construction. Land grants of this
type were ordinary procedure, and in addition national governments
granted exemptions of port duties and other concessions in order to
hasten the construction of rail lines. Several attempts were made to
continue construction of the national railroad toward the Pacific, but
nothing ever materialized. The line never went further inland than
San Pedro Sula. The fact is that to this date, although there are over
900 miles of railroad in Honduras, all are within the rich banana lands
of the North Coast. The capital city, Tegucigalpa, and other major
towns still lack rail communication.

In Guatemala, railroads came long before bananas, and in this
country many of the major towns are connected by rail to the sea. Be-
fore 1885, 20 miles were built from the capital, Guatemala City, toward
the Atlantic. During the decade from 1880 to 1890, American con-
tractors built the Central Railroad of Guatemala, which connects the
capital with San Jose on the Pacific Coast, and the Western Railway,
which connects with Puerto Champerico, also on the Pacific. Later on,
136 miles were constructed from Puerto Barrios on the Atlantic toward
the capital.

In 1904, Keith and William C. van Horn contracted for the con-
struction of the Northern Railroad. A company was formed, called the
Guatemala Railroad Company, and was incorporated under the laws
of the State of New Jersey with a capital of $40 million. The new

10

company took over the 136 miles in operation from Puerto Barrios
and constructed the remaining 61 miles over the mountains to Guate-
mala City. In 1912, this company changed its name to International
Railways of Central America, and the Western Railroad with 200
miles of track was taken over. This system of railroads which extended
from Guatemala into El Salvador, grew over the years. In 1930, Inter-
national Railways operated about 887 miles of track. Although Keith's
dream of connecting the Central American republics with Mexico to
the north and Panama to the south never came true, his contribution
to the building of railroads in the Caribbean region was extraordinary.

International Railways, with too little traffic to support its expenses,
had been on the verge of bankruptcy and in the hope of solving its
financial difficulties it approached United Fruit and reached an under-
standing that became effective in 1936. Previous to this, United had
signed a contract with the government of Guatemala which granted the
company the right to develop a large banana plantation at Tiquisate
on the Pacific Coast and bound it to build, at its own expense, a rail
line from Tiquisate to an open roadstead on the Pacific at Concepcion
del Mar. According to the contract, it was to be a port open to all
shippers. Had this port been built, International Railways inevitably
would have lost much of its profitable long-haul traffic from the West
Coast to Puerto Barrios on the Atlantic. Most of that traffic, notably
export coffee, would have moved out via the West Coast port instead.

In this situation, under pressure to help solve the railroad's finan-
cial difficulties, United Fruit agreed in 1936 not to build a port at all
on the Pacific Coast near which its Tiquisate plantations were located.
Instead, it made a traffic rights agreement with International Railways
which enabled it to ship all its Pacific Coast bananas over that com-
pany's lines to Puerto Barrios, some 288 miles away on the Atlantic.
The agreement, originally covering a period of 25 years, was subse-
quently extended until 1968. Under its terms, United made substantial
capital contributions in cash and equipment to International Railways
and was afforded preferential rates on its freight carriage. To enter
into these arrangements, United had to persuade the government of
Guatemala to release it from its obligation to build the port. After
considerable negotiation, the government agreed in March 1936 that
the building of the port should be optional rather than obligatory.
The modification of United 's original plan with respect to its Pacific
Coast operations and its subsequent relationships with International
Railways have been among the major sources of criticism against the
company in Guatemala. (A more extended discussion of the specific
issues in dispute is set forth in Chapter VI.)

11

In Colombia, the Santa Marta Railroad was originally started in
1881 for the exportation of sugar. After Keith became manager of the
Colombia Land Company, Ltd., the Santa Marta Railroad Company
started to develop transportation of bananas. In 1925, it operated 176
miles of track, 91 of which constituted the main line to Fundacion,
and 81 miles of branch lines within the plantations. Long years of
friction between the railroad company controlled by United Fruit
and the Colombian government ended when, in 1932, the company
transferred the railway to the government. The government, in turn,
leased the railway to United for a 30-year period, and gave the
company the right to surrender the lease at an earlier date. The com-
pany exercised this option in 1947, and the railroad has since been
operated as the Magdalena Division of the National Railways of
Colombia.

Although railroad building preceded the development of the banana
industry in Panama, the operation of railroads in the banana-growing
regions of this country is intimately associated with United Fruit.
Early in the century, United built railway lines connecting its plan-
tations with the port of Bocas del Toro on the Atlantic Coast. In 1927,
the government completed its railway from interior points to Puerto
Armuelles on the Pacific. United Fruit then built a network of lines
connecting with the government railway to provide transportation for
bananas from its farms on the Pacific side to this port.

Railroads were vital to the banana enterprise. If the banana inter-
ests had not provided them, railroad service for the scantily popu-
lated lowlands in Central America would have been delayed for many
decades. But the banana companies did not provide a railway network
ideally suited to serve the overall economic needs of the several na-
tional economies. That was not their business. Nevertheless, histori-
cally railroads and bananas have become so closely associated in the
minds of people in the area, that the banana companies more often
have been censured for their failure to provide fully for all railway
needs, than credited for their considerable contributions to this im-
portant field.

UNITED FRUIT'S COMPETITION

THROUGHOUT ITS GROWTH, United Fruit has had
competition. In early years, the Boston Fruit Company had supplied
bananas for the city of Boston and surrounding areas, but as success-
ful sales brought in money, Boston Fruit began to consider the possi-

12

bility of developing markets in New York, Baltimore, Philadelphia,
Mobile, and New Orleans. In general, Boston Fruit had been more
lucky than other early banana companies. The banana lands of Ja-
maica had not been struck by the sudden hurricanes that had wiped
out so many of the banana lands held by other small enterprises.
Boston Fruit, because of its consistent policy of maintaining several
sources of supply, was a stable and respectable little company with
enough capital to look after its interests. But both Preston and Baker
knew that to insure their business they had to expand both banana
supplies and markets.

Boston Fruit proceeded cautiously and wisely. Wherever it was
financially advantageous, it bought out small companies in ports along
the East Coast. Later, union with Keith's Tropical Trading & Trans-
port Company and the formation of United Fruit gave the Boston
firm additional banana supplies and markets along the East Coast and
in New Orleans. After the Boston and Keith groups joined forces, the
United Fruit Company emerged as the largest enterprise servicing the
world banana trade. From 1900 until 1910, its average yearly business
accounted for well over three-quarters of total stems imported by the
North American and European markets combined. In 1900, there were
about 20 competing companies operating in these markets, but less
than one-quarter of the total trade was divided between them.

United's relative position declined steadily subsequent to this first
decade of its existence. The inherent hazards of the business have
contributed to a high incidence of business casualties among those who
have attempted to enter into this precarious vocation. The risks have
not prevented many from trying, and an ever-increasing number has
met with success. Today, there are about 160 importing firms servic-
ing the North American market alone. The largest of these, after
United Fruit, is the Standard Fruit and Steamship Company, which
imports about 30 percent of the stem volume handled by United Fruit
in this market.

Between 1910 and 1930, United Fruit's competitors made steady
inroads upon its overall position in the two great import markets. A
number of additional mergers, or rather purchases of going companies,
were effected by United during this period, but only one was of
major importance. The portion of the whole trade handled by its com-
petitors increased rather than diminished. On the average, United
handled about 60 percent of the total trade over this 20-year period
as against 77 percent in its first decade of operations.

November 1929 marked the last important merger transaction in
United Fruit's history. That was the date when it purchased the Cuya-

13

mel Fruit Company. The president of Cuyamel, and the creative brain
that had built it to important stature, was Samuel Zemurray. The
name is one that assumes sufficient importance in United Fruit's sub-
sequent fortunes to warrant here a review of the transaction's back-
ground. But first, to round out the theme under discussion, it is appro-
priate to note that the acquisition of Cuyamel did not appreciably
halt the steady encroachment of United Fruit's competitors upon its
position in the world market. That position continued to decline, until
today the company's share in the world banana trade is of the order of

Chart I

United Fruit's Share of the Combined North
American and European Banana Market
Has Steadily Declined

120

! .00

60

40

20

Sales, all companies

United Fruit sales

1900 '05 '10 '15 '20 '25 '30 '35 '40 '45 '50 '55

28 percent. In the past 10 years, Ecuador has emerged from a very
minor status in the trade to become, since 1951, the largest exporter
of bananas in the world. All but a small fraction of this increase
has been accounted for by competitors of the United Fruit Company,
a number of whom have outstripped United in numbers of stems pro-
duced in that country and exported from it. In Colombia, also, there
has been a very considerable increase in banana production and export
by local producers unaffiliated with United Fruit. They have overcome
the inherent disadvantages of relatively small-scale independent oper-

14

ation by organizing two cooperatives through which their production
is marketed.

It has been stated that the present-day United Fruit Company rep-
resents the merged businesses of some 21 banana concerns that once
operated independently. The inference is drawn that by acquiring rival
business interests it has succeeded in eliminating serious competitors
and increasing its own stature. The record fails to bear this out. It
shows that over the years there has been a marked growth both in the
numbers of its competitors and the weight of their competition. Since
the earliest days of its formative infancy, the record shows no acqui-
sitions of going businesses by United that were of significant size indi-
vidually or in combination other than that of the Zemurray interests.
And Cuyamel, itself, appears to have increased United Fruit's rela-
tive position in even the North American market by a very scant
margin.

SAMUEL ZEMURRAY AND CUYAMEL

THE SON OF A POOR BESSARABIAN FARMER, Zemur-
ray came to the United States in 1892. At the age of 15 he helped his
uncle and aunt run a little country store in Selma, Alabama. One day
he ran into a banana jobber who was closing a deal with a grocer and
at once saw the possibility of making a profit by selling in nearby com-
munities ripe bananas, which sold at a discount on the docks in Mobile,
before they spoiled completely. Successful in this venture, he expanded
his area by shipping bananas to inland cities by rail. Next he merged
with small competing companies in Mobile, Ashbel Hubbard and
Thatcher Brothers Steamship Company. In 1905, he went to Honduras,
then a country of constantly changing governments and recurrent revo-
lutions. Zemurray had been purchasing bananas in the area, but then
he bought land along the Cuyamel River with the idea of building a
railway and growing his own fruit. However, Zemurray felt that if his
venture were to pay, he would have to have certain government con-
cessions— a guarantee against increased taxes, permission to build a
railroad, and above all customs-free importation of needed construc-
tion materials upon which he considered the import duties
prohibitive.

The President of Honduras at the end of 1910 was Miguel Davila.
As the story is told in the March 1933 issue of Fortune magazine, at
the same time that Zemurray was wondering how he could obtain the
necessary government concessions for his Cuyamel Company, Davila

15

was negotiating with bankers in the United States for a loan to save
the country from bankruptcy. The banking interests agreed to lend
Honduras the money, but only upon the stipulation that they be al-
lowed to name their own agent, who would have control of Honduran
customs collections to assure that the obligated payments of interest
and principal amortization on their loan would be met. Zemurray
realized that if Davila were to sign the papers for the loan, the New
York banking interests might balk at any transaction that proposed
even minor cuts in the existing schedule of import duties.

Needless to say, the prospect of mortgaging customs revenues to
foreign banking control was not popular with many elements in Hon-
duras. One dissenter was General Manuel Bonilla, an ex-President of
Honduras living in exile in the United States and anxious to return to
power. Upon the basis of a common interest in blocking the proposed
loan, Bonilla went to New Orleans, sought out Zemurray, and obtained
from him a loan sufficient to purchase the yacht Hornet that had been
used for a period by the U. S. Navy. Zemurray financed also the pur-
chase of a case of rifles with ammunition and a machine gun. On Zemur-
ray's own power launch, Bonilla and two soldier-of-fortune cohorts
were carried out to the Hornet and loaded aboard with their guns, thus
eluding U. S. Secret Service men who were assigned to prevent the
coup of which Washington had heard rumors. Zemurray himself waved
the adventurers good-bye as the Hornet sailed from Biloxi for Hon-
duras. The revolutionary trio disembarked in Puerto Cortez, gathered
enough Bonilla sympathizers to oust Davila, and Bonilla was quickly
reinstated as President. The loan agreement that Davila had hastily
signed was repudiated by the Honduran Congress, and Zemurray was
given every concession he had sought. The United Fruit Company, of
course, was in no way involved in this incident, which occurred 20
years before it bought out Samuel Zemurray's interest in Cuyamel.

Zemurray's boundless energy, engaging personality, and many good
friends in Honduras pushed him ahead in his new activity as a grower
of bananas. He proved to be a good farmer. He risked millions in
large-scale irrigation, on selective pruning, on propping trees with
bamboo poles to keep the fruit from falling to the ground and bruis-
ing. He let the floods overflow in inferior lowlands and when later the
water was permitted to drain away, a deep layer of rich alluvial soil
was left on which bigger and better bananas grew. Through these prac-
tices, Zemurray was shipping to northern markets bananas of equal or
better quality than those shipped by United Fruit. He had a further
advantage in that he had his headquarters in the tropics and gave his
banana growing personal attention. United Fruit managers had to fol-

16

low directions from far-off Boston. Zemurray had become a very se-
rious competitor; his Cuyamel Company sold more and more bananas
and the quotations of its stock rose steadily.

In 1915, Cuyamel had begun to expand into the Motagua Valley
region along the Honduran-Guatemalan border, for which it had been
granted a concession by Honduras. The political jurisdiction of the
area had been in dispute between the two governments for more than
65 years. United Fruit had a well-established interest in the area based
upon the territorial claims of Guatemala. Both Guatemalan and Hon-
duran troops were sent into the area and a few minor skirmishes took
place. The incident is mentioned here because it frequently has been
cited as an example of the close involvement of the early banana pio-
neers in Latin American politics.

In common with a number of parallel situations involving other
foreign corporations that have occurred in various Latin American
countries and elsewhere, opinions differ on this case. Some feel that this
typifies a situation in which political frictions were brought to a head
by the efforts of rival business corporations to enlist governmental
support of their interests. Others feel it was more a matter of govern-
ments seeking to use such influence as important foreign corporations
might bring to bear in support of their respective political claims. We
have no firm basis for forming a judgment upon this issue. It can be
stated that the U. S. State Department offered its services in mediation
of this dispute, which was not settled until after the Cuyamel Fruit
Company had ceased to exist.

In November 1929, Zemurray sold his interest for 300,000 shares of
United Fruit stock worth $31,500,000, which made him the company's
largest single stockholder. Now a man of great wealth, Zemurray
retired to his home in New Orleans, but as soon as the depression took
hold, he found that his wealth was shrinking alarmingly. United Fruit
stock that he had acquired dropped to a record low of 1Q1A a share,
which reduced the value of his holdings by $27 million. In 1920, the
company's profit had reached a high of $44.6 million; in 1932, profits
dropped to $6.2 million.

As a large stockholder, Zemurray demanded to be heard in Boston
and after a short struggle with his fellow directors, he took over com-
plete control of Latin American activities under the impressive title
of Managing Director in Charge of Operations. United Fruit stock
climbed back to 26 in a matter of weeks on the strength of his prestige
alone. He moved down to the tropics, established personal contacts
with his old associates, gave local managers a freer hand, and over-
hauled operations all around. He had to face the serious menace of the

17

rapid spread of sigatoka and of other serious banana plant diseases,
which if left unchecked could have wiped out the industry.

SHIPPING, COMMUNICATIONS, AND MARKETING

IN THE EARLY DAYS, United shipped its fruit on
the small vessels of the New Orleans, Belize, Royal Mail and Central
American Steamship Company and of the Bluefields Steamship Com-
pany, which it controlled. In 1904, the Tropical Fruit Steamship
Company, Ltd., was organized and three ships commissioned for the
banana trade sailed under the British flag.

Andrew Preston created United's Great White Fleet. He saw a profit
in passenger traffic and in 1899 chartered four new ships (the Admiral
Dewey, Admiral Schley, Admiral Sampson, and the Farragut), that
originally had been built for the Navy. Each carried 53 passengers
and 35,000 bunches of bananas, which assured a fast and efficient
service from the tropics to U. S. ports. In 1903, the Venus, owned by
the Weinbergers of New Orleans and chartered by United, was rigged
up for refrigeration, and as the first successful refrigerated ship started
a new era in ocean transportation. Preston contracted for the building
of three almost identical ships, the San Jose, Limon, and Esparta, the
nucleus of the White Fleet which grew to 95 ships by 1933.

Fast, refrigerated ships alone could not assure the efficient move-
ment of bananas from the tropics to the United States. The profitable
handling of bananas also involves rapid communication of directives
and information between domestic offices and the remote plantations.
Telephone and telegraph services between the United States and areas
of United's tropical operations were hopelessly inadequate. As early
as 1903, Preston and Keith became interested in radio. Pioneering in
wireless communication was expensive and not always successful.
Static and tropical storms were a constant problem. In 1904, United
was first to put commercial radio on shipboard. At last in 1910, thanks
to Preston's vision and tenacity, uninterrupted radio communication
between the United States and Central America was formally estab-
lished. For the first time commercial international broadcasting
became trustworthy. In 1913, Tropical Radio Telegraph Company
was incorporated as a subsidiary of United Fruit.

Fast transportation from the tropics and an efficient communication
system helped, but much more was needed to assure the proper mar-
keting of the fruit. The pioneer banana trade was the acme of disorder.

18

The almost complete lack of quality standards severely handicapped
reliability in merchandising. Not much fruit was moving to interior
markets, and an efficient and rapid distribution system had to be
established if such markets were to be adequately supplied. For this
purpose, Fruit Dispatch was organized by the Boston Fruit Company
in Boston and New York and then expanded throughout the United
States. It was maintained as a separate subsidiary by United Fruit.
Success in the banana trade depends not only on growing large and
healthy stems of bananas, but on the integrated operation of producing
the fruit in the American tropics coordinated with efficient transporta-
tion and distribution throughout the marketing areas.

THE COMPANY IN PERSPECTIVE

To EVALUATE EVENTS of half a century or more
ago in the light of present-day standards and practices is to invite
distortion and commit injustice. Past events can be better weighed
and understood in the light of their own time and scene. The days of
banana pioneering were rough times in Central American politics.
Countries and factions within countries were chronically at war with
each other. A president was no sooner inaugurated than overthrown.
Strong men took over and ran the countries as if they were their own
personal properties until they stopped a bullet or until stronger men
succeeded. International relationships reflected this dismal state of
affairs. Seen through U. S. State Department eyes, tropical America
was a convulsive, unstable region that needed watching and protec-
tion. Looked at from below, the actions and attitudes of the United
States were symbolized by the image of Uncle Sam forwarding his
self-interest with the benefit of a big stick.

The banana-producing countries were poor; few mineral resources
had been developed; they depended almost entirely on the agricul-
ture of their cool, high, inland valleys. Their coastal lowlands were
covered by virgin jungles; the few so-called "ports" that served to
maintain tenuous contact with the outside world were pestholes. No
wonder the governments were eager to attract those enterprising Amer-
icans that had found a use for their wastelands and were willing to in-
vest unheard-of amounts of dollars in clearing the jungle and building
railways for the growing of bananas. This explains why national gov-
ernments were willing to sign contracts and grant concessions on
terms that today would be considered grossly unfavorable. But, at that
time, such arrangements represented to the governments an oppor-

19

tunity for opening up to civilization without cost great tracts of land
that were valueless to them as they stood, and with no other hope for
increasing their value in sight. To the foreign investors, the terms did
not appear to be unreasonably cheap, in view of what they conceived
the risks to be — a judgment that has been vindicated by time. Even
from the vantage point of hindsight, it is difficult to say whether or
not, if the producing countries had set harder terms, the job would
have got done. It did, and most of the modern ports in Central
America are there because banana pioneers built them.

The early contracts made by United Fruit in tropical countries
fixed low export taxes on bananas for a period of years and granted
certain tax exemptions. Among these were exemption from import duty
on heavy equipment and materials for the construction and operation
of railroads, wharves, electric plants, communication facilities, and in
some instances exemption for materials and supplies for irrigation and
drainage works. Its contract of 1900 with Costa Rica, for example,
remitted export taxes entirely for a period of 10 years, and for the fol-
lowing 20 years set the banana export tax at 1^ per stem. In 1930, this
tax was raised to 2^ per stem. Its original contract in Guatemala
called for payments to the central government of $14,000 per year
plus an export tax of 1^ per stem. The company, however, remained
liable for other taxes payable by local enterprises — such as property
taxes, consular fees, and import duties on all articles except those spe-
cifically exempted.

At the time United Fruit started its tropical operations, there was
no income tax either in the United States or in any of the tropical
countries. When the United States established its income tax in 1914,
the income of U. S. companies from operations abroad was made sub-
ject to income tax here with a credit for income taxes paid abroad.
When the tropical countries, in turn, began enacting income taxes, it
was found that some of the contracts under which United was operat-
ing stipulated that the company was not subject to any taxes beyond
those specifically listed. In all such cases, United Fruit amended these
contracts to accept liability to, income taxes in the countries in which
it operates. Costa Rica took the initiative and deserves major credit
for bargaining through the pattern that now applies throughout the
Central American area. This change has greatly increased the revenue
of tropical countries from the operations of United Fruit. From the
detailed accounting of the company's operations in later chapters, it
will be seen that its overall tax contributions to the producing coun-
tries currently run at a level that by no stretch of the imagination could
be held to place it in a preferential position.

20

The very existence of special contracts between foreign corporations
and sovereign governments is something that grates upon Latin Amer-
ican sensibilities, regardless of whether or not the terms are equitable.
It is only fair to point out, however, that because of the character of
the company's operations in developing jungle areas, some form of
contract with the local government was mandatory. United had to
construct such important works as railways, wharves, electric plants,
radio stations, and other works of a similar character, which is not
permissible without government authorization in the form of a fran-
chise or contract. Furthermore, rightly or wrongly, foreign investors
generally have been reluctant to commit to relatively immature econ-
omies large amounts of capital in this class of development, without
having assurance in explicit contract terms that the burdens on its
works and operations would not be radically increased for a period of
years.

Foreign companies necessarily have to deal with existing govern-
ments. In countries in which there are frequent changes in the govern-
ing establishments and where political passions run high, it is inevi-
table that recriminations will be hurled — both for having dealt with
the deposed and for dealing with those who replace them. United Fruit,
as a foreign corporation conspicuous for its size, has been a particu-
larly eligible target for such double-barreled attacks. Another source
of fear and suspicion has been the comparatively giant size of the
company in a number of the Latin American countries in which it
operates. It frequently is baited by some of the Latin American press
which often refers to it as el pulpo (the octopus) , and sometimes ac-
cuses it of installing and deposing governments, bribing officials, and
throwing its weight around in order to obtain advantages.

Although our study did not sift the detailed record of the early tur-
bulent years and therefore we are not qualified to establish the de-
gree of historic truth or falsehood behind these charges, we can say
that they have little relevance to its behavior record of recent times.
Most of the responsible public officials whom we systematically inter-
viewed spoke in generally favorable terms of the company's current
standard of conduct. In searching for an explanation of what is un-
doubtedly a lingering residue of bitter feeling in certain quarters,
it seems likely that the historic setting may have been a contributing
factor. In its formative years at the turn of the century, United may
have been seized upon as a present and therefore tangible symbol of
widespread Latin American discontent with the U. S. government for
what was considered high-handed practice in its policy toward Latin
America.

21

What no one has criticized is the way the company developed the
land. Once they fell into United Fruit hands, tropical swamps and
jungles soon blossomed into immense plots of luscious green banana
plants, set out in rows, on well-drained, properly fertilized, and irri-
gated soil. Progressive agriculture practices, never heard of before,
in connection with silting, flooding, and spraying in a never-ending
fight against plant disease, produced millions of stems of the golden
fruit for export. Whole communities sprang up almost overnight;
workers came from afar attracted by the high wages — the highest
paid to rural workers in the tropics. In addition, the company had
free housing for its agricultural labor, free hospitals, schools, and
labor clubs. Extensive programs of sanitation were carried out to
eradicate tropical disease, swamps drained, sewer and potable water
systems put in. Cost of food was kept to a minimum in company com-
missaries where other goods also could be obtained at bargain prices.

In these well-organized agricultural enterprises, every eight banana
farms constituted a district, and four districts a division. Usually
each division was served by a modern port where spotlessly white,
refrigerated ships would stand at the docks loading stems of bananas.
The carefully handled bunches moved by the tens of thousands from
the farms over the extensive railroad network.

The growth of United Fruit in a period of less than 60 years has
been remarkable. It is not a particularly large corporation by stand-
ards in the United States, but it is by Central American terms of
reference. (The comparative size of its economic role in its small host
countries is detailed in Chapter VI.) For example, in Honduras, the
company's taxes, wage payments, and other expenditures are the
largest for any single economic unit in the country. At one time in
Costa Rica, the national budget was not as large as that of the com-
pany. Things that are conspicuously strange are often resented, and
for all of its long residence in the Caribbean, the United Fruit Com-
pany is marked as foreign and, therefore, strange. Things that are
large are often feared and, in the eyes of Central America, the com-
pany is a very large representative of an awesomely large neighbor
to the north. It is not surprising, then, that the image of the United
Fruit Company as reflected in Central American minds should be
partially clouded by resentment and fear. In Ecuador and Colombia,
on the other hand, where the company's roles are of comparatively
modest dimension in the overall economies, its general reputation is
blurred by few misgivings or doubts.

What is surprising is that, shadowed or serene, the images of what
the company's activities mean to the areas of its foreign operation

22

bear so little resemblance to what the actual record shows. Precon-
ceptions about foreign private investments generally, and abbut United
Fruit in particular, are so strong that people, both north and south of
the border, tend to see what they expect to see rather than what is
there.

It is probable that the United Fruit Company might have done more
than it has to present a clearer accounting of its complex operations,
and to correct inaccurate statements by others before misconceptions
had time to take root. It is certain that scholars concerned with the
development field have done far too little to provide a clearly under-
standable frame of reference through which the significant effects of
various types of development investments might be appraised in com-
parative terms.

The chapters that follow will develop such a framework for measur-
ing the particular case under study in objective terms that have gen-
eral meaning. The operations of one company will be analyzed in a
way that we hope will add significantly to an understanding of the
important field of direct private investments of international scope —
a field that has scarcely been touched by quantitative investigation.

But the findings of the particular case are of significance, too.
For the United Fruit Company is surely one of the most important
examples extant of international investment based on agriculture.
It can be viewed either as a corporate colossus of exceptional stature
and resources or as an average-sized representative of U. S. busi-
ness of international scope by looking through a single lens of nar-
row sectional perspective. It has been our endeavor to look at the
record through two-lensed spectacles. Clearly the interests of United
Fruit are rooted in both halves of the Western Hemisphere, and its
future depends upon the economic progress of both. Just as clearly,
its operations are of importance to both, though the weighting here is
significantly greater to the south than to the north.

All of us, in this hemisphere, will have to develop vision that under-
standingly spans the gap between the cultures of the two Americas,
a myopia that has persisted too long and stretched too wide in a period
of world history that is driving our interests ever closer together. We
hope and we believe that the record of the United Fruit Company is
one that will serve to cement mutual understanding and respect on the
part of those who have the patience to read our findings as set forth in
the pages that follow.

23

The World Banana Market

T

HE PRESENT STUDY is directed neither toward justification
nor criticism of the United Fruit Company's operations over the
more than half century of its history. We feel that it would be an
essentially sterile exercise to attempt to disentangle the skein of events
since 1899. Since then, a banana industry of sufficient size to assume
importance in international commerce literally has been created by
imaginative traders, with the United Fruit Company exercising a
dominant role in the process. To reconstruct and appraise the his-
torical record in a way that would allow recriminations to be bal-
anced against solid accomplishments would call for an omniscient
judgment that we do not feel we possess.

Rather, we have set ourselves the much more modest, though still
not unambitious, task of attempting to contribute toward an under-
standing of what the banana industry is, of who benefits from it and
by how much, and to appraise the record of the United Fruit Com-
pany in the industry as it operates today. Our perspective, then, is
contemporary rather than historic. Most of our field work was com-
pleted in 1956, and our major concentration is upon operations in the
year 1955, the latest year for which national accounts data for the
several banana-producing countries were available in relatively com-
plete form.

We are acutely conscious of the fact that our study deals with a
field in which the ideas of most people are colored by strongly held
preconceptions based upon an interpretation of past events rather
than upon an examination of the current record. It has seemed to us
that a useful service could be performed by describing the present
organization and procedure of banana production and marketing, by
measuring what can be measured, and by limiting subjective judg-
ments to matters not susceptible to appraisal in objective terms.
Where we are forced to make value judgments, it is our hope that at
least relative objectivity may be achieved through the circumstance
of a joint authorship that combines North American with Latin Amer-
ican outlooks.

More particularly, our interest in the United Fruit Company record
is focused upon its impact upon the economic development process

24

in the six Latin American republics selected for intensive study-
Guatemala, Honduras, Costa Rica, Panama, Colombia, and Ecuador.
These were singled out because their combined banana shipments rep-
resent close to 60 percent of the tonnage weight of world banana
exports, and because about 95 percent of the bananas handled by the
United Fruit Company in 1955 was produced in or purchased from
these six sources. Through this sampling procedure, we could limit
our field work to supportable dimension, and still cover the bulk of
the world banana production for export, and a preponderant portion
of United's banana procurement operations.

In concentrating upon United Fruit's contributions to economic
development in these six countries, we are guided by our conviction
that the widest possible diffusion of vigorous economic growth is
one of the most important concerns of the contemporary free world.
We are convinced that adherence to and strengthening of democratic
institutions in the less developed countries of the world depends in
large measure upon the demonstration that aspirations for general
economic progress can be realized under free institutions. And we
believe that the flow of investment capital from the capital-generating
nations of high industrial development to the capital-poor countries
is a major instrument for helping to stimulate balanced growth in
the latter.

We start with the premise that investment capital, private or public,
will not continue to flow unless it receives a return judged to be ade-
quate. Therefore we shall examine the profitability of United Fruit
investments in the six republics upon this criterion. But it seems
equally clear to us that continuing hospitality for foreign private
investment ventures cannot be expected to endure unless there is clear
evidence that it is contributing to the development of the host nations
to a degree that would not be realizable without it. Accordingly, we
shall examine the United Fruit record to see whether or not its opera-
tions present convincing evidence of satisfactory performance upon
this score.

Before we embark upon such an examination of the operations of
the company, it is requisite that we establish a frame of reference,
by presenting a picture of the world banana market as a whole.

WORLD BANANA PRODUCTION AND CONSUMPTION

THE FOOD AND AGRICULTURE ORGANIZATION of the
United Nations estimates world banana production in 1955 at 11.6

25

liiiiil

26

million metric tons or about 25.7 billion pounds. It apportions about
46 percent of this to South America, 23 percent to Central America,
23 percent to Asia, 6.5 percent to Africa1, and 1.5 percent to Oceania.
As such, the banana crop is the fourth largest of the world's reported
fruit crops, exceeded in tonnage production only by grapes (88.0 bil-
lion pounds), by citrus fruit (39.2 billion pounds), and by apples (29.1
billion pounds) . If the portion of the grape crop produced for making
wine (71.4 billion pounds) rather than for consumption as fruit is
deducted, and that of apples produced for cider (8.8 billion pounds),
bananas displace both grapes and apples and are second only to citrus
among the world's fruit crops consumed directly as food. Excluding
grapes, citrus, and apples, the tonnage of bananas exceeds by a con-
siderable margin the combined weight of the remaining important
fruit crops of the world — pears, pineapples, dates, and figs (17.2 bil-
lion pounds, combined, for 1955) .

Table 1

1955 World Banana Production

Producing area

Million
Pounds

%of
total

Central America

5,950

23.2

South America

11,700

45.6

Asia

5,950

23.2

Africa

1,650

6.4

Oceania

400

1.6

World total

26,650

100.0

Source: Agricultural and Economic Statistics, monthly bulletin of FAO, July-
August 1957. (Corrected by assigning Canary Island production to Africa
rather than to Europe.)

Table 1 covers a world population for 1955 estimated at 2,490 mil-
lion persons. On this basis, the average consumption of bananas by
each man, woman, and child was 10.3 pounds in 1955 on a stem-weight
basis.2 Only the subcategory of citrus fruits, comprising oranges, tan-

1 In the FAO accounting the banana production of the Canary Islands is attributed
to Spain. It has seemed to us more appropriate to attribute this banana production
to Africa since the Canaries, while a Spanish possession, lie^bff the African Coast
well south of the European boundaries.

2 The actual weight of bananas reaching consumers averages about 15 percent
less, and the wastage factor on other fruits varies. Throughout this chapter pro-
duction weights are used for comparisons given.

27

gerines, and Clementines shows a larger per capita consumption, 12.6
pounds; and only apples, 8.1 pounds, and grapes, 6.6 pounds, were
serious rivals of the banana among the world's consumption fruits.

It is, of course, obvious that such blanket averages have little
relationship to the actual pattern of fruit consumption by the world's
populace. Banana production is restricted to the tropics and more
particularly to humid tropic areas. For successful growth, most
varieties require a temperature range between 55° and 105° F., and
almost all suffer severe damage when temperatures drop below 50°
to 52° F. Since the banana cannot be grown as a seasonal crop — its
cycle of development ranges from 12 to 15 months from planting to
harvest — its range of cultivation is restricted to the zones in which
year-round temperatures are within these extremes. It is further
restricted to areas that can provide its exceptionally high moisture
requirements (four to five inches monthly or 60 inches annually as a
minimum) through heavy and evenly spaced rainfall or generous
water supplies for irrigation.

The banana thrives best in alluvial, well-drained soils, though it
will tolerate clay soils of friable consistency. Since its stalk is merely
a tightly rolled cylinder of leaf sheaves, it is particularly vulnerable
to blowdowns or uprooting by floods when heavy with fruit. Even
relatively mild winds can seriously injure the fruit by shredding the
protecting leaf structure upon which healthy fruit production depends.
The areas that can grow bananas successfully upon a commercial basis
must therefore provide the necessary environmental factors of tem-
perature, moisture, soil characteristics, and freedom from damaging
wind and flood recurrence.

In general, the areas that can provide a hospitable environment for
banana culture are found in low-lying, high-precipitation lands be-
tween 20° North and 24° South latitude, with the extremes set by
24° North and 30° South latitude. The range of actual banana pro-
duction is indicated by the areas listed in Table 1. The major Latin
American areas in which bananas are produced for export are shown
in the map on page ii.

It might be assumed that the areas of important production would
be the areas of major consumption. Yet, as indicated in Table 2, some of
the broad areas of banana production are heavy banana consumers
as well, while others are not. On a per capita basis, the highest level
of consumption in 1955 was in South America, 80 pounds per capita;
while Central America (including Mexico and islands of the West
Atlantic) consumed about 52 pounds per capita; Asia less than 7
pounds; Africa about 1.5 pounds; and Oceania, 27 pounds. In the

28

United States and Canada combined consumption of bananas was 20
pounds per capita, and for Europe it was 9 pounds — an average of
almost 13.5 pounds per capita for the two combined.

Table 2

Banana Production
and Consumption
(Stem-weight basis)

Area

Production

Consumption11

Billion Ibs.

Percent

Billion Ibs;

Percent

Central America.

6.0
11.7
6.0
1.6

0.4

23

46
23
6

2

3.0

9.9
6.0
0.3
2.5
0.4
3.6

12
38
23
1
10
2
14

South America

Asia

Africa

Europe

Oceania . . .

North America

Total

25.6

100

25.6

100

a Derived by subtracting exports and adding imports as reported by the U. S.
Department of Agriculture from FAO data on production. Again, Canary
Island production has been assigned to Africa rather than Europe.

Thus, up to the present time, it is fair to say that bananas have
assumed as important a place in the average diet in the two major
industrialized areas of the temperate zone as for the vast majority
of the people living in what we regard as tropical areas. In India,
for example, the apparent annual per capita consumption of bananas
is only about 11 pounds. Since there is so little inter-country trade
in bananas within the tropic zones, it follows that there is an extraor-
dinarily high annual per capita consumption in some of the major
producing countries, while in other tropical countries the consumption
rate of bananas is very low. For 1955, on the basis of reported pro-
duction minus export figures, Brazilians consumed something like
150 pounds per capita; Costa Ricans, 350 pounds; Panamanians, 380
pounds; and Ecuadorians a fantastic 500 to 600 pounds per capita.
Even allowing for apparent inflation in some of the reported produc-
tion figures and for the known fact that there is considerable feeding
of bananas to livestock in some of these countries, the human con-
sumption of bananas where they are grown in profusion clearly reaches
heroic proportions.

29

INTERNATIONAL TRADE IN BANANAS

Or THE ESTIMATED 25.7 billion pounds of bananas
produced for commercial sale in 1955, something over 25 percent was
exported in international trade.

The breakdown by areas of export and import, given in the Appendix
Table, is adapted from figures compiled by the U. S. Department of
Agriculture. We have adjusted the North American import weights
slightly upward upon the basis of evidence that the official estimates
of the Department of Agriculture do not give sufficient allowance to
the increases in average stem weight in recent years. This has the
effect of raising the world total of 1955 imports from the Department's
estimate of about 6.6 billion to 6.7 billion pounds. It is probable
that, on the export side, there is a comparable degree of understate-
ment of weights for fruit going to North America but we have not
attempted to make this adjustment in the data presented. The dis-
crepancy is not large enough to alter substantially the proportionate
shipments as reported by broad area. Reported import and export
figures never are in exact balance because of inevitable inaccuracies
in accounting and because, due to time consumed in ocean transport,
there are always some shipments credited as exports at the end of
one year that only show up as imports when delivered at the begin-
ning of the following year.

On the export side, the data show that almost 80 percent of all
reported banana exports in 1955 were shipped from Middle America,
including Mexico and the islands of the West Atlantic, and from the
three South American banana exporters — Ecuador, Colombia, and
Brazil. Africa accounted for about 20 percent; Asia (entirely from
Taiwan) for a bit more than 1 percent; and Oceania for less than 1
percent. It is clear, then, that Latin America is the dominant banana-
exporting area of the world, and that the West Coast of Africa (in
which the tabulation includes the Canary Islands) is the only other
major area that plays a significant exporting role, and that a relatively
minor one, in the overall picture.

On the import side, North America (United States and Canada)
and Western Europe, neither of which produces any bananas on a
commercial scale, are the outlets for over 90 percent of world banana
trade. Argentina, Chile, and Uruguay are the principal Latin Amer-
ican importers, with Brazil and Ecuador as sources of supply. The
breakdown of world banana imports for 1955 is shown below.

Of the North American imports, about 92 percent went to the
United States and a little more than 8 percent to Canada, most of

30

31

the latter transshipped in bond from U. S. ports. Of the three South
American importing countries, Argentina takes more than 80 percent
of the total. African imports are divided among the Union of South
Africa, Algeria, French Morocco, Southern Rhodesia, and Tunisia in
the order of their importance as banana importers. Japan is the
only listed Asian importer, with about 54 million pounds imported in
1955; and New Zealand the sole importer in Oceania at a slightly
lower level than Japan.

Table 3

World Imports
of Bananas, 1955

Importing area

Billion Ibs.
imported

% of world
imports

United States and Canada

3 60

53 8

Europe

2 47

36 9

South America

43

6 4

Africa, Asia, Oceania

20

2 9

Total

6 70

100 0

It now can be seen that this remarkable tropical fruit, originating
in the Far East and for thousands of years rarely even listed in the
learned chronicles of the West, has undergone a dramatic meta-
morphosis— largely within the last century. Almost in the manner
of historic glacial drifts, it has crept from its original domicile in the
East into western zones, until today of all bananas grown, the roots
of 70 percent thrust down in the soil of the Western Hemisphere.
Another 5 percent grows along the African shores that rim the Atlan-
tic. Considered in marketing terms, within the short span of the
past 60 years this exotic fruit has burst the containing bounds of its
central tropic environment, and has moved northward, and to a
lesser extent to the south, to find a place in the fruit bowls of tem-
perate zone tables from the Yukon to California, from Scandinavia
to Austria and Italy, and from Chile to Uruguay.

Agriculturally, bananas are chained to the tropics. Commercially,
about one-fourth of all that are produced find a market outside the
temperature zones in which they thrive. And nine-tenths of this
fourth find their way to the industrial heart of the western world —
to North America and Western Europe, whose inhabitants a century
ago scarcely knew what a banana was, except for the scholarly few

32

who read the works of Pliny the Elder or of the Swedish botanist
Linnaeus. An important part of our story is concerned with how this
remarkable change, came to be. It is the more remarkable in that it is
a phenomenon that has occurred on a comparable scale with respect to
no other delicately perishable, definitely tropical fruit.

The general picture of major world fruit exports, presented in
Table 4 as the average exports in metric tons, 1951-53, is adapted
from a study by Erik Mortenson, entitled "Trends in Production and
Consumption of Fruit and Vegetables," in the September 1955 issue
of the FAO publication, Agricultural Economics and Statistics. The

Table 4

Major World
Fruit Exports

Type of fruit

Export 1951-
53 average
(1,000 metric
tons)

%of

fresh fruit

%of
total

Fresh fruit:
Bananas

2,552
2,060
261
127
714
186
218
154

40.7
32.8
4.2
2.0
11.4
3.0
3.5
2.4

36.4
29.4
3.7
1.8
10.2
2.7
3.1
2.2

Oranges and tangerines

Lemons and limes

Grapefruit

Apples, table

Pears, table

Grapes, tableb

Pineapple"

Total

6,272

100.0

89.5

Dried fruit:
Dates

343

285
49
48
12

4.9
4.0
0.7
0.7
0.2

Raisinsd

Prunes e

Dried figs

Other dried fruit f ...

Total dried fruit

737

10.5

Total all fruit

7,009

100.0

a Excluding China and the U.S.S.R. b Grapes sold for fresh consumption.
0 Including fresh equivalent of canned pineapple. d Including currants.
e Excluding Bulgaria and Romania. f Apricots, peaches, apples, and pears.

table, which was evidently compiled on the basis of official FAO
trade statistics, would appear to give a reasonable basis for comparing
the relative magnitudes of the reported trade in the several fruits that
bulk large in international commerce.

33

On this accounting, the trade in bananas for 1951-53 accounted
for over 36 percent of all world commerce in fruit and for more than
40 percent of world trade in fresh fruits. Oranges and tangerines
make up the only other fruit category that is of even proximate im-
portance as a world trade item upon a weight basis, and the amount
of bananas traded is about 25 percent larger. Citrus fruit, however,
hardly classifies as a tropical fruit. Again using FAO figures, the
1954 record shows that almost two-thirds of commercially produced
oranges and tangerines were grown in temperate zone areas, more
than 50 percent in the United States and Western Europe alone. Tem-
perate zone countries furnish 70 percent of all exports. Over 85 per-
cent of commercial grapefruit culture is restricted to the United States,
and three-quarters of all commercially grown lemons and limes
are produced in the United States, Europe, Japan, Argentina, and
Uruguay. Aside from the fact that citrus fruit is far easier to ship
than bananas, the striking fact is that all citrus shipments from
tropical areas amount to only about one-quarter, by weight, of banana
shipments, all of which originate in tropical areas.

Pineapples qualify as a tropical fruit crop, but the FOA figures
show that only about 10 percent of total production is exported in
world trade, and the great bulk of this was shipped in canned rather
than fresh fruit form. Canned pineapples are included in the fresh
fruit category upon the basis of the equivalent fresh fruit content.

Dates are preponderantly a tropical area crop, and about one-fifth
of reported production is exported internationally. But the big
export is in dry rather than fresh fruit form and, in 1954, world trade
in dates amounted to less than one-ninth that of bananas on a tonnage
basis. Figs are the other entry on the list that in most people's minds
would fall into the classification of tropical fruit. Actually, FAO
figures assign considerably over half of commercial fig culture to
Western Europe and the United States, and total fig exports, again
with shipments preponderantly in dried form, account for less than
1 percent of world fruit trade.

How did it come about that the banana (which is technically a
herbaceous vegetable) should have become the one tropical "fruit"
that has become a major item in the diet of North Americans and
Europeans? Why the banana among the literally scores of fruits
that are native to the tropics? Why not the mangosteen of which
poet-gourmets have written in ecstatic terms, or the luscious mango,
the peptic papaya, or the delicately flavored naranjilla? It is cer-
tainly not because of special qualities that make the banana easy
to grow or to transport.

34

Chart IV

World Trade in Bananas Averages 40%
of World Trade in Fresh Fruit

bananas

citrus fruits

35

We already have pointed out that the banana is singularly de-
manding with respect to the temperature, soil, precipitation, drain-
age, and wind conditions of its environment. The areas that can offer
an even proximate optimum of all of these factors are relatively
limited. As we shall see, bananas are subject to blights of devastating
intensity for which it is tantalizingly difficult and formidably expen-
sive to find adequate controls. This is virtually a seedless plant,
with new cultivations established by planting large pseudobulbs or
rhizomes, and there is no wood stalk to permit grafting. Thus, there
has been no success to date in developing, through the genetic
approach, man-made strains that would combine the disease-resistant
characteristics of certain varieties with the better qualities for han-
dling and ripening inherent in others that are vulnerable to disease.
In addition to disease blights, insect pests that destroy plant and
fruit abound wherever bananas are grown.

The banana is a bulky fruit, shipped attached to a stem that
accounts for about 7 to 8 percent of worthless weight, from which the
fruit fingers protrude in a fashion that invites crushing and bruising
under anything less than the tenderest handling. It must be cut in
a green state, before full maturity — how long before depends upon the
length of haulage to ultimate market — and the permissible time span
between cutting and eating by the consumer is limited to not more
than 21 to 25 days. Yet, bananas regularly travel from 2,000 to
6,000 miles by water and up to 1,500 additional miles by rail and
truck to reach their ultimate markets. Any accumulation of dust or
gravel before or during transit, any roughness or cramping in stowing
or carriage, even fingering by customers on the retailer's shelves shows
up in marring discoloration of the delicate, golden skin of the ripened
fruit and depreciates its marketability. Strict temperature controls
have to be maintained from the time of loading aboard ship to delivery
to retailer, and the latter is under strong compulsion to sell his fruit
to customers within 24 hours after receipt.

Every stage, from plantation to retail sale, requires meticulous
planning and coordination, upon a time schedule far more precise
than pertains to any other major commodity of world trade. Supply
in every market must be geared to a demand that, in turn, is affected
by the availabilities of competitive fruits. The cutting by maturity
grade, the transport to shipping port, the stowing, the ocean carriage,
the unloading, the sorting (by size, condition, and degree of ripeness) ,
the shipment by truck or rail to distribution centers, the operations
in the jobbers' ripening rooms, the trucking to retailers, and the sale
to customers — every one of these stages is a tailored process with

36

minimal tolerances for departure from a schedule that has to be
calculated from its beginning. Even small divergences from the
rigid timetable and handling requirements result in losses; whereas
major departures would spell a total loss for the shipments in-
volved.

If Captain Lorenzo Baker, Minor Keith, Thomas Hart, Andrew
Preston, and even the imaginative Sam Zemurray had been able to
visualize the complications that were to beset the production and
marketing of bananas as a large-scale item in world trade, it is im-
probable that they would have had the fortitude to launch and expand
the United Fruit Company. But if they had not made the start, it
is probable that this thoroughly implausible commodity — implausible
in the sense of its inherent lack of adaptability to the hazards of world
marketing — would have bulked no larger in temperate zone food
economies than do pineapples, or figs, or dates today. Happily, for
the North American and European consumer, and for the Latin Amer-
ican banana-producing economies as well, the vision of these pioneers
was too limited to foresee the involvements or, at least, too sanguine
to sense the formidable impediments that were to arise. So they
built the foundations of today's giant trade, largely unaware of the
whirling windmill blades before which even a Don Quixote might
have quailed.

THE VALUATION OF THE WORLD BANANA MARKET

THE MONEY VALUE OF BANANAS that enter into
world trade, to the best of our knowledge, has had no systematic
study. Values are commonly attributed to exports on an f.o.b. basis,
and to imports on a c.i.f. basis. Such reporting is generally made by
applying to the number of stems involved in either case a formula
price that usually grossly understates the prices at which sales are
actually made. Accordingly, the reported export valuation for a
given country as shown in its annual trade account figures often rep-
resents 50 percent, or even less, of what it actually receives upon its
adjusted accounts. The International Monetary Fund, in its work
of keeping track of international balance of payment flows, has been
forced to make radical adjustments in reported banana trade figures
to avoid untenably large distortions in the accounts of the major
banana exporting countries. But the Fund only makes its adjust-
ments for those countries in which banana exports account for a
major portion of foreign exchange revenues.

37

The authors of this study, in attempting to put valuation figures
on the world banana trade as a whole, have started with the North
American market about which a good deal is known and which repre-
sented 54 percent of the world's total banana imports in 1955. We
have less complete data on the European marketing structure, which
represented 37 percent of 1955 imports by weight, but there is suf-
ficient evidence to indicate that an extrapolation of the American
cost structure to that segment will not give any upward bias to the
whole. The costs per pound of European bananas are consistently
higher from original purchase in the producing areas on through the
transportation and distribution chain. The remaining segment of
world trade in bananas is too small to importantly distort the whole
structure.

Our estimating base, combining relatively complete North American
marketing data with the very detailed information made available by
the United Fruit Company on all phases of its operations, is indicated
in Table 5.

Table 5

United Fruit's Share

of the World Banana Market

1955

Importing area

United Fruit

Competitors

Total

Million
stems

Million
pounds

Million
stems

Million
pounds

Million
stems

Million
pounds

United States and
Canada

29.5
7.1"

2,333
339

20. 4a
62. 9a
8.6e
3.9e

l,271b
2,129b
429
196

49.9
70.0
8.6e
3.9e

3,604a
2,468d
429 d
196d

Europe

South America
Africa, Asia, Oceania. . .

Total

36.6

2,672

95.8

4,025

132.4

6,697

a Estimated.

b Residual, i.e., total minus United Fruit's share.

c 5.5 million stems from Central America and 1 .6 million from the Cameroons.

d From U. S. Department of Agriculture count bunch data.

e 50-pound count bunches.

On a stem basis, the United Fruit Company accounted for 59 per-
cent of North American imports, for 10 percent of European and for
28 percent of the world total. But on a weight basis — and bananas
are sold by weight in markets of distribution — there are indications
that the percentages of United Fruit's shipments are somewhat higher

38

Chart V

United Fruit's Share of the
World Banana Market

Millions of Lbs. imported*

EUROPE

U. S.

&
CANADA

AFRICA,

ASIA,
OCEANIA

"ESTIMATED

Competitors' Share
SOUTH AMERICA

in each case, since the stem weight of the company's shipments gen-
erally runs above market averages.

Our specific data gleaned from the United Fruit Company's records
furnished a far more precise base for the portion of the field that it
covered than anything available in published studies. To this we
added everything that could be furnished by public officials and pri-
vate banana operators in the six countries in which we made detailed
field surveys. As has been noted, these six, between them, produced
about 60 percent of the bananas shipped in international trade in 1955.
In sum, while our global estimates have been pieced together from
these sources, and then blown up to represent the whole market as
revealed by world trade and production statistics, we believe that
our findings reasonably represent the general magnitudes of a field in
which there has been no previous basis for any general appraisal.

In Chapter III, we shall present in some detail the procedures

39

through which we arrived at an estimate of how much consumers
spend for bananas in the United States and Canada and how the
consumer's dollar is broken down in this market to cover the costs
and profits of the several services involved in making them available
from the time when they are put aboard ships to the time when they
are slipped into the housewife's shopping bag. In Chapter IV, we
shall trace the consumer's dollar back through its apportionment
among the several operations required to produce the fruit and arrange
for stowage aboard ship for consignment to export markets, leaning
heavily on data gleaned from our six-country survey. Here, how-
ever, it appears appropriate to anticipate a few of the major findings
presented in these forthcoming chapters, in order to round out our
world market picture by assigning money values to the tonnage data
given above.

It is our rinding that, in 1955, North American consumers spent
about $527 million for bananas — 3,063 million pounds consumption
weight; 3,604 million pounds stem weight — at an average retail price
of 17.2^ per pound. We know that Europeans paid a somewhat higher
price per pound than Americans, and that other importing areas paid
somewhat less. Taking the North American price as average, and
knowing that this area accounted for 54 percent of all imports, we can
estimate the world retail expenditure for imported bananas at approx-
imately $976 million.

We have seen earlier that about three-quarters of the reported
world commercial production of bananas is consumed in the coun-
tries where they are produced. We have no overall reporting of
what consumers paid for bananas in the producing countries, but we
have some data on this for our six-country sample. In these coun-
tries, bananas sold on the local market for from one-fifth to one-
tenth of what they brought when sold as export stems. It is certainly
conservative to estimate that the totality of fruit grown for local
markets throughout the world, although almost three times as great
in quantity, has less than one-half and perhaps not more than a third
the value of that committed to export markets. It is probably safe to
estimate the total retail value of the 1955 world's commercial banana
crop at between $1.3 billion and $1.5 billion.

We are able to make a reasonably proximate estimate of the value
in 1955 of world banana exports f.o.b. vessels at ports of embarkation.
On the basis of our North American consumer dollar analysis that
follows, it will be seen that about 27^ out of each such dollar spent
on bananas represents the return actually realized by producing coun-
tries. Hence, of the estimated $976 million sales at retail, $263

40

million can be assigned as the share of the producing countries from
their banana exports. This general dimension will be confirmed in
Chapter IV as well, where it will be shown that our six countries
actually realized about $157 million from their banana sales in 1955 —
which accords with their 60 percent share in the total tonnage of that
year's world banana shipments.

41

III.

The Consumer's Banana Dollar
in the United States and Canada

.S OF MID-1955, there were just under 181 million inhabitants in
the United States and Canada combined. The peoples of these two
countries consumed a trifle under 300 billion pounds of food in that
year — or about 1,660 pounds per capita. Banana consumption for
the area totaled 3,063 million pounds1 or 17 pounds2 per capita of
population. Thus, upon a weight basis, the banana, an exotic fruit
every pound of which had to be imported from tropical areas, ac-
counted for a full 1 percent of North American diets.

It would be reasonable to expect that this food item, with its in-
herent perishability and its necessarily long carriage by sea, rail,
and truck under constant temperature controls, would qualify as a
luxury food product of relatively high price. This is far from being
the case. The total combined food bill for the United States and
Canada in 1955 is estimated at over $60 billion. The banana bill
of North American consumers for the same year was about $527
million. The average price of 17.2^ for bananas was well under the
average of 20^ per pound paid for food of all classes.

This relatively low retail cost has put bananas financially within
the reach of practically all North American consumers. These con-
sumers can afford to include more fruit in their diets than can be
afforded in most parts of the world and the banana has fitted well
into the assortment they choose to eat. Not only is it palatable to
most tastes, but it also has characteristics of flavor and texture
sufficiently different from other fruits to enable it to contribute sig-
nificantly to the variety in eating satisfactions which people naturally
desire. When we add to this the fact that the banana is nutritional,
we can begin to understand how this implausible commodity has come
to occupy the place it does in the food consumption pattern of this
continent.

1 Although 3,604 million pounds was the stem weight of imported bananas, the
actual weight of fruit consumed is about 15 percent less.

2 This is equivalent to about 20 pounds per capita on a stem-weight basis.

42

In the market lists for low-cost, moderate-cost, and liberal meals
drawn up by the Bureau of Human Nutrition and Home Economics
of the U. S. Department of Agriculture bananas are specifically in-
cluded in the category of "other vegetables and fruits." This classifica-
tion reflects the varied nutrient content of this fruit as distinguished
from the citrus fruits which are recommended specifically for their high
content of Vitamin C. With respect to the 10 other nutrients con-
sidered important enough by the Bureau to be itemized in its pub-
lished tables bananas outrank oranges in all except two. In a list of
20 fruits they rank second in carbohydrates, third in thiamine, fourth
in protein, fifth in riboflavin, sixth in niacin, seventh in Vitamin A,
eighth in phosphorus, and ninth in iron. In terms of food energy
they rank fourth in the list of 20, being surpassed only by avacados,
grapes, and blueberries. As purchased by the housewife, each pound
has an energy content of 264 calories, which compares with 300 in
dressed fish, 312 in fresh whole milk, and 325 in potatoes. Because
of their high content of sugar, vitamins, and minerals and because
they are easily digestible, bananas are recommended for children and
are popular with this important group of consumers. They satisfy
hunger remarkably well in spite of their low fat content and have
proved an acceptable element in the diets of those who have to limit
their overall intake of food. They are convenient for inclusion in
lunch-box meals and can be eaten sanitarily regardless of the sur-
roundings or the cleanliness of the eater's hands.

Nutritional research has demonstrated that the inclusion of bananas
in the diets of normal children stimulates the retention of mineral
elements contained in the various foods they eat and tends to increase
their growth rates. The giving of bananas as the first solid food of
all infants entering the New York Foundling Hospital was made
routine practice more than 25 years ago. For all who suffer from
celiac disease the banana is literally a necessity of life. The digestive
systems of those afflicted with this disease cannot use carbohydrates
obtained from cereals, sugars, and potatoes, since such foods produce
diarrhea. Fortunately, however, carbohydrates in the form of ripe
bananas appear to be tolerated perfectly and thus make possible the
eventual cure of the trouble in almost all cases. Although other
fruits may be substituted before the cure is completed, the banana
has been found to be the most satisfactory and the only safe food for
use in the early stages of the treatment now customarily prescribed
for this disease.

It is the purpose of the present chapter to explain the genuinely
extraordinary phenomenon of how this foreign-produced food, which

43

now accounts for almost 10 percent of all fruit — fresh, processed,
dried, and frozen — eaten in North America, comes into our market and
to describe and put a price tag on the various stages of its transport
and merchandising.

We start with the bananas loaded aboard ship in the six countries
in which we made a first-hand study of production methods. In 1955,
these countries shipped about 4 billion pounds, the equivalent of
approximately 3.4 billion pounds of retailed fruit after allowing for
15 percent shrinkage in weight of stems and damaged fruit discarded
in the distribution process. As we shall see in the following chapter,
the six countries realized about $157 million for their 1955 banana
shipments, or 3.93^ per pound for bananas on the stem and 4.62^
per pound of merchantable bananas at retail level.

OCEAN TRANSPORTATION

OUR PRESENT STARTING POINT, then, is the banana
fleet, with hatches battened down upon a cargo of bananas owned by
North American distributors. In 1955, the United Fruit Company,
the major North American distributor, operated a fleet of 62 vessels.
Fifty of these were fully refrigerated fruit carriers, ranging from about
3,000 to over 7,000 gross tons, which handled all but about 120 million
pounds (sold directly at port to European importers supplying their
own shipping) .of United's 2,672 million pounds of banana consign-
ments. During 1955, this fleet completed 982 voyages of about 5.2
million nautical miles, the great bulk of which was determined by
the demands of the company's banana distribution. About 90 percent
of all United's banana consignments went to the North American
market, and since 95 percent of all its banana shipments originated
in our six-country sample, we can derive from a study of its shipping
operations a representative picture of the ocean link in the chain of
banana distribution between areas of supply and the U. S.-Canadian
market.

At last count, there were over 160 importers of bananas into the
United States, but most of them are quite small. United Fruit im-
ported about 59 percent of the stems entering the North American
market. As we have noted, its percentage on a weight basis was
probably somewhat higher, although there is no accurate record of
the weight of its competitors' imports. Importers normally purchase
the fruit in the countries where it is produced or themselves produce
an important share of the stems imported — as is the case with United

44

and its principal competitor in the Western Hemisphere, the Standard
Fruit and Steamship Company. United Fruit, in 1955, produced on
its own plantations about 70 percent of its North American shipments,
while Standard depended to a somewhat larger extent on purchased
fruit.

From about 1875 to 1900, bananas traveled as deck cargo on sailing
vessels and steamships from Central America and the West Indies into
U. S. ports. Gradually, ventilated cargo ships were introduced, with
simple equipment to keep a constant flow of air over bananas stowed
in closed holds. Beginning in the early 1900's the refrigerator ship or
"reefer" has increasingly taken over, until today this type of vessel
carries most bananas shipped in the North American and European
trades, although a few "ventilators" are still in use. The modern
banana reefer is a highly specialized instrument devised for this par-
ticular use, although it can be, and is sometimes, used for shipping
other fruits, dairy products, and meat products.

Bananas are always loaded green — the degree of maturity deter-
mined by the length of the voyage envisaged — but the ripening process
proceeds inexorably day by day. In the course of ripening, a great
amount of heat is generated as well as carbon dioxide, ethylene, and
other gases. Both heat and ethylene gas hasten the ripening process
and they must be dispelled or the cargo will be overly ripe before
reaching its destination. The reefer is equipped to exhaust the gases
in each stowage compartment of every carrying hold. It must have
ample refrigerating capacity to precool each compartment to a suf-
ficiently low temperature to rapidly lower the pulp temperature of
fruit loaded in tropic heat to 53° or 54° F. And the refrigeration must
be sufficiently flexible to keep the subsequent temperatures in each
compartment at between 55° and 60° F. (depending upon the variety
and maturity of the fruit carried) for the duration of the voyage.
Obviously, heating facilities are required also as cargoes move into
northern winter climates. A given ship may have from as few as
six to as many as 14 compartments and up to nine or 10 separate
cooler units. The space served by an individual refrigerating unit
must be completely insulated to minimize the damage done if one
or more coolers should break down.

In addition to the ventilating and cooling systems, banana ships
require other special fittings. The floor of each stowage deck is
covered with a wooden grating that allows constant circulation of air,
under as well as over and through the stowed fruit. Each compart-
ment is subdivided by movable, vertical bin boards to prevent the
cargo from damage through shifting caused by the roll or pitch of

45

the ship in heavy seas. Within each bin, the banana stems are
carefully stowed by highly skilled men who must gauge with fine
precision the degree of compactness that will prevent shifting or
rubbing without bruising or crushing the fruit fingers. The bottom
layer of stems is always stowed vertically, butt end down, with the
second tier either flat or vertical with either butt or tip end down,
and if there is a third tier, it is stowed flat on top of the vertical tiers.

The hatches of banana ships must be ample to accommodate the
automatic loading and discharging elevators that are used in efficient
ports to hasten these processes. It is of course important to ship-use
efficiency to shorten the time that the ship is held at dockside, but
even more urgent is the necessity for moving the bananas on a minimal
time schedule. For in the banana trade, as in few others, time is
money. Every hour of schedule delay means increased loss through
spoilage; every hour that must be added to the planned scheduling
means that the fruit must be cut at a less mature stage and therefore
entails loss in the weight of merchantable fruit produced or purchased.

The importer has three choices. He can own and operate his own
reefer fleet; he can charter his required tonnage of refrigerator ships
from independent ship operators, thus shifting a heavy capital invest-
ment requirement to other shoulders; or he can combine the two
alternatives. In practice, all three methods are in use in both the
North American and the European banana trades. Banana shipping
costs, over a period of time, have varied little among the three pro-
cedures. But since reefers, with slight shift-over costs, can be used
for other fresh produce moving in world trade, the demand for banana
space may be greater or less than the available reefer supply at any
given time. Chartering rates move up and down accordingly, and
the banana importer may or may not be able to arrange charters at a
tenable price when competitive demand for reefers is heavy. Direct
ownership of a major portion of his reefer requirements eliminates
these short-run risks. Accordingly, United, Standard, and others of
the larger importers have found it desirable to become ship proprietors
and operators on a considerable scale.

For several reasons it is not practical to describe the banana move-
ment to North America in 1955 with precise particularity. The ships
that serviced the North American banana trade that year varied
widely in size, speed, and operating efficiency; there were numerous
new entries and withdrawals during the year ; and we have an accurate
record only for United Fruit shipping operations. From the United
record, however, we can construct a hypothetical picture that gives
an adequate notion of the entire movement.

46

North American imports in 1955 amounted to just about 50 million
stems. From United Fruit experience in this trade, we find that the
average round-trip voyage (for 1953 and 1955) was 4,147 miles.
Therefore, although bananas are carried for only half of the round-
trip distance, it is proper to compute the stem mileage requirements at
4,147 x 50 million stems, a total of 207,350 million stem miles.

An ideal fleet for this carriage would be apportioned between ships
ranging from about 3,700 gross tons to about 8,000 gross tons, with
actual maintained speeds of from under 15 knots per hour to well over
17 (360 to 420 miles per 24-hour day), and carrying anywhere from
27,000 to perhaps 61,000 stems on each voyage. Such flexibility in
the size, speed, and carrying capacity of the banana fleet is dictated
by the wide variations in the length of voyages between the several
major embarkation and debarkation ports serving North American
markets. They range from a little over 1,800 nautical miles for the
round trip between Honduras and Mobile or New Orleans to something
over 7,500 nautical miles between the west coasts of Costa Rica or
Panama and Seattle. Also, flexibility is required because there is a
great deal of variation in the quantities of fruit available for shipment
between different producing centers or even in the receiving capacity
of a given debarkation port from time to time. Experience shows that,
allowing for loading and discharge time in ports and layups for repairs
or cargo inavailability, 255 days per year of actual steaming is a
reasonable average for each ship.

On this basis, the shipping complement needed to accommodate
North American banana imports from Latin American producing
areas would be represented by 43 modern reefer ships, averaging about
5,800 gross tons, maintaining average speeds of 16.5 miles per hour
on both northern and southern voyages, and averaging 255 sea-days
in the year, with each carrying 47,755 stems per voyage upon 24.35
round-trip voyages. Performance standards of this hypothetical, uni-
form fleet may be set forth in the following terms:

(a) 16.5 miles per hour x 24 hours = 396 miles per ship per day.

(b) 255 steaming days x 396 miles = 100,980 miles per ship
per year.

(c) 43 ships x 100,980 miles = 4,342,000 fleet miles per year.

(d) 4,342,000 fleet miles -^ 4,147 miles per round trip = 1,047
voyages.

(e) 50,000,000 stems -f- 1,047 voyages = 47,755 stems per voyage.

47

(f) 100,980 miles per ship per year -f- 4,147 miles per voy-
age = 24.35 round trips per ship per year.

(g) 255 steaming days -r- 24.35 round trips = a shade less than
10.5 days of running time per voyage.

(h) % of 10.5 days == 5.25 days average running time each way.

Again, basing our estimates upon actual experience in banana ship
acquisitions, the current reproduction cost of efficient banana reefers —
in European yards where construction costs are markedly lower than
in the United States — works out to $3,667 for each 1,000 stems of
carriage in the North American trade. A fleet capable of carrying
50 million stems would cost something over $183 million at current
reproduction costs (50,000 x $3,667 = $183,350,000). Actually, since
the working components of a fleet are continuously being retired and
replaced, with depreciation being taken on allowable estimates of the
degree of obsolescence accrued to each unit, it is appropriate to assume
that the effective valuation of a going fleet at any given time would
be about half of the current reproduction cost — or between $91 and
$92 million (% of $183,350,000 = $91,675,000).

We are able to check this estimate against the actual accounting
figures of the United Fruit Company's fleet. Since this company carried
59 percent of the North American stem imports in 1955, the theoretical
value of its fleet on this trade would be about $54.5 million. The com-
pany's entire fleet, at the end of 1955, had a book value of $52.7 mil-
lion, although some slight deduction should be made from this to cover
the 8 percent of its banana carriage for which the company's own
fleet serviced the European trade, and for a small proportion of fleet
investment in other than fruit-carrying vessels. However, the major
part of the discrepancy reflects the fact that the average age and
quality of vessels of the company's banana fleet in 1955 was some-
what poorer than the theoretical ideal. On a 50 percent depreciated
basis against actual cost, the value of its banana-carrying tonnage at
the end of 1955 comes to $54.2 million. Our overall estimate of some-
thing over $90 million as a realistic investment figure for ships
servicing the entire North American banana trade is thus verified.

Upon the basis of United Fruit operations, the average charge for
banana shipments between port of embarkation and discharge in
North American ports was 1.51^ per pound for weight of stems im-
ported. This charge is representative of the going commercial rate
charged by independent fleet operators performing a similar service.
Allowing for the fact that it was necessary to import 1.1764 pounds

48

stem weight for each pound of bananas reaching the consumer, this
amounts to 1.78^ per pound of actual fruit consumed. Applying this
to the total 1955 banana trade for North America (3.063 billion
pounds consumption basis x 1.78^), we get a total ocean carriage
charge of about $54.5 million on the year's trade.

It is obvious that if this were the only ship earnings, it would be
insufficient to pay fleet operating costs, depreciation, and return on a
$90 million investment. All of the banana ships in the North American
trade, including those of the United Fruit Company, carry return
cargo, generally at established Conference rates, to earn additional
revenue.

We now have our fruit alongside the dock in one of the North
American entry ports. The ship bringing them in has been notified in
advance of temperatures at the port. If they are very low, the tem-
perature of the stowage compartments aboard ship will have been
raised some 12 hours before arrival to protect the delicate fruit pulp
from undue chilling in the unloading process. It is ready for dis-
charge at a cost averaging 6.J$$ per consumption pound (4-62$ cost
in country of origin plus 1.78$ ocean freight.)3

IMPORTERS' HANDLING AND MARGIN

As A BANANA SHIP noses alongside the pier at,
say, Weehawken near the Jersey end of New York City's Lincoln
Tunnel or at New Orleans, a highly intricate mechanized procedure is
set in motion. By the time the lines have been made fast, the ship's
hatches have been removed. There are four hatches on each of the
larger reefers. A giant elevator crane wheels into position on the dock
opposite each hatch, its top reaching well over the side of the ship
and its arm thrusting across deck and deep into the ship's carrying
holds. The crane is really an endless belt conveyor to which are
affixed at regular, closely spaced intervals horizontal canvas pockets,
rubberized and padded, each of which can cradle even the largest
stems that weigh more than a hundred pounds each.

As the pocketed belts revolve, men of the longshore crew pick the
stems from their firmly stacked rows in the stowage compartments
and swing them onto the shoulder pad of another worker who walks
his stem over to the conveyor and places it on its side in one of the

8 On a stem-weight basis the equivalent charges would be 5.44$ per stem-weight
pound (3.93$ in country of origin plus 1.51$ ocean freight).

49

belt pockets, and then returns for another. This process goes on
simultaneously in several compartments at a time on each deck level,
so that a good proportion of the pockets on the conveyor serving
each hatch are filled as they move on their upward journey. The
conveyor carries the stems of green fruit up into the daylight, across
the ship's deck and down its side to the dock level. The chain of
pockets passes an electric "eye" which tallies accurately the number
of stems of fruit discharged.

The elevator crane conveyors automatically, and very gently, de-
posit the stems on horizontal conveyors which run in an intricate
pattern along the pier from shipside to railway sidetracks and truck-
loading ports. All stems ride on foam rubber cradles attached to the
horizontal conveyors. At convenient stations along each conveyor
line men are located whose job it is to grade and classify each stem
as it passes. The grader sings out his appraisal and an assistant marks
the call by pasting a small paper tab to the stem, its color designat-
ing the classification made. This color code varies from port to port.
On the New York-Weehawken piers of United, green signifies Heavy
Nines (stems having more than nine hands of well developed fruit) ;
red marks Light Nines ; white, eight-hand stems ; and pink, seven-hand
stems, the lightest that are normally imported to this market. Other
colors signify quality, appearance, or condition classifications. A
black label signifies that some of the fingers are beginning to turn
yellow and a gray label that the stem as a whole is too nearly ripe
to stand shipment. Such stems must be disposed of in the local market,
generally at a sacrifice price. A purple label means that the stem, be-
cause of faulty appearance, crushing or bruising of some fingers, or
stem breakage is rejected for sale? Such stems are pulled off the
conveyors at a given point, the salvagable fruit cut off and boxed for
donation to charitable institutions that make regular calls at the
banana piers to collect this perfectly wholesome but nonmerchant-
able fruit. A yellow label denotes that stems have been classified as
"Specials," or substandard for any of a variety of reasons such as
undersized stems or fingers, marred fruit, or other flaws that dictate
its downgrading, and a brown label indicates that the stem is not
to be sold but reserved for experimental ripening or other testing.

The job of accurately classifying stems of fruit as they whirl by
on the conveyor belt at the pace of a brisk walk calls for a high
degree of skill that is born of long experience. The reputation of the
importer depends upon his delivery to the jobber of the size and
type of fruit that the latter has ordered in a condition that meets
requirements. The importer's representatives, at a given port, have

50

advance notice of the size, source, and general composition by grade
and condition of each cargo, and its precise arrival schedule. This sales
force tries to dispose of the complete cargo through advance orders
from jobbers throughout its distribution area. Fruit arriving in Wee-
hawken may be sold in the New York metropolitan area or be con-
signed to New England, to Buffalo or Rochester in northern New
York State, or to Montreal. Shipments to New Orleans or Mobile fan
out through Louisiana and Texas and move northward to cover the
entire central area of the United States and Canada. Charleston,
Miami, and Tampa generally service the southeastern section of the
United States; Baltimore the Middle Atlantic States; Los Angeles
and San Francisco the Far West, Southwest, and Mountain States;
and Seattle the Northwestern States and Western Canadian provinces.
Fruit that has not been sold in advance may be consigned as "rollers"
to sub-distribution stations along the line, and the importers' sales
forces in these areas are alerted to see that customers are found be-
fore it arrives.

The horizontal conveyors carry the tagged fruit along the piers —
covered piers in northern ports where winter temperatures are low,
for the fruit must be protected from chilling even in the brief interval
of discharge and dispatch — to the freight cars and trucks assembled
to carry the product to points of predetermined destination.

As the fruit arrives opposite the car or truck to be loaded, workers
along the line pick off the stems bearing the appropriate colored
label — Heavy or Light Nines, Eights, or Sevens according to what
the jobber has ordered, carry it a few steps to the waiting railway
car or truck, and hoist it aboard, stepping on a tally indicator that
records each stem loaded. Stowage on railway cars or trucks follows
much the same pattern as stowage in the ship's holds, always with
punctilious care to assure firm packing, bracing, and tying to pre-
vent rubbing in carriage or crushing or bruising that would mar the
fruit. Each car carries about 300 stems, so that 250 to 275 railway
cars may be required to discharge a large reefer's cargo. The standard
railway refrigerator car — and there are now more than 100,000 of
them on North American service — has been carefully engineered to
serve banana haulage requirements. It is light-weight, refrigerated,
heavily insulated, mechanically ventilated, and carries charcoal or
portable alcohol heaters when outside temperatures are low. It is
equipped with inside thermometers to register in-transit temperatures,
and frequent inspection is made along the line with re-icing or re-
fueling of heaters provided at way points to assure that the proper
temperatures are maintained throughout each haul.

51

The large trailer trucks that are employed for the shorter hauls
are similarly equipped. Each truck has been weighed on a big plat-
form scale before loading and the process is repeated after loading
to record the weight of its banana stem cargo. In a remarkably few
hours, the fruit has passed from the custody of the importer to that
of the jobber who, except in the case of "rollers," takes over when it
is loaded on the internal transport vehicle.

There appear to be no published data covering importers' invest-
ments, operating costs, sales organization, and mark-ups, but from
the United Fruit records we can reconstruct a pattern that is reason-
ably representative of the North American market as a whole. Be-
hind the discharge operations that have been briefly described here,
there is an elaborate network of activities that the importer must
maintain. In the case of United Fruit, at least, this includes pro-
motion and advertising through newspapers, magazines, radio, and
television to keep the product continuously in the public conscious-
ness in order that it may hold its important place against competing
food items in the American diet. It includes sustained research effort
on the banana's nutritional qualities and on all phases of its handling,
with the view of progressive improvement of the condition and at-
tractiveness of the fruit made available to the ultimate consumer. To
this end, there is intensive cooperation with medical groups, dieti-
tians, institutional food purchasers, newspaper and magazine depart-
ments and publishers dealing in food and cookery advice and infor-
mation, as well as with the restaurant, confectioner, and ice cream
industries. The sales force, through a network of subdepots covering
all of United States and Canada, systematically keeps in touch with
jobbers throughout the country, and the inspection force similarly
covers the fruit in transit to assure correct handling by the carriers.

Since the operation of the major importers is not restricted to dis-
tribution alone, but involves also the growing of fruit in centers of
production, the purchase of additional fruit from independents, its
transport to points of embarkation, provision of ocean carriage, and
discharge and sale at ports of entry, it is extremely difficult to appor-
tion accurately the amount of importers' capital that is invested in
this phase of North American banana distribution. The problem is
accentuated by the fact that of the 160 North American importers, only
the United Fruit Company issues annual statements in sufficient par-
ticularity to furnish even an approximate breakdown of the detail of
its operations.

From United Fruit's generous access to its operations accounts,
we are able to derive a very complete picture of its integrated opera-

52

tions. From these, we find that of the $390 million of total assets at
the end of 1955, $300.7 million may properly be assigned to those
activities of the company directly related to the production, pur-
chase, distribution, and sale of the bananas it handles. Since a frac-
tion over 87 percent of its banana shipments in 1955 went to North
America, its total banana capital for the North American trade can be
estimated at about $262 million. If the other importers had a com-
parably heavy investment, the total could amount to as much as $440
million. But the next largest importer, Standard Fruit, reported total
assets of only $42 million. This is about 16 percent of the banana
assets attributed to United Fruit's integrated North American opera-
tions, although Standard imported almost 30 percent as many stems
to the North American market as did United. And the other importers
— supplying perhaps 23 percent of North American stem imports —
probably had proportionately less capital invested than Standard.
Altogether, the integrated investment of North American importers
in 1955 probably amounted to somewhere in the neighborhood of $335
million, including the estimated $90 million ship investment and per-
haps $12 to $13 million in importer-owned elevator cranes, conveyor
equipment, and other installations in the North American ports.

Again using United Fruit accounting, we can estimate the im-
porters' direct costs of handling and sales in North America at 0.57^
per pound of fruit imported on the stem basis and at about 0.67^
per pound of saleable fruit at retail level.

On top of these direct costs, there is the importer's margin, which
must cover the return on all phases of his investment in what we
have seen to be a highly integrated operation, as well as the major
item of taxes in the United States. We estimate this margin to have
amounted in 1955 to 1.41^ per pound on a stem basis, or 1.66^ per
consumption pound.

Since about 3.063 billion pounds of bananas were consumed in
North America in 1955, the total yield from a margin of a 1.66$
per pound comes to $50.85 million, which would amount to a 15 per-
cent return before U. S. income taxes on a $335 million investment.
At current corporate income tax rates, this amounts to from 8 to
10 percent as a final return.

THE JOBBERS

A VARIETY OF COSTS must be met by the jobber
after payment for the banana stem. These include inland transpor-

53

tation charges, losses from shrinkage in weight, costs for ripening
rooms, delivery to retailers, and so on. In 1955, North American
banana jobbers paid an average of 7.4®$ per pound for bananas on a
stem-weight basis, the equivalent of 8.73$ per pound of fruit avail-
able for sale to retailers.

Inland Transportation

Since the jobber generally takes title to the fruit when it is loaded
onto the railway refrigerator car at port of entry, he has to pay the
cost of inland transport by rail before the operations that are under
his direct control commence. We have estimated that perhaps 84
percent of the fruit coming into North American ports of entry is
forwarded to subdepots of distribution through rail shipments. The
remaining 16 percent is picked up directly by the trucks of those
jobbers serving zones sufficiently close to ports of entry to make rail
shipment to sub-distribution points unnecessary. The lowest trans-
portation cost for any jobber, then, may be estimated at about 0.35$
per pound (0.3$ per pound stem-weight basis) for average local pick-
up cost. This applies whether the pickup occurs at the ship or at sub-
depots on railway lines at interior points.

But the great bulk of the fruit moving from importer to jobber
moves by rail to subdepots from which the jobbers' trucks take de-
livery. The task of arriving at an exact average railway carriage cost
for all bananas moving by that medium is exceedingly complex. We
have made a computation for the U. S. and Canadian markets involv-
ing individual freight rates between normal shipping and distribution
centers and arrived at an average by weighting the quantities of ship-
ments over each. The mathematical computations are far too in-
tricate to warrant detailed presentation here, but the range of charges
in 1955 over the literally hundreds of routes may be defined as run-
ning between 0.6$ per pound (from Weehawken to nearby New
England points) to over 2.6$ per pound from Seattle to points in in-
terior Western Canada. On a weighted average basis, we have com-
puted 1955 transportation charges paid by the jobber, including his
local pickup charges, at 1.34$ per pound of bananas that he sells to
retailers.

Adding this 1.34$ to the 8.73$ per pound that the jobbers paid the
importers (the 7.42$ per stem-weight pound, plus 1.31$ for shrinkage
of weight that the jobber absorbs in cutting the fruit from the stems
and culling substandard or damaged hands and fingers), we arrive at
an average cost to the jobber of 10.07$ per pound of saleable fruit.

54

There is no clean-cut method for arriving at the capital value of
railway and truck facilities that service the North American banana
trade. However, we do have figures of railway revenue derived from
banana haulage which amount to 0.375 percent of total railway reve-
nue. Applying this ratio to the approximately $30 billion of total capi-
tal assets of the U. S. railroad system gives a figure of $112,500,000
that might reasonably be assigned as the value of railway assets de-
voted to banana haulage in the United States. If we add to this a
proportionate amount of the Canadian railroad investments, plus an
allowance for trucking facilities and something for the port facili-
ties that are generally owned by municipalities, we can estimate that
something like $135 million is invested in the internal carriage of
bananas in the North American market.

Jobbers9 Facilities, Procedures, and Markups

There are perhaps 1,800 banana jobbers in North America, of
which about 150 are in Canada. They represent the essential middle
link in the distribution chain between the importer and the retailer.
In their hands is the essential process of ripening. They also absorb
the major 15 percent shrinkage in weight, when the fruit is cut from
the stems, is finally cullecj,, and sold to retailers in a form suitable
for final sale to consumers. They provide delivery service to the local
retailers, often extend credit facilities, and carry the burden of main-
taining inventories to balance out fluctuations in the week-to-week
demands of the retailers.

Very few of the North American jobbers deal exclusively with one
importer. The jobber must know the quantity, size, condition, and
type of fruit that the retailers in his area want, and see that it is
furnished. They buy from whatever importer can fill this demand
at the most advantageous price. The first choice of the North Amer-
ican market is for the variety of banana known as the Gros Michel.
This type of banana has certain advantages over all others in size
and general shipping qualities^ The fingers hug the stem rather than
protrude, and thus suffer less from crushing and abrasion in transit,
and its thicker stems provide a lower incidence of breakage. Gros
Michels have a further advantage over other types in that they tend
to ripen in a more uniform fashion under normal handling. The
United Fruit Company imports nothing but Gros Mi'chel bananas in
its North American trade. Other types of bananas known as "vari-
eties," however, are imported to North America and are even more
prevalent in the European trade. These include Cavendish, Lacatan,

55

Bout Rond, and others. To insure uniform ripening of the fingers,
it is the general practice with the varieties to introduce ethylene gas
from portable containers into the ripening rooms in which the variety
fruit is hung. With Gros Michels, this is unnecessary unless the
supply-demand situation necessitates a shortening of the standard
ripening cycle.

In addition to specifying the variety of fruit wanted, the jobber
is interested in and keeps close track of the seasonal and cyclical
qualities of fruit from specific areas. Thus, he may find at a given
time that Santa Marta fruit from Colombia, Fortuna (United Fruit)
or Frico (Standard Fruit) from Honduras, Chiriqui or Colon from
Panama, Golfito from Costa Rica, or Pacific from Ecuador comes
closest in size and condition of fingers, weight of stems, and quality of
fruit to meeting his customers' demands. Or he may find it advan-
tageous, because of the price differential, to purchase Standard Fruit's
Golden Beauty — Cavendish or Bout Rond varieties — from Honduras.

To the housewife in North America, a banana is a banana. Not
one in a million knows the difference between a Gros Michel and a
Cavendish or Lacatan banana, nor are the differences in flavor or
nutritional qualities of any material importance. The general pref-
erence for the Gros Michel banana in the North American market
rests upon the size, appearance, and handling qualities that make it
easier to present this type of banana to the housewife in a way that
will make her pause at the banana display and make a purchase rather
than pass it by. From the firsthand testimony of many jobbers and
retailers, we can record that sales volume responds with extraordinary
sensitivity to attractiveness of the fruit displayed, and there is general
consensus that the Gros Michel meets this specification better than
any of its rivals. It is both easier for the jobber to handle and ripen,
and it has a generally longer life on the retailer's counter before
deterioration of appearance sets in to prejudice consumer accept-
ance.

The jobbers with whom we have talked are acutely conscious of
three factors as major determinants of the profitability of their opera-
tions. The first is quality and appearance of the fruit. There seems
to be general agreement that their volume of sales in North American
markets goes up when they can deliver to retailers bananas of attrac-
tive appearance, uniform ripeness, and with a holding life on retailers'
display shelves of from one to two days.

Second, they are keenly aware of the shrinkage factor. We have
used a 15 percent shrinkage incidence as an average, but the actual
jobbers' shrinkage varies widely on individual consignments (from

56

between 10 or 12 percent to 21 percent or even higher) depending upon
the number of bananas that he must discard as unsaleable in addition
to the inevitable 7 or 8 percent loss represented by the weight of the
central stem to which the hands are attached. Naturally, the jobbers'
profits are importantly influenced by the ratio of the weight of fruit
purchased on a stem basis, and the weight of merchantable fruit that
he can sell to the retailer. Again, the Gros Michel has advantage
over other varieties in this respect, but here there are wide divergencies
in the shrinkage factor between Gros Michel bananas originating in
the several producing areas, or even those from a given area at dif-
ferent seasons of the year.

Ecuadorean bananas, for example, because they are generally less
carefully handled than Central American fruit, consistently show a
high shrinkage incidence. Jobbers generally testify that the grime
acquired by Ecuadorean fruit under current practices of interior ship-
ment results in more scarring and abrasion in transit, which increases
the percentages that must be discarded. Also, it has a comparatively
high seasonal variation in quality because of the fact that much of
it is grown without irrigation in areas that afford too little moisture
from natural rainfall during three-quarters of the year. Hence, job-
bers generally pay from half to one cent less for Ecuadorean than
for Central American fruit, and a number state that they do not
handle it at all if they can obtain what they need from other sources.

The third factor — and it is significant that it was rated third rather
than first by the jobbers we consulted — is the question of price.
Obviously, the jobber will not pay a higher price to one importer than
to another for fruit that he judges to be of comparable quality, ap-
pearance, condition, and net saleable weight. In most, if not all,
North American areas, jobbers have access to fruit offered by more
than one of the importing companies. The testimony is singularly
unanimous, however, upon the point that an adequate supply of fruit
of the highest quality is more important in determining the level of
consumer demand upon which jobber volume ultimately depends than
minor fluctuations of a cent or two in the retail price level. Accord-
ingly, jobbers generally are swayed to a greater extent by their judg-
ments as to the comparative quality and shrinkage factors in the
fruit offered to them than by minor price concessions linked to what
they regard as compromises in these key factors.

The jobbers in North America vary widely in size and operating
procedure. There are numbers of small firms in this business, each
of which serves a limited group of retailer customers. At the other
extreme are large operators servicing some hundreds of retail stores

57

within a radius that may extend up to 150 miles. A few of these
large jobbers also sell to smaller regional wholesalers or subjobbers,
who in turn maintain delivery routes over a more limited area. Many
of the large jobbers, in addition to operating their storage and ripening
facilities, extend short-term credit to their customers. An increasing
number of the large-scale operators are owned by the large food-store
chains and supply only their affiliated outlets.

Between 15 and 20 percent of the banana jobbers in the United
States are banana specialists and handle no other produce. This group
embraces some of the oldest and largest firms in the business. Many
of them are family owned, and are now in the third generation of
such family management. More typically, the banana jobber also
handles other fresh fruits and vegetables — citrus fruits, apples, po-
tatoes, onions, and a variety of seasonal fresh fruits and vegetables.
But generally the special handling and ripening facilities required for
bananas and the fact that this is a year-round business make banana
merchandising the core of the operation to which other distribution
is an adjunct.

The Jobbers Plant

The heart of the jobber's establishment is the ripening room. At
the end of 1955, the 1,800 banana jobbers in the United States and
Canada were maintaining collectively over 8,000 ripening rooms or
on an average, about 4.5 to each jobber. Among them were many small
one-room establishments, with others ranging in size up to those main-
taining 10 ripening rooms in active operation. We can best visualize
the jobber's role through describing the facilities of a "typical" four-
room jobbing establishment, and following the operations through
which it serves the retailers in its orbit of distribution.

A plant with four ripening rooms would have cost about $200,000
to reproduce at the 1955 level of construction and equipment costs.
The great bulk of this represents the cost of housing and equipping
the ripening room facilities, with a small amount added for the pro-
vision of trucks and office space and other facilities necessary to the
operation.

In a modern plant, there are provisions for the indoor discharge of
trucks bringing in the stems of fruit and for the loading of the fruit
to be delivered to retailers after it has been properly ripened, severed
from the stems, and packed in box containers that now are pretty
generally standardized at a capacity of 40 pounds. The stems may be
discharged from the incoming trucks and carried to the ripening rooms

58

on a belt conveyor system of the general type described in connection
with the movement of fruit from shipside to railway cars or trucks.
More generally, the stems are lifted from the trucks, hung by a cord
loop to the hooks of an overhead monorail conveyor, or of wheeled
pipe-rack trucks that may be pushed by hand from the truck ports
to the ripening rooms. In all cases, there is a premium on moving the
received green stems into the ripening rooms with a minimum of
lost time.

The ripening room itself is a well-insulated refrigeration chamber
in which from 250 to over 500 stems, weighing 24,000 to 40,000 pounds,
may be hung under rigorously controlled conditions of temperature
and humidity. Glass panels, thermometers, and humidity gauges
allow accurate readings of conditions inside the chamber and frequent
inspection of the fruit without the disturbance of intermittent opening
and closing of the doors.

Since there are inevitable differences in the size, pulp temperature,
moisture content, condition, and degree of fruit maturity in every
consignment, the job of ripening bananas efficiently requires a high
degree of judgment, skill, and experience. It would be quite unfeasible,
for example, to attempt to handle Gros Michel and "variety" bananas
in the same ripening chamber at the same time. Even with a given
type of banana, the jobber's task is made much easier if his chamber
can be loaded with fruit of a high degree of uniformity in all its char-
acteristics.

His job is to bring the fruit to the exact classification of ripeness
or "color" that will best satisfy the specifications of his retailers
when delivered at the time when it is wanted. There are eight color
specifications in common usage and, by varying the temperature-
humidity controls in his ripening chambers, the jobber can speed up
or hold back the normal five-day or six-day ripening process to pro-
duce the required color within from three to 10 days. When there is
need to accelerate ripening or to counteract the tendency of the
variety bananas toward "wild ripening" (the uneven ripening of the
hands or individual fingers on a given stem), the jobber commonly
introduces a charge of ethylene gas into the chamber as a corrective
measure. At the beginning of the ripening cycle, a relatively high
degree of temperature and humidity is normally employed. For the
first 24 hours, sprayers may be turned on to raise humidity to over
90 percent under 70° F. temperature, with a gradual reduction to 68°,
66°, and finally to 56° -50° on successive days.

When the green fruit has ripened to the required yellow color clas-
sification— lighter in summer when high outside temperatures will

59

shorten the permissible holding time on the retailers' shelves and
deeper in winter — the fruit is moved out of the ripening rooms by
conveyor or pipetrack truck to the cutting tables.

Here the hands are severed from the stems by cutters, and the
hands themselves are subdivided into units that each retailer to be
served finds most acceptable to fill his customers' needs. Usually,
the dealer requires an assortment of unit sizes, varying from three to
four banana fingers to six, eight, or even a dozen. The units are
carefully nested in the 40-pound boxes or cartons, with shredded paper,
or sometimes the polyethylene bags in which the stems have been
sheathed for protection in transport, as padding. The boxes may be
either one-trip cardboard containers that the retailer discards, or
returnable wooden or aluminum trays for which the retailer normally
pays a deposit refundable when returned to the jobber's truck drivers
at the time when he makes new deliveries.

These practices of fruit delivery are developments of the last 30
years. Formerly, all fruit was delivered to the retailer on the stem
which he hung in his store and from which his clerks cut hands or
portions of hands to the customer's requirements. Modern retail
merchandising methods have made this procedure prohibitively time-
consuming and expensive, and over 95 percent of all bananas are now
delivered to retailers in the manner described.

To an increasing degree, jobbers are prepackaging the fruit for the
retailer by banding each cluster unit with tape on which the retailer
may record weight and price for his customers' convenience and to
minimize the handling by clerks and customers that tends to mar the
delicate skins of ripened fruit. A further refinement is for the jobber
to pack each cluster in "cello-trays" — one or more standard sizes of
cardboard boxes with transparent cellophane tops through which the
fingers inside may be clearly seen without any touching of the fruit
after it leaves the jobber's establishment. This form of packaging
has many advantages, in addition to the protection it affords: The
package retains the fruit moisture and makes for attractive display.
The cartons generally have printed instructions telling the consumer
how to recognize the deep yellow shade with a speckling of small
brown dots that signifies the stage when the banana may be eaten
with maximum enjoyment and nutrition, as well as giving recipe
suggestions for its use in cooking, in salads, or with cereals. This,
together with other merchandising and advertising themes, reflects
the position of bananas as competitors for the consumer's favor not
only with other fresh fruits but with a considerable range of alternate
food products.

60

The Accountancy of Banana Jobbing

Allowing about 300 stems to the average-sized ripening room and
one week as the average ripening cycle, the 8,000 rooms operated by
North American jobbers have the theoretical capacity to turn over as
much as 125 million stems per year. Since North American con-
sumption in recent years has been averaging only slightly more than
50 million stems annually, it is clear that there is a considerable
margin of surplus capacity. But in this business, as in many others,
fluctuations in seasonal demand, the incidence of holidays, and other
factors call for peak capacities considerably larger than would be
necessary to service perfectly distributed requirements.

The current reproduction cost of North American jobbers' estab-
lishments may be estimated at around $400 million (8,000 rooms at
$50,000 per room). Upon the reasonable assumption that half of the
value of existing plants has been depreciated, it would be fair to esti-
mate the current book value of these facilities at about $200 million.

In addition to their investments in handling facilities, jobbers must
provide working capital to cover their inventory requirements, pay-
rolls, credit extended to retailers, and other current expenses. A
reasonable allowance for this would average $10,000 per jobber, an
$18 million total for the 1,800 North American jobbers. Thus we
arrive at an overall estimate of $218 million as the depreciated value
of capital invested in 1955 by jobbers to service the North American
banana trade. This is a very considerable sum (even if substantially
less than what it would have required to reproduce the same facilities
at 1955 construction and equipment costs) . It represents an average
investment of about $121,000 per jobber, although hundreds of the
smaller establishments had no more than $30,000 to $60,000 invested
in this business in 1955, while the investments of some of the larger
jobbers ranged up to half a million dollars.

A composite 1955 operations account per pound of fruit handled by
a jobber located in an area where inland freight charges happened to
approximate the North American average — in Central Texas, Oregon,
or Northern New England, for example — was about as shown in the
table which appears below.

The jobber's margin of 1.1 cents per pound would have yielded, in
1955, a total return before taxes of $33,693,000 on total sales of 3,063
billion pounds of fruit. On a total investment of $218 million, this
would have provided a gross return before income taxes of something
less than 15.5 percent, or about the same as that estimated for the
integrated operations of the importer group.

61

Cents per
pound

Purchase cost (green, stem basis) 7.42

Inland transport (including local pickup cost) 1.34

Shrinkage at 15 percent of pound cost on stem basis 1.31

Cost to jobber per pound of saleable fruit 10.07

Ripening room costs per pound of saleable fruit 92

Delivery costs per pound of saleable fruit 81

Total jobber costs per pound of saleable fruit 11.80

Jobbers' margin 1.10

Jobbers' selling price 12.90

OPERATION OF THE RETAILER

THE FINAL LINK in the marketing chain is the
vast array of retail stores which provide direct contact with the ulti-
mate consumer. We have seen that, in 1955, these stores paid an
average of 12.9 cents for each pound of bananas delivered to them
by the jobbers.

Food retailing in the United States and Canada is now dominated
by large unit stores. These are not necessarily units owned by large
chains. It is the costs and the resulting prices set by these large units
which determine the overall costs of retail distribution. As the pace-
setters, their operations are of primary interest. The concept of a
large food unit has come to be defined in current usage (and in
statistical analysis) as a unit having annual sales of $375,000 or more.
This is now the accepted definition of the term supermarket. Some
such large stores are owned and operated as a single unit by one
owner-operator. Many others are owned in small groups of two to
10 stores, all located in single communities or metropolitan areas.
They are thus not chain stores since that term carries the implication
of widely dispersed operations over broad regional areas. A currently
accepted, though arbitrary, definition by the U. S. Department of
Commerce is that these large stores are called "independent" if the
units under single ownership do not exceed 10 in number. Thus,
groups of one to 10 stores owned and managed by a single owner are
not chains. Groups of 11 or more, by this same arbitrary convention,
are to be called chains.

Fairly elaborate efforts are constantly being made in the United
States, both by private and governmental research agencies, to deter-
mine the shares of different types of stores in the total sales volume,

62

and the numbers of each type in operation. The results can be sum-
marized as follows:

1. Total U. S. food-store sales in 1955 have been estimated as $45.97
billion by the Department of Commerce. This total is exclusive of
food purchased by hotels, restaurants, the military establishment,
and a variety of institutions. Of this food-store total, specialty
stores (delicatessens, bakeries, small meat stores, general stores,
health food outlets, etc.) did $6.55 billion. The remaining $39.42
billion sales volume was in the hands of the true food stores. But
all food stores sell some nonfood items: drugs, household sup-
plies, books and stationery, clothing. Statistically, it is as yet
not known accurately what is the exact nonfood percentage.
Estimates of 4 percent to 5 percent of the dollar total are often
used. This would bring the total food-sale volume down from
$46 billion to about $44 billion. Including Canada, the North
American total would be about $48.5 billion. About 1 percent
of this represented banana sales, since a small part of the esti-
mated $527 million banana consumption in North America was
dispensed through restaurants and institutions rather than sold by
food stores.

2. From a study of food marketing in the United States, it appears
that supermarkets accounted for 59.7 percent, or nearly $24 bil-
lion, of the $39.4 billion total attributed to food stores proper in
1955. Their dominance in the field is thus clear. There were about
21,450 units of this size in operation, of which only 11,140 were
owned by chain stores, now defined as 11 or more units under one
ownership. A medium-sized group (coming to be known in market-
ing parlance as "superettes") , having sales of between $75,000 and
$375,000 per unit annually, account for another 26.4 percent of
the total. The remaining small stores having less than $75,000
annual volume, of which there are still 272,000 in operation in the
United States alone, did the residual 13.9 percent of 1955 volume,
again exclusive of the specialty store category.

The pace-setters in prices and operating methods are clearly the
supermarkets. Within this category, the leaders in North American
food retailing today are the independently owned supermarket units
owning only one store in some cases, and not over 10 at most; they
have forged ahead most rapidly in the past decade. It is the efficiency
of these local leaders and of some, though by no means all, the larger
chain managements which symbolizes the efficiency and operating skill
of U. S. and Canadian retailing.

63

Such stores sell packaged grocery items at the amazingly low mar-
gin of about 16^ out of each $1.00 of sales. This was unheard of in
1900 or 1910 — when grocery stores took a comfortable 25^ or 30^
for such easy-to-sell items. In the severe depression years, when the
supermarket method of retailing suddenly grew to maturity, this
margin fell as low as 10^ to 12^ on each sales dollar. The average
margin has crept up since 1940, but the operating performance of these
typically American units in the face of rising labor and real estate
costs is still spectacular.

But their performance in selling fresh fruits and vegetables is not
at comparably low margins. In the elaborate statistical testing that is
currently conducted by trade organizations or publications connected
with retail food merchandising, attention has been drawn to the dif-
ferences in performance, and reasons for them. Two clear-cut indi-
cators of the higher expense involved in handling fresh fruit and
vegetables show up in current analyses of operations. Careful account-
ing methods and analyses of their own operations are important hall-
marks of successful management in the leading stores.

First, retail selling of fresh fruits and vegetables requires more
floor space per sales dollar. In one cross-section sample survey, it
was shown that they required 17.4 percent of space in stores, while
contributing only 12.8 percent of sales volume. Secondly, they require
more man-hours of employees' time. In the same survey, fruit and
vegetable items contributed only $17.05 of sales per man-hour, while
grocery items contributed $34.12 per man-hour. Expert management
recognizes these handicaps by setting gross margins much higher on
produce items than on packaged groceries. Thus, the computed mar-
gins used to set prices show that grocery items were set at 15.68^ per
$1.00 of sales, and produce items at 26.38^. The produce category,
logically, has to contribute a margin 70 percent higher than that re-
quired for the staple grocery lines, a differential recognizing the higher
space and man-hour requirements involved. Another survey using a
somewhat different sample of stores (but again chosen from the more
efficient leaders) confirms these basic causes for the higher margins
required to handle produce. The third major category of food sales,
meat, falls between the two others, with an average established mar-
gin of 20.18^.

There has been in the past few years much less detailed analysis of
the margins set by leading stores on individual products within these
broad categories. But such studies as have been made indicate that,
in addition to the factors of space cost and employee time, the set-
ting of margins also reflects such factors as wastage and spoilage, the

64

necessity for daily re-handling of particular products (such as night-
and-morning removal of material off display counters and into con-
trolled-temperature storage space), and the necessity for additional
cleanup and sanitation efforts. Thus, indicated margins on some sea-
sonal fruits and vegetables run as high as 35ff to 38^ on each dollar
of sales. In other cases, rapid sales turnover, ease of handling, and
small bulk permit margins below 20^. From the scattered evidence
available, bananas fall into about the middle of the range in one
or two studies where as many as 40 items have been analyzed.

In one local study made in Seattle in 1948 for 40 stores, the margin
on bananas was found to average 21.6^ per dollar of sales. In another
study, made in January 1950, the banana margin was 23.1^. A lead-
ing publication in the food retailing field, in an advisory survey for
operators, has suggested that bananas along with a number of other
fruits and vegetables should be placed at a basic 25 percent margin
level. If consideration is taken of the fact that any actual data se-
cured for a single product are nearly always from the more efficient
stores, and do not take into account the wider margins applied by
small independents and by the specialty stores (such as delicatessens) ,
this margin of 25 percent for bananas probably reflects the North
American average of retail food store practice. Were it not for the
constant pressure from the efficient leader stores, however, the average
level would be much higher — perhaps 35 percent.

Since there is a factor of loss from waste and spoilage included in
the pricing of nearly all items in this category of fresh produce, no
separate allowance needs to be made for this factor. It is considered
by authorities to be in the range of 2 percent to 3 percent in the case
of bananas, but considerably higher in some other fruits and a few
vegetables. The actual margins used by stores include within them-
selves such necessary allowance for this source of higher cost.

It must be remembered that bananas are sold in a great majority
of the 350,000 or more retail food outlets of the country. An exact
computation of the actual margin would require a very large and ex-
pensive sampling survey, and one that would also reflect conditions
at several different times of the year. No such comprehensive survey
has ever been made. Fortunately, we have an entirely independent
check that verifies that the 25 percent margin is the one that actually
applied on 1955 banana sales at retail. The Bureau of Labor Statistics,
in connection with its consumers' price index, tabulates monthly the
actual retail sales prices of a wide variety of items that are considered
representative in the shopping lists of consumers, from centers care-

65

fully selected to give an accurate cross-section for the United States
as a whole. Bananas are among the items so sampled.

For 1955, the average price paid by U. S. consumers for bananas,
as shown by the Bureau's sampling, averaged 17^ per pound. When
allowance is made for the 8 percent of Canadian sales, estimated to
be almost 4^ per pound higher because of the higher freight rates for
the longer hauls involved, and for minor adjustments to cover sales
in areas not covered by the survey and direct sales to institutions,
we calculate an average sales price for North America in 1955 of 17.2^
for the two countries combined. Twenty-five percent of 17.2^ is 4.3^
which, subtracted from 17.2^, gives us the 12.9^ figure which we built
up in our separate and independent calculation as the average jobbers'
selling price to the North American retail trade.

Investment in food retailing stores is, of course, not specifically
allocable to any one item sold, such as bananas. But it is of interest
to place a valuation on what may be termed a "second-level" invest-
ment in the marketing chain for bananas. This is in contrast with the
direct, or "first-level" investment in plantations, refrigerated ships,
dock and handling facilities, and in jobbers' ripening and storage
plants.

As an overall average, food retailing requires capital of about 17.5^
for each $1.00 of sales. The ratio would be higher but for the fact
that the vast majority of food stores are located on leased land, and
almost as large a proportion use rented or leased buildings. Some
large chains have a higher investment-sales ratio; but many small
stores and individual units are below this figure. The land and build-
ings so leased are, in a vague sense, part of the necessary capital re-
quired— but this relationship is a tenuous one for our analysis. Much
of food retailers' investment is in working capital, that is, inventory
and cash on hand, plus some fixed investment in warehouses, trucks,
and store fixtures.

The ratio of 17.5^ investment per $1.00 of sales would indicate a
rough total of $8.5 billion as the directly identifiable investment asso-
ciated with retailing $48.5 billion in food. For bananas, which account
for about 1 percent of the sales volume, the roughly proportionate
sum of $85 million is the second-level share of that item in a some-
what uncertain total. We can note that the 4.3^ retail markup per
pound yielded all North American food retailers approximately $131
million in revenue, but we know of no accurate way of appraising the
particular cost of banana sales and the resulting net revenue. We can
say, however, that the supermarkets, the dominant class among food

66

retailers, in their overall operations realized about 12 percent to 13
percent of profits before taxes on their invested capital.

SUMMARY OF THE CONSUMER'S BANANA DOLLAR

FROM THESE COMPUTATIONS, then, we can offer
the following summary of how each dollar spent by consumers in the
United States and Canada was distributed among the several links
in the distribution chain through which it traveled on its long route
to the North American larder:

Share of Costs per pound

banana dollar consumption basis
North American consumer

expenditure $1.00a 17.20^

The retailers' costs and margin. . . .25 4.30

Jobber's selling price to retailer. . .75 12.90

The jobber's margin 06 1.10

The jobber's handling costs 10 1.73

Inland transportation (including

jobber's pickup) 08 1.34

Importers' selling price to jobber .51 8.73

Importers' margin 10 1.66

Importers' costs at point of sale .41 7.07

Importers' distribution and
sales expense 04 .67

Importers' landed cost 37 6.40

Ocean freight 10 1.78

Amount realized by producing
countries . .27 4.62

aln 1955, at an average North American retail price of 17.2tf per pound, $1.00
purchased a shade above 5.8 pounds of bananas.

In translating the costs and margins of each step in the distribu-
tion process into the equivalent share of the consumer's dollar, it is, of
course, possible to read the figures in the first column as percentage

67

e

. ,••

68

Chart VII

Of Each Dollar Spent for Bananas-

distribution costs in the U. S. are:

ocean
freight
is:

while the
producer
receives:

63*

10<

1

i

in \

n_B__________<J

For Foods (other than Meat) Grown
in the U. S.

costs for distribution are:

and the farmer receives:

shares that accrue to each link in the distribution chain — 27 percent
to the countries of origin, 24 percent for importers' costs of ocean car-
riage and subsequent distribution and the return on their complete in-
vestment of capital and effort, 24 percent for jobber's costs and mar-
gins, and 25 percent for retailers.

Two explanatory comments would seem to be in order.

First, in apportioning the share assignable to the importer's margin,
we have taken into consideration the realistic fact that close to 80
percent on a stem-count basis and over 80 percent on a weight basis
of all North American banana imports are handled by integrated op-
erators. Such operators produce a large portion of the fruit they handle,
provide extensive services to many of the independent producers from
whom they purchase fruit, operate extensive transportation systems
in the countries of procurement, and own and operate a large propor-
tion of the fleet of ocean carriers that bring it in. Hence, our importer's

69

margin in this accounting is related to the integrated operations of
North American importers, rather than exclusively to that part of
their operations that actually takes place in North America as such.
One of the main purposes of our exercise is to arrive at an accurate
estimate of the return realized by the countries of production. There-
fore, in our accounting here and in the next chapter, we have adopted
the procedure of accounting for all steps up to the importers' margin
at estimated actual cost. Accordingly, our listing of the importers'
margin of 10 percent includes estimated return on the complete inte-
grated operation of North American importers, deducting only income
taxes that the importer pays to the countries of production, but in-
cluding the income taxes that he pays in the United States and Canada.

Second, the 27 percent return from the consumer's dollar that our
accounting shows as accruing to the countries of production repre-
sents an accurate appraisal of what those countries actually re-
ceive and retain from their banana exports. If we add to it the 10
percent represented by cost of ocean transport, it will be seen that the
landed cost of bananas at 37 percent of retail value closely approxi-
mates the 37 percent or 38 percent share of the retail value of all food-
stuffs other than meat produced and consumed within the United
States that accrued to American farmers in 1955.

We have ended this chapter, then, by giving a final table that sum-
marizes the estimated capital investments in the North American
distributive system that have been presented piecemeal in earlier
pages.

We make no pretense of precise accuracy for the figures set forth in
Table 6. They are admittedly estimates, derived by methods that have
been explained in this chapter, but we believe that they represent rea-
sonable orders of magnitude for the North American banana trade as
a whole. As such, they serve to dramatize the formidably large North
American investment — more than three-quarters of a billion dollars
— that has been required to develop and sustain the market for bananas
in this area at something over an annual level of a half-billion dollars.

If foreign investment had not been forthcoming, there is no ground
for believing that the present North American trade in this com-
modity would have developed into anything larger than the trade in
other tropical fruits, none of which represents more than a trickle com-
pared to the flood of banana commerce. Since the United States pio-
neered in banana trade development, it is not even clear that without
this initiative the remaining 46 percent of the world banana trade
would have grown to anything like its present magnitude. If the mar-
ket had not thus been created, whatever benefit has been derived by

70

Chart VIII

North American Investment Supporting
Banana Supply is Estimated at ...

$773 million*

218

135

I! • invest'! in No. America

ty 35

ocean shipping

90

investment in
producing countries

210

retailing
facilities

jobbers'
facilities

North American
inland transport
facilities

importers'
\ total
r investment

$335 mill.

'Depreciated book value basis.

71

the countries that produce bananas would never have been realized.
The appraisal of just how much the producing countries have bene-
fited from their banana exports is the subject of the chapter that
follows.

Approximate Capital Investment
in Banana Distribution
Table 6 I United States and Canada

Book Value (Depreciated) Basis
(In U. S. dollars)

Cost element

First-level
investment

Second-level
investment

1 Ocean transportation facilities

$ 90 000 000

2. Distributor-owned port discharge facilities.
3 Other distributor investment

12,500,000
232 500 000 8

4 Inland transportation facilities . .

$135 000 000

5 Banana jobbers' investment

218 000 000

6 Food retailers' facilities

85 000 000

7. Total North American banana investment.

$553,000,000*

$220,000,000

We know that all but a small fraction of United Fruit's total banana invest-
ments, other than investment in shipping facilities, are located in the tropical
producing areas from which its imports are derived. It is reasonable to assume
that this applies equally in the case of other North American banana importers.
Therefore, something like 90 percent of Item 3 in Table 6, represents invest-
ment of North American importers in countries of origin rather than in the
United States or Canada. To arrive at a rough estimate of the total first-level
banana investment actually located in North America, one would have to
reduce the $553 million estimate in the first column under Item 7 by sub-
tracting 90 percent of Item 3, leaving about $344 million. However, since our
calculation of importers' margin covers the entire realization of North Amer-
ican investment wherever located, deducting only income taxes actually paid
in countries of origin, the estimates as presented in Table 6 are appropriate to
the accounting method employed for our consumer dollar breakdown.

72

Banana Production and Producers' Revenue

TP
JLHE MOVEMENT OF BANANAS over the oceans to North

American entry ports and from St. John, New York, Baltimore,
Charleston, Mobile, New Orleans, Los Angeles, San Francisco, and
Seattle to consumers throughout the United States and Canada has
been described. We broke down the average consumer's price of 17.2^ a
pound in 1955 among the several main steps in the distribution chain.
In doing so, we found that the f.o.b. value to countries of shipment
amounted to a little under 53 percent of the importer's selling price
of 8.73^ in North America, and to about 27 percent of the consumer's
banana dollar.

In general, Latin American bananas consigned to Europe were
worth about 1.35^ more per pound than North American shipments
upon an f.o.b. basis, largely because the European fruit must be cut
at a lighter, less mature stage in order to survive the longer sea voyage.
Yet the cost of growing and handling these light stems is virtually the
same as that of the heavier stems consigned to the North American
market. Thus we have estimated the average weight per stem of all
North American imports in 1955 at a trifle over 72 pounds against an
average weight per stem for European imports of 35 pounds.1 Much
of this weight disparity results from Europe's heavy dependence upon
supply areas where bananas are grown under conditions and agricul-
tural practices far inferior to those in Latin America. A better measure
of the distance-from-market factor upon weight is found in the record
of United Fruit Company shipments to the two markets. In 1955,
United's shipments from Latin American countries to North America
averaged 79.1 pounds per stem, while its European shipments from the
same area averaged 49.7 pounds per stem, or about 37 percent lighter.
Most, though not all, of this is attributable to the differences in the
maturity stage of the fruit cut for the respective markets.

THE PRODUCING COUNTRIES

PRODUCTION OPERATIONS will be examined on the
basis largely of our firsthand study of banana culture in the six coun-

Based on data given in Table 5, Chapter II.

73

tries — Guatemala, Honduras, Costa Rica, Panama, Colombia, and
Ecuador — which collectively produced about 60 percent of the 1955
banana tonnage that entered world trade, and about 92 percent of
North American imports.

A parenthetical statement about these six countries may be in
order. They have only two conspicuous common attributes that lend
themselves to safe generalization: All are Spanish-speaking countries,
at least in the sense that in each Spanish is the official language. All
grow bananas for export on low-lying, humid lands in the American
tropics that have been cleared of their tangled rain-forest cover, or
on swampland that has been drained and silted over for this purpose.
On almost every other count their differences are at least as striking
as their similarities. Their combined populations in 1955 totaled
something over 23 million, of which Colombia alone, with about 13
million, had well over half, Ecuador and Guatemala between 3 and 4
million each, Honduras about 1.7 million, and Costa Rica and Panama
less than 1 million each. Colombia has more than 60 percent of the
total land area of the six republics. Three of the six, Guatemala,
Honduras, and Costa Rica are Central American countries; two —
Colombia and Ecuador — are South American. Panama is ambiguously
perched between the two. It is Central American in location but since
historically it was once a part of Colombia, it regards itself as one of
the South American republics.

There are very wide divergences among the six in ethnic composi-
tion. In Ecuador and Guatemala the indigenous Indian cultures are
very dominant; in Costa Rica they have all but disappeared; while
in the others there have been varying degrees of admixture between the
Indian and white, Indian and Negro, and Negro-white inhabitants.
There are marked differences also in the degree of literacy, the relative
political stability, the cultural and economic patterns, and the levels
of economic accomplishments among these six republics. Although
the data for such comparisons are far from satisfactory, it is probable
that the levels of per capita income are almost twice as high in Panama,
Colombia, and Costa Rica as in Ecuador, Honduras, and Guatemala.
Colombia, with its much larger population and area has carried in-
dustrial development further than any of the others. In Panama, as
might be expected, the operation of the Canal has importantly in-
fluenced the national economic trends.

It is obvious that even with respect to the common economic interest
that all of the six countries share — the growing of bananas for export
— the impact of this endeavor upon their several economies varies
widely. There is a correspondingly wide divergence in the relative

74

importance of the United Fruit Company operations in the banana
production and export business of the six republics. Accordingly, de-
tailed analysis of these two factors must await the country-by-country
examination that will be set forth in chapters to follow. Table 7, how-
ever, will serve to dramatize both of these points. It will be seen from
this tabulation that while bananas accounted for 20 percent of the
total value of 1955 exports of the six countries, the incidence varied
widely among them. For Panama, bananas earned 74 percent of all
export revenue, for Ecuador 55 percent, Honduras 50 per cent, Costa
Rica 41 percent, Guatemala 18 percent, while for Colombia they ac-
counted for only 4 percent of export earnings.2

Far the six countries combined, coffee exports brought in more than
three times as much revenue as banana exports — $631 million against
$192 million from bananas. But the great magnitude of the discrepancy
was almost completely accounted for by the huge coffee export of
Colombia. The year's foreign exchange earnings from coffee were
considerably higher than banana earnings in Guatemala, and slightly
higher in Costa Rica as well, but bananas were more important than
coffee in each of the other three countries. Panama exported no coffee
at all. The combined banana exports of the five republics other than
Colombia exceeded their combined coffee exports by about 15 percent.

The United Fruit Company marketed 60 percent by value of all
bananas exported from the combined area, but again the incidence of
its importance was very different from country to country. Its ship-
ments accounted for virtually all of Costa Rica's banana export earn-
ings,3 93 percent of Panama's, 75 percent of Guatemala's, 69 percent
in the case of Honduras, 58 percent for Colombia, and only 19 percent
with respect to Ecuador's banana shipments. It should be noted that
Ecuador's shipments, even on a value basis, exceeded the combined
exports of its two closest rivals in the banana trade, and accounted for
about 33 percent of the total banana exports of the six countries.

One additional comment will add useful perspective on how the
pattern of United Fruit Company's banana operations varied from

alt is worthy of note that in Panama, largely because of revenues from the
Panama Canal, exports play a far less decisive role in the overall balance-of-
payments position than in the other five republics. In 1955, Panama's merchandise
exports accounted for only about 25 percent of its total foreign exchange earnings
upon current account, as compared with 85 percent for Costa Rica and more than
90 percent in each of the other four countries.

8 This situation may be expected to change substantially over the next few years.
Standard Fruit has just started to plant variety bananas, highly resistant to
Panama disease, on a large area in the Atlantic Zone where the United Fruit
Company formerly grew Gros Michels, but which it abandoned many years ago
because the soil had become infested with the fusaria of Panama disease.

75

1

S DO

*1 S

^f CO Q OJ (N 1
00 rj< ?5 CO <M 1

10

CO

11

§

rH CO TH C^ TH 1

1

*

>

r*» co ^o TH

1

II

%

Purchased

O W >O Oi rfl 1

t> rH t> rH CO 1

CO

o &

%
Produced

O OO ^O TH CO O

CO 00 (N 00 CO O

00

CO

•ll

% of total
banana
exports

GO O5 O5 'O O5 CO
VO O5 TH t>» cO O5

o

CO

1 'S p

§

CO CO ^^ CO ^* ^t^
Oi OO *O O5 *O TH

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3

TH CO TH TH rH C<1

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T— 1

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is 1 1

tt o • &

if! I

5 X 0 K
3 CO -4-s CJ
\

^ rH »O OO O ^f

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8

Cf3

I1". 2 1

£•< CS *^ g ^

5 g jg

. -O o5

^J^ CO C^l O5 ^O ^*
C<l CO CO rH C<l CM

0

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rH

1

|JJJ 1

« ^ o

§11111

1

3 1 1 -a S

1 1 %

!>• OO TH O lO CO

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1

2 ^ 3 0

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£ "3 & *

'cS <N _5

c S ^

.

PS J e C

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**^

•

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.2

3

eg

O

aOHK^HIHBe

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-a •* - ^ a j
1 -8 1 4 i §

r2 TO S <3 fl rl

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0 0 H O W ft

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03

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76

Chart IX

Importance of Bananas in Six Countries'
Total Exports in 1955

EXPORTS IN
MILLION DOLLARS

BANANAS AS A %
OF TOTAL EXPORTS

-70%

-60%

-50%

-40%

-30%

-20%

-10%

COLOMBIA COSTA RICA ECUADOR GUATEMALA HONDURAS PANAMA

77

Chart X

United Fruit's Share of Six Countries'
Banana Exports in 1955

OTHER

UNITED

FRUIT

SHARE

58%

99%

19%

Million Dollars

60

75%

69%

50

OTHER
UNITED FRUIT EXPORTERS

30

93%

20

— 10

COLOMBIA COSTA RICA ECUADOR GUATEMALA HONDURAS PANAMA

78

country to country. On an overall basis, the company grew 68 percent
of the stems that it shipped from the six countries. From Panama, it
shipped only fruit that was grown on its own plantations. In Costa
Rica, it grew 88 percent of the bananas it exported and procured the
other 12 percent from independent banana farmers. For Guatemala
and Honduras, respectively, the percentages were 81 and 66 percent
grown versus 19 percent and 34 percent purchased. But the pattern was
radically different in both Colombia and Ecuador. In the former,
United Fruit produced only 30 percent of its banana shipments. It
procured the rest from local independent growers, under contracts
calling for a variety of company-provided services including sigatoka
control and fertilizer supply. In the case of Ecuador, the company's
own plantations provided only 25 percent of its shipped fruit, and in
that country almost all of its purchased fruit was procured on the
open market, without any contractual relationships with the inde-
pendents who supplied it. The significance of these variations will be
discussed as we review the situation on a country-by-country basis.
But first we will follow the production and distribution procedures
step by step.

BANANA LANDS

THE FIRST STEP in banana production is the
acquisition of suitable land. Table 8 helps to give some perspective
on the relationship of banana lands to total areas and acreage planted
to all crops in the six republics as well as upon the weight of United
Fruit holdings and banana operations in the overall picture. A number
of observations may be drawn from this table.

The term "Banana Republic" has been rather widely and loosely
applied to at least all of the countries of the isthmus, but it is clear
that banana production is far from monopolizing a large percent-
age of even that portion of land devoted to crop production. For
the six republics collectively, banana culture represented only a trifle
over 3.5 percent of total crop acreage. The incidence is highest — 12
percent — in Ecuador, which has never been termed a "Banana Re-
public." It is next highest in Costa Rica where banana acreage
amounts to .about 7 percent of total crop acreage; in Panama the
incidence is on the order of 6 percent; and in Honduras about 4 percent.
In Guatemala and Colombia, banana culture takes less than 2 percent
of the land planted in crops.

This picture hardly conforms to the general concept conjured up
by the term "monoculture" — a label contrived by sociologists and

79

Table 8

Banana Acreage and Land Use
in Six Countries
with United Fruit's Share
(In thousands of acres)

Country

Six countries

United Fruit Company

Total
area

Total
crop-
lands

Total
banana
acreage

Total
acreage
owned

Total banana
acreage a

Other
crop
acreage

Acreage
owned

Mature
acreage
owned or
controlled

Guatemala. . . .
Honduras

27,000
28,000
13,000
18,000
256,000
72,000

3,683
1,815
875
650
7,200
2,344

40
70
60
42
112
284 b

461
325
497
151
100
192

21
34
35

27
7
9

28
28
39
23
20
7

31
91

72
41
10
10

Costa Rica. . . .
Panama

Colombia
Ecuador

Total

414,000

16,567

608

1,726

133

145

255

B United Fruit banana acreage owned includes acreage planted but not mature;
mature acreage owned or controlled shows company-owned producing acre-
age, plus acreage of independent growers under contract to sell to United Fruit.

b Acreage reported for 1954; 1955 acreage figures not available.

frequently attached to at least several of the countries that produce
bananas. The total agricultural acreage in the six republics — that is,
the cleared land devoted either to crop production or animal grazing —
is about seven times as large as their combined crop acreage, and at
least a large portion of this could be turned into crop production.
Furthermore all six republics have even larger areas of uncleared land
that could be put to agricultural use. These facts drive the point home
that whatever else may be said about them, bananas are not pre-
empting land that might be better employed.

An additional perspective is offered by the data set forth in Table
8. The United Fruit Company, in 1955, held ownership title to
1,726,000 acres (2,700 square miles) of land in the six republics, a
little less than a fourth of which was planted in productive crops. Its
banana planting of 133,000 acres, in turn, accounted for just over a
third of United Fruit's total crop acreage on its own lands. A brief
analysis of these company landholdings may throw some light upon
the highly controversial issue of whether or not United Fruit has

80

THE SETTING

• Latin American Republics

• Colombia • Costa Rica • Ecuador

• Guatemala • Honduras • Panama
which were the source in 1955 of 60%
of world banana exports and 92% of
North American banana imports.

The 17. S. Business

• United Fruit Company
which grew or bought

in these six republics 95% of
all its banana shipments in 1955.

THE VOLUME OF BANANAS
shipped in international trade ex-
ceeds that of any other fruit and
decisively dwarfs that of other
tropical fruits. This is despite the
fact that bananas are exception-
ally susceptible to diseases, blow-
downs, and floods, and to deterio-
ration or complete loss with any-
thing less than tender handling
under demanding harvesting,
shipping, and marketing sched-
ules.

UNITED FRUIT COMPANY, since its incorporation in 1899, has
played a leading role in most developments that have made this trade
feasible — from large-scale production through disease-control tech-
niques, land and ocean transport, and sales promotion. The company
handled 59% of U. S. and Canadian banana imports in 1955 and 10%
of Europe's, or 28% of the world total. In that same year, bananas
accounted for 4% of Colombia s total exports, 41% of Costa Rica's,
,55% of Ecuador s, 18% of Guatemala's, 50% of Honduras', and 74%
of Panamas. United Fruit's share of the total banana exports from
these six countries amounted to 60%.

1 'w£*£&eiStt

£*•*• «J~ ^±!P* «fc^SSlr

THE PLANTATIONS

Carved out of virgin jungle, the
company's banana divisions in all
six countries are on low-lying,
humid lands.

A VAST AMOUNT of manual labor as well as hydraulic engineering is needed, not
only for clearing tangled rain forests, but also for drainage canals, dykes, flood-
ways, and irrigation canals. In addition to banana land, acreage is needed foi
pasturage and other crops for sale and for food; lumber to supply construction
materials and railway ties; facilities and living space for the relatively self-con-
tained communities of 30,000 to 40,000 people who make up the average banana
division.

I

Typically, a 20,000-acre division is divided into over 20 banana farms,
each organized as a separate community and producing unit. A
checkerboard of roads, ditches, bridges, and large and small pipes
covers each farm, and all are interconnected— with each other and
the division centers— by roads, tramways or railways, and by power,
electric, and telephone lines.

THE TELEPHONE, telegraph, and ra-
dio stations are of crucial importance in
closely coordinating the banana busi-

DIVISION CENTERS, which link the
farms to the outside world, are made
up of the staff headquarters and com-
munity facilities; railway yards, equip-
ment depots, and machine shops; power
plants and communications stations;
and airstrips and terminals.

GROWING BANANAS

Even before the land is cleared,
the farm is staked and lined for
planting the banana rhizomes.

ENTIRE "HEADS" are sometimes
planted in each hole, but usually they
are split into "bits." As young plants
emerge, they have to be pruned and
surrounding lush growth cleaned out
until banana plants are able to provide
sufficient shade to inhibit such com-
petition.

IRRIGATION CANAL feeds the pump- Water is a "must" for both over-
house which in turn drives water fccflrf ^ undertree irrigation of
through a network of pipes to the
banana plants. banana plants.

•HMMMRl

k

«Bto^WSP»Pr'

THE YOUNG PLANTS, shown at top,
are served by undertree irrigation. Each
automatic revolving spray nozzle of
the overhead irrigation towers, seen
above, are watering mature plants for
a radius of over three acres. One plant
yields a stem (bunch) of fruit —
United's weigh anywhere from 75 to
over 100 pounds — about 10 to 12
months from planting.

When all goes well, each acre on

a well-managed plantation may

produce annually 300 or more

stems of the Gros Michel bananas

grown by United. But this seldom

happens. Because of the many

hazards to which bananas are subject, marketable yields, year in and

year out, are about 25% less.

PANAMA DISEASE has killed banana
plants in the dark area of this air view
(diagonal white line, running from
upper left to right, is a railroad, indicat-
ing scale). This fungus disease attacks
the rhizome and root system of the plant
and results finally in complete destruc-
tion. United Fruit has pioneered in
flood fallowing to control this major
blight — an expensive method, practical
only for large-scale operators since it
involves moving enormous amounts of
earth and pumping water, and requires
large reserves of lands for new banana
plantings.

ARTIFICIAL LAKES are part of the
flood-fallowing program. Chemical con-
tent of flood-fallowed lake is tested,
above, to determine whether infection
remains. If not, the lake may be
drained, and banana growing resumed.
Here a plowman cuts lines in flood-
fallowed land, indicating where banana
rhizomes are to be planted.

i.'>fcj V»

ill

SIGATOKA, an air-borne fungus, first
causes irregular ripening and cuts down
the size of fruit; eventually, it kills the
plants. For its control, United Fruit
plantations are equipped with central
mixing and pumping stations and an
elaborate gridwork of small pipes with
outlets at frequent intervals to allow
workers to spray Bordeaux mixture on
every banana plant at regular periods.

t

FLOODS AND BLOWDOWNS continue despite efforts to ameliorate their effects.
Systems of barrage dykes and floodways to carry waters around fields sometimes
cover about as great an area as the actual banana plantings. In some areas where
winds cause frequent blowdowns, the large-scale planting of trees for windbreaks
has been undertaken.

FARM TO RETAILER

Banana cutting has to be ar-
ranged on a precise schedule
timed to proper maturity, ship-
calls at loading ports, and move-
ment to shipside without delays
before cooling.

HARVESTING is a year-round operation, with each stem to be cut selected on the
basis of maturity appropriate to the distance from its port of consignment. The
cutter nicks the stalk just enough so that the bunch rests on the shoulder pad of
a waiting courier. He then severs the stem, and the carrier deposits it on a
padded cart for transport to the receiving station.

MODERN receiving stations usually are
equipped with overhead monorail con-
veyors on which the "strung" fruit is
hung and moved along to large washing
vats. After it dries, a clear plastic bag,
with holes to assure proper ventilation,
is slid over each bunch to prevent
scarring and damage.

Farm-to- port haulage of bananas varies greatly among producing
areas, but generally it is by rail, and many railways have been built
and are operated by banana companies.

SPLIT SHEATHS of banana plants are
used as protective padding in cars,
which are not refrigerated but are
slatted to provide maximum ventilation
for the perishable fruit.

LOADING AND HAULING to ports
proceeds day and night to preserve the
fruit and cut down the ship's time in
port. After locomotives pick up loaded
cars in the fields, their hauls usually
vary from 10 to 75 miles, although some
are longer.

THESE MODERN PRACTICES, de-
veloped to assure speed and tender
handling, are in marked contrast to
methods at the turn of the century when
the picture at left was taken.

AS UNITED'S SHIP noses up to the
pier, the first cars loaded with bananas
are already rolling into place parallel
to the ship's side. It takes some 160 cars
to load the average banana ship, and
the entire operation usually takes about
24 to 36 hours.

A GANTRY CRANE with a belt of rubberi/ed canvas pockets swings into place
opposite each hatch. Stems are carried from the cars on padded shoulders of dock-
workers to slings that carry the bananas over shipside and down into the holds.
There, other workers stack them precisely in refrigerator compartments. Tem-
peratures during the subsequent voyages — ranging anywhere from 1,800 to 7,500
nautical miles — must be maintained at 55° to 60° F.

At U. S. piers, unloading ma-
chinery moves into high gear.
Once off the ship, bananas are
carried on conveyors past stations
where they are tallied and
graded, on to points where faulty
stems are disposed of, and then
to refrigerated cars and trucks as-
sembled by jobbers to carry the
bananas to predetermined desti-
nations.

TENTS OVER HOLDS keep cold
winter air from damaging fruit during
unloading at Weehawken, New Jersey.

UNLOADING continues into the night
at a Mobile, Alabama, pier.

Jobbers, who usually take title to
their orders at port of entry, ripen
the bananas, cull those that are
damaged, and prepare them in
the forms which each retailer be-
lieves are most appealing to his
customers.

i

Chart XI

Bananas Occupy Only a Fraction
Of All Crop Lands

BANANA CROP LANDS AS TOTAL CROP LANOS

PERCENT OF TOTAL AS 100%

1%

w

GUATEMALA (3,683,000 Acres)

L4

TgSBes*.

% HONDURAS (1,815,000 Acres)

L_

7 % COSTA RICA (875,000 Acr6s)

l_

6 % PANAMA (650,000 Acres)

1 .5 % COLOMBIA (7,200,000 Acres)

1 2 % ECUADOR (2,344,000 Acres)

monopolized actual and potential banana land in this area to a degree
that chokes off the entry of competing producers. Incidentally, it
should illuminate some inherent characteristics of banana culture.

The Relative Size of UnitecTs Holdings

Certainly, the ownership of more than 1.7 million acres of land in
the six republics marks the United Fruit Company as a very large
land proprietor by any definition. Yet this vast holding, the great
bulk of which was purchased in the form of virgin tropical jungle
mostly in completely unopened areas devoid of linkage to settlement
centers, amounts to less than four-tenths of 1 percent of their com-
bined land areas. The company's 388,000 acres of land planted to crops
accounts for a fraction over 2 percent of all reported croplands in the
six republics. In every one of the six countries there still are incom-
parably larger tracts of virgin forest land as good as or better than
the United Fruit holdings for general agricultural purposes. Thus there
would seem to be little ground for the claim that the company's
landlordship, large though it is, has served as a barrier to agricultural

81

enterprise by others. On the contrary, around almost all of United's
divisions (and the same is true of the Standard Fruit Company's
Honduran holdings) we saw an extraordinarily large amount of local
agricultural and commercial development. This could not have taken
root in the absence of the basic port, rail, road, health, education, and
communication facilities that the company provided largely at its
own cost, or where community provision was made possible by the
tax payments from the company operations.

Company-Owned Acreage not in Cropland

Another matter that deserves review concerns the question of why
United Fruit should find it necessary to own over four times as much
land as it has actually put to use in its plantings of bananas or other
crops. Four major points are relevant here:

First, a large-scale banana operation in virgin territory requires
far more land than the acreage upon which bananas actually are
grown. In carving a banana division out of the wilderness, provision
has to be made to house workers, to cultivate food crops to feed them,
to provide them with schools, hospitals, churches, and recreational
facilities. A network of roads, tramways, and railroads must be estab-
lished to service the division and to link it with port facilities where
sidings, docks, and boat yards also must be established. Pasturage
must be provided for a large number of work animals, and for beef
and dairy cattle to furnish meat, milk, and butter to feed the workers
and their dependents. A very large water supply is needed for the di-
vision community and the requisite watershed has to be protected from
pollution. Large-scale lumbering operations must be inaugurated to
supply railway ties and construction materials. There must be room
for machine and railway shops, for pumping stations to supply irriga-
tion water and chemical sprays, for warehouses, commissaries, and
power stations. In short, the setting up of a banana division entails
the supply of everything needed for a relatively self-contained com-
munity of 30,000 to 40,000 people and for its linkage with the outside
world.

A second reason why a great deal of land is needed rests on the
fact that banana acreage, invariably located in low-lying river valley
lands, requires a vast amount of hydraulic engineering. In addition
to irrigation facilities, extensive drainage is almost always necessary.
In certain divisions, where much of the land is actually lower than
the rivers, a network of huge drainage canals must be dug from the
plantations to the ocean 10 to 20 miles away. Where seasonal river

82

flooding is a problem, and this is the rule rather than the exception,
it is often necessary to build a system of barrage dykes and floodways
to carry the flood waters around rather than through the cultivated
areas to protect them from destruction. In a number of cases, the area
of such floodways rivals the extent of the actual banana plantings. In
many areas where wind incidence results in frequent blowdowns, the
large-scale planting of trees for windbreaks has been found advisable.

A third factor is important in connection with land acquisition. In
each of the six banana-producing countries the large-scale cultiva-
tion of bananas involves unrelenting combat with a variety of diseases
and insect pests. One of the most serious, sigatoka or leaf spot disease,
is an air-borne fungus (Cercospora musae), which developed as a
formidable blight in the Far East in the early 1900's, and spread to
Latin America in the 1930's. This highly contagious disease destroys
banana leaves, which in turn drastically cuts down the size of produced
fruit, causes irregular ripening that makes the bananas unsuitable for
shipping, and eventually kills off the producing plants. Sigatoka affects
all of the variety bananas as well as the Gros Michel, and throughout
our six countries systematic control measures now are virtually
requisite for successful commercial production. Until very recently,
Ecuador was thought to be virtually immune to serious sigatoka infec-
tion, but in the last few years this disease has wrought havoc to
bananas in Esmeraldas and the upper Guayas River basin and seems
to be spreading southward.

Fortunately, sigatoka can be kept under control by regular applica-
tions of copper compounds. To this end, the United Fruit Company
plantations are now generally equipped with permanent pipe installa-
tions through which Bordeaux mixture, prepared in mixing and
pumping stations placed throughout its banana cultivations, can be
sprayed in water suspension on the plants at regular cycle intervals.
Installations for spraying are elaborate and far too expensive for
small operators. Only recently, however, successful experiments with
a new method of sigatoka control, introduced by missions of the U. S.
International Cooperation Administration, have been undertaken in
Ecuador; and the new method is beginning to be used in Jamaica, Pan-
ama, Guatemala, and Honduras as well. The experiments will be con-
ducted in Colombia early in 1958. Portable equipment is used for apply-
ing agricultural oil in the form of a fine mist, either alone or with cop-
per compounds or zinc dithiocarbamate suspended, as a way of con-
trolling sigatoka at less cost for installations and for chemicals. One
method, first initiated in Guadalupe by the French, used knapsack

83

sprayers carried on workers' backs, but more recent experiments indi-
cate that helicopter and airplane application will prove more efficient.
While results to date are promising, only time will tell whether or not
the new methods will make obsolete the permanent installations for
Bordeaux spraying.

Panama disease, the second major banana blight, is one that has
far greater implications to the question of how much land in addition
to current plantings a major banana producer needs. It, also, is a
fungus disease caused by a fusarium (Fusarium osysporium f. cubense)
that invades the soil and multiplies and spreads at varying rates of
speed depending upon soil composition and other factors that, as yet,
are imperfectly understood. Panama disease does not spread with the
speed of sigatoka, that can wipe out a whole plantation in short order,
but it acts more persistently and gradually until it entirely destroys
a plantation's usefulness for growing bananas. It has made no inroads
to date in the Santa Marta region of northern Colombia, although
careful and very intensive research has not been able to determine
why this area should have an immunity that is unique in the Western
Hemisphere.

This fusarium attacks the rhizome and root system of the banana
plant, quickly affects the vascular system through which water and
nutrients are fed to the stalk, leaves, and fruit, and results in stunt-
ing, leaf withering, and finally in complete destruction. It has no effect
on crops, other than the banana, and the Lacatan, Cavendish, and Bout
Rond varieties of bananas have demonstrated a high degree of re-
sistance, while the Grps Michel is particularly susceptible. The ob-
vious genetic solution of crossing the resistant characteristics of the
Lacatan with the other more desirable qualities of the Gros Michel
has so far been unproductive. Since bananas are a virtually seedless
crop, and there is no wood structure to make grafting experiments
feasible, banana genetics are of an almost unique order of difficulty.

The United Fruit Company has pioneered in seeking a "control"
solution through what is known as "flood fallowing." This involves a
huge agricultural engineering project of surrounding every field in
infected areas with massive dykes, pumping water into the enclosures
and holding it at controlled levels for periods varying from four months
to a year. Early experiments with flood fallowing were very promis-
ing. The water in the man-made lakes seemed effectively to smother
the fusaria, and subsequent Gros Michel plantings flourished for as
long as seven or eight years before serious reinfection.

Unhappily, as this system has been applied over much wider areas,
the results have not been uniformly good. In some instances, the dis-

84

ease has reappeared in virulent form almost immediately, and the
span of effective immunity has varied widely even from field to con-
tiguous field in a given division. Obviously, the great expense of the
colossal earth-moving operations involved in flood fallowing could
not be justified unless the areas so treated could be relied upon to have
a productive span of at least five or six years. Even so, this control
measure would require larger areas than are actually devoted to banana
plantings at any one time, since the system would demand a rotation
under which perhaps a fifth or a fourth of a given plantation would
always be under water. There is the further consideration that flood
fallowing could never be universally applied, since it is applicable
only to areas that have adequate water supplies, sufficiently level
terrain, and a compact subsoil that will hold the water for the neces-
sary periods of time.

There are, to be sure, certain expedients other than flood fallowing
that may be adopted in certain areas to stretch out the productive
life of a plantation that is shrinking through the inexorable attrition
of soil infection by this dread fusarium. United Fruit and other large
operators have employed pump drainage and silting procedures to add
to the potential banana acreage swamplands and lands where the
soil has been classified as too thin or too barren to support banana
cultivation profitably. The procedure for pump drainage is to construct
great levees around large swamp areas, to drain the water into sumps
at the lowest level in the operation, and to lift it over the levees by
siphon pumps for discharge into drainage canals that will carry it to
points downstream on the river or out to the sea. Silting is accom-
plished through hydraulic engineering operations that divert silt-
loaded rivers at flood stage from their normal courses through over-
flow canals allowing their burden of alluvial soil to be deposited in
the form of a new topsoil blanket over adjacent low-lying areas.

Obviously, the adaptability of either procedure to a particular locale
depends upon whether or not the requisite physical conditions are
present. Like flood fallow, the expense of carrying out these two op-
erations, the heavy equipment requirement, and the fact that they
are rarely feasible at all unless they can be planned and carried out
over a very wide acreage limit their employment to large-scale opera-
tors only. To date, there is no practicable means through which an
owner of a small plantation can hope to continue banana cultivation
when his land is severely infected with Panama disease.

Panama disease has been the greatest single factor in dictating the
large-scale banana growers' policy of always maintaining larger hold-
ings of potential banana lands than are put to active use at any given

85

time. It is difficult to see how this can be avoided unless or until a way
is found to grow bananas of a type demanded by the dominant North
American market under conditions that provide an adequate protec-
tion from the ravages of this disease.

In the history of United Fruit operations, according to the com-
pany's own account, Panama disease has destroyed and compelled the
complete abandonment or suspension of banana-growing operations
in the following major divisions: "Almirante Division on the Carib-
bean Coast of Panama, Trujillo Division on the north coast of Hon-
duras, Limon Division on the east coast of Costa Rica, Quepos Divi-
sion on the west coast of Costa Rica, the East Coast Nicaraguan Di-
vision, the Suriname Division in Dutch Guiana, the British Honduras
Division, and practically all of the North Coast Guatemala Division.
In infected areas where the disease has spread more slowly, banana
farms are continually being destroyed and replaced by planting in
other areas." Over a 50-year period, the United Fruit Company alone
has been forced to discontinue banana cultivation on about 900,000
acres of land, with Panama disease as the chief reason for abandon-
ment or shifts to other crops.

The impact of the wholesale abandonment of divisions upon local
economies and the policies and practical procedures that might cushion
such impacts will be reserved for later discussion. The point to be
registered here is that until the problem of Panama disease can be
resolved, the production of at least Gros Michel bananas will entail
moving banana cultivation from acreage that becomes untenably in-
fected to adjacent reserves of virgin acreage sufficiently close to per-
mit use of the huge facilities that make up the apparatus of a modern
banana division. The alternative, under present conditions, is the far
more drastic and socially more costly procedure of operating a banana
division until it no longer can produce enough to warrant continuing
operations in bananas, and then to close it up.

There are a variety of other diseases and a host of insect and animal
enemies that must be constantly combatted by the banana producer
through unrelenting vigilance and expensive control measures. None
of these present threats is, as yet, comparably serious to either
sigatoka or Panama disease. One bacterial wilt disease, moko (Pseu-
domonas solanacearum) has recently caused considerable damage in
Costa Rica, Honduras, and Colombia, but its spread seemingly can be
controlled through rigorous disinfection of machetes as the pruners
move from plant to plant, and destruction of all root systems found
to be infected.

There is a final point relevant to the fact that United's landhold-

86

ings are so much larger than the acreage planted in bananas or other
crops. Of the 1.7 million acres of land owned by the United Fruit
Company in the six republics, it would be a fair estimate that only
about a fourth, or something like 450,000 acres, is at all suitable for
banana cultivation and not more than half of this can be classified as
land upon which it would be feasible to plant Gros Michels as distin-
guished from the varieties. This means that United is maintaining re-
serves of some 300,000 acres of potential banana land in addition to
its 133,000 acres now under banana cultivation, about half of which
could be used only by taking the drastic decision of going into variety
production. This does not appear to be an unreasonable margin against
the contingencies we have listed.

As to the remaining 1.3 million acres of its landholdings that are not
suitable for banana growing, two comments are in order: First, there
is a genuine requirement for control of acreage vastly larger than that
employed for banana plantings for the purposes that have been cited
above, but such requirements fall well below the extent of the com-
pany's present holdings.

Second, a large part of United's current holdings were acquired by
necessity rather than by design. In order to purchase the potential
acreage for growing bananas which it wanted, it was necessary in
numerous cases to purchase outright large parcels of land held by
private owners who were unwilling to sell only part of their properties.
Thus, the company acquired a very large amount of land for which
it had no foreseeable use, and which it would be glad to dispose of at
nominal price if there were any prospect of anyone's finding produc-
tive employment for it. This is evidenced by the fact that, since 1935,
the company has reduced its total of owned acreage by about one-third
(including considerable acreage of potential banana lands). A great
portion of the relinquished area was deeded to central or local govern-
ments without compensation. The hard fact is that there is very
limited demand for this nonbanana land, even after an area has been
opened through the establishment of a banana division, since it is
generally surrounded by countless acres of entirely comparable trop-
ical forests that are being put to no productive use.

The Extent of United Fruit Control of Banana Land

There remains the question of the degree of dominance exercised by
the United Fruit Company over producing or potential banana land
as such. In an antitrust suit complaint filed by the U. S. Department
of Justice against United (Civil Action No. 4560, filed July 2, 1954, as

87

amended January 12, 1956) the following is among the allegations
made: "With the exception of land in Ecuador, United owns, leases,
or otherwise controls 85% of the land in the American tropics suitable
for banana cultivation."4

If true, this would indicate a degree of dominance sufficient to effec-
tively choke off the entry of other producers on a scale that might
offer serious competition. Let us see what evidence on this is presented
by the figures given in Table 8, remembering that about 95 percent
of all United Fruit's banana shipments in 1955 originated in these six
countries, so that this is the area of its major impact. In the first place,
the tabulation shows that for the six countries combined, United Fruit's
owned acreage in bananas was about 22 percent of total reported
acreage planted in bananas, and United's producing acreage plus that
of independent growers producing under contract with United was
about 24 percent of the reported combined total.

But the Attorney General's complaint on this score specifically ex-
cepted Ecuador. If Ecuador is disregarded, the total banana acreage
of the other five countries is 324,000 acres, of which United's owned
acreage accounts for 124,000 acres or about 40 percent. Adding to this
acreage of its owned lands that of independent growers producing
under contract to United increases the total under company control to
138,000 acres or about 43 percent. This, of course, leaves out the ques-
tion of how much of the total acreage owned by United in these five
countries — a total of 1,534,000 acres — might be classifiable as potential
banana land. Again the 25 percent proportion cited above is believed
to be applicable. Combining both the actual and potential banana land
owned by United in the five countries, and adding in the 14,000 acres
upon which independents are growing bananas for United under con-
tract, we arrive at a figure of something under 400,000 acres.

Even upon the assumption that the only potential banana acreage
in the five republics not now under United control was the 186,000
acres actually in production by independents not under contract

*The attorneys for the government, in a pretrial conference, indicated that its
charges regarding land monopoly might not be pressed in this suit.

Early in February 1958, after this study had been completed and was in process
of being printed, this antitrust suit was settled through a "consent decree"
without judicial determination of the issues presented in the Department of
Justice charges. The terms of this decree, accepted by the Department of Justice
and approved by United Fruit Company stockholders on April 16, 1958, are set
forth in an Appendix note at the end of this report.

While the authors of this study believe that readers should be informed of this
agreement and its terms, none of the study's conclusions would have been altered
had the decree been entered into before the study was completed.

88

with United, that company's control would be much less than the 85
percent figure that has been given publicity. But such a comparison
is obviously spurious. In response to inquiries that we made on our visits
to these five countries, we compiled a listing by specific location and
acreage estimation of between 300,000 and 350,000 acres of land that
a survey had established as suitable for banana production, but which
presently was not being put to use. A study mission recently sent up
by the Inter-American Economic and Social Council has estimated
that potential acreage suitable for banana plantings but not now put
to that use amounts to about 1,600,000 acres in the five countries, with
another 580,000 in Mexico.

Much of this potential banana land would, of course, require the
same sort of basic facilities that United, Standard, and other large
producers had been compelled to install on their divisions. A small
fraction of this potential included lands on which bananas had for-
merly been grown and which had succumbed to Panama disease, so
that cultivation of variety bananas rather than Gros Michel would be
indicated. Nevertheless, we can state with assurance that United Fruit
owns or controls less than a quarter of the actual and potential banana
lands in these five countries where its activities are preponderantly
concentrated. If the comparison is made on the basis of the American
tropics other than Ecuador, as in the quoted allegation, it is difficult
to see on what reasoning the 85 percent estimate could have been
based. Brazil, alone, in which the United Fruit Company does not
operate, has a reported 385,000 acres of bananas in production, and
Mexico, also outside of United 's orbit, reports about 49,000 acres in
banana cultivations. These two countries alone have more acreage
presently in banana production than the total of United Fruit's poten-
tial banana acreage however generously estimated.

If Ecuador is included in the accounting (and it is difficult to see
why it should be excluded since it alone ships about 20 percent of the
bananas moving in world trade) the 85 percent claim becomes palpably
ridiculous. The United Fruit Company's position, on the objective
record, is sufficiently large to raise a host of problems for it and for
others in the banana trade. It clearly is one of our tasks to appraise
how well or how badly it has exercised the stewardship that is the
inevitable burden of those who attain great size. But when we come
to our summary of the evidence presented by the complete record,
the widely publicized charge that the company maintains a monopolis-
tic control over the major portion of the land areas on which bananas
could be produced for the North American market will be given no
weight. It is clearly refuted by the facts that have just been cited.

BANANA PRODUCTION

THE ESTABLISHMENT of a modern banana divi-
sion of, let us say, 20,000 producing acres is a truly monumental job.
Depending upon the amount of hydraulic engineering that is neces-
sary, it can easily cost from $20 million to $25 million in initial capital
investment, or from $1,000 to $1,250 per banana-producing acre. The
number of the world's food crops that have sufficiently high and valu-
able yields to warrant an investment on this scale can be counted
probably upon the fingers of one hand.

Typically, a division of 20,000 acres will be divided into 22 or 23
banana farms, each organized as a separate producing unit with its
own workers' and supervisors' housing, equipment complements, com-
missaries, schools, and dispensaries. Each farm will be crisscrossed
with an elaborate gridwork of small pipes with outlets at frequent
intervals to allow the sigatoka spray workers to reach every banana
plant in every field with the Bordeaux mixture pumped from numerous
central mixing and pumping stations appropriately spaced. There will
be a similar grid of larger pipe leading to irrigation towers that reach
high above the 15- or 20-foot altitude of mature banana plants, and
the automatically revolving spray nozzles of these towers throw out
great concentric arcs of artificial rain with a radius of over three acres
each to cover every inch of the cultivation.

A checkerboard of roads, ditches, and bridges covers each farm, and
all farms are interconnected with roads and narrow-gauge tramways
or railroads along which steam, diesel, or gasoline powered rolling
stock carries in materials, fertilizers, equipment, supplies, and work
force, and over which the harvested fruit moves out. All are intercon-
nected, too, by power, electric light, and telephone lines. The transport
and communications network binds the several farms to the division
center. The center itself is a complex of central offices, staff headquar-
ters, railway yards and shops, equipment depots and machine shops,
power plants, commissaries, houses, recreation buildings, baseball and
soccer fields, telephone and telegraph stations, schools, hospitals,
churches, airstrip and terminal, slaughterhouse and dairy. In short,
the farms are linked to a complete small city that is a division head-
quarters, which in turn maintains its linkages to the outside world.

Almost invariably, private farms, trading centers, and settlements
spring up immediately adjacent to the division headquarters, so that
the communication system set up by a banana company usually be-
comes to some extent a public service establishment. Its railways
carry general cargo and passengers, its airstrips are used by local air-

90

lines, its power stations light noncompany homes, its telegraph or
wireless facilities, its hospitals, and even its schools and commissaries
commence to serve a generalized community — a community that
sprouts, like the suckers from a banana rhizome, from the plantation
center that has won a foothold in the jungle.

Clearing and Planting

The first step toward establishing the farm units of a contemplated
division is the arduous job of clearing out the tangled mass of trees,
brush, and vines on the potential banana land, arid establishing the
needed drainage system. The former is generally a hand job with the
machete, and the latter a heavy machinery job for great drag lines.
Even before the heavier bodied trees are felled, the land is staked and
lined for planting. The banana rhizomes or pseudobulbs are carted in,
and planted in regular rows of a spacing that may vary from two or
three to five or six meters (a meter equals 1.0936 yards) between each
planting. Botanically, the banana is closely related to the lily, and
the banana rhizome is like a giant lily bulb. Sometimes entire "heads"
are planted in each hole, but more generally they are split into "bits"
weighing from five to 10 pounds each. Care is taken to assure that
each bit has one or preferably several buds or eyes from which the
sprouts emerge. After the carefully spaced planting has been made,
the heavier forest trees are felled. Some are hauled away, but many
are allowed to rot in the swiftly destructive moisture of the wet tropics.

As the young plants emerge from the root system or "mat" and
push up into the sunlight, excess suckers, and always the "heart"
growth, are pruned out so that the most vigorous sucker can develop
maximum strength, while from one to several more, appropriately
spaced, are allowed to come along to replace the major plant when
it is harvested 10 or 12 months later. By that time, the road and path
system of the farm has been established, and the disease control and
irrigation pipelines laid.

Meticulous cleaning at frequent intervals — more machete work — is
required to keep down the lush growth of brush, vine, and weed until
the bananas are tall enough and have a sufficiently developed leaf
system to furnish enough shade to inhibit such competition. Even then,
three or four cleanings each year are required to keep the jungle growth
from taking over once more.

After the plants have blossomed, some seven to nine months from
their planting, the stalk is required to support the ever-increasing
weight of the stem that begins to form. Gros Michel stems from the

91

area average about 79 pounds each when they reach the stage of
maturity suitable for North American shipment, but some will weigh
from 100 to 130 pounds. The leaf -structure stalk of the banana plant
is not well-adapted to carry this weight, particularly when subjected
to winds. It is standard procedure, therefore, to prop each stem with
one or two bamboo poles or sometimes with guy ropes or wires at-
tached to stakes driven into the ground.

In the case of the Gros Michel and the larger Lacatan varieties, the
aim is to produce about 300 or 320 mature plants per acre (750 to 800
per hectare) since experience has shown that more plants than this
produce lighter and otherwise inferior stems of fruit. Always, there will
be one or two additional suckers to each root system which, ideally,
should be ready to flower at about the time that the mature stem is
harvested. Thus banana harvesting on a given acreage goes on in a
continuous cycle when proper cleaning, pruning, fertilization (chiefly
nitrogenous) , sigatoka spraying, irrigation, and drainage are provided.

When all goes well, each banana acre of a well-managed plantation
may produce 300 or more stems of Gros Michel bananas per year, or
about 24,000 pounds of fruit on a stem-weight basis (20,400 pounds
consumption basis). In Honduras, the yields per acre of certain well-
cared plantings of Cavendish bananas, which may be planted in much
closer array than the larger Gros Michel plants, have at times pro-
duced as much as 40,000 pounds per acre. But seldom does all go well
on banana plantations. Floods, blowdowns, chill, disease, insect dam-
age, and rejects for deficient quality take a toll which, year in and
year out, cut down the potential marketable yields by an average of
something like 25 percent. Thus, on United Fruit Company planta-
tions, under the most advanced practice, the average yield per acre
amounts to about 18,000 pounds of shipped fruit, stem-weight basis
(15,300 pounds consumption basis). On most banana acreage in the
six countries, where farm management standards are far lower than
those of the United Fruit Company, the average yields p.er acre are
considerably less.

Disease and Pest Controls

We already have outlined the formidable problems presented by
the three most serious banana diseases, Panama, sigatoka, and moko,
and the elaborate means that have been devised to combat them. The
point that requires emphasis is that the widespread invasion of these
diseases in the banana-growing areas has revolutionized the charac-
ter of this agricultural enterprise. Before their incursion, the raising

92

of bananas was relatively cheap, required limited capital, and called
for no more specialized knowledge and discipline in agricultural prac-
tice than could be provided by the average small farmer.5

Even if substantial success follows from the current experimenta-
tion with portable spraying apparatus — some of which is of the knap-
sack variety that may be carried on a man's back — it is doubtful that
the vital matter of keeping under control a blight that can spread
across a whole community can be left safely to the initiative of a large
number of individual growers. The practice developed by such com-
panies as United and Standard of installing and operating sigatoka
control systems for independent growers with whom they maintain
purchase contracts is only one of a number of possible patterns through
which responsibly centralized supervision might be furnished. It seems
quite likely that mist spraying from helicopters or fixed-wing planes
will replace pipe-spray installations as the standard procedure.

Panama disease, even more than sigatoka, is likely to be a power-
ful influence toward centralization and large-scale operations. For, as
has been described, the known means for dealing with it entail very
large capital expenditures and advanced engineering practices. The
great importance of both speed and systematic care in handling and
transporting fruit shipments drives in the same direction. Floods and
blowdowns — which periodically wipe out a banana crop in an entire
area and damage properties to an extent that calls for major expendi-
tures before they can be rehabilitated — make it prohibitively danger-
ous for even very large producers to confine their operations to one
region or even one country.

The United Fruit Company alone is now budgeting over $1 million
per year for research, a very large portion of which is related directly
or indirectly to solving problems raised by the incidence of banana
diseases and insect blights. It maintains field laboratories at La Lima,
Honduras, at Goto in Costa Rica, and at Sevilla in Colombia manned
by scientists who give full time to this effort. It commissions basic
related research at such universities as Cornell, Purdue, and Wis-

5 When we discuss the current situation in Ecuador, we shall see how the
freedom from sigatoka and the low incidence in Panama infestation made it
possible for that country to build itself in a short span of less than 10 years
into the major banana-exporting country of the world, based largely upon the
production of small independent farmers numbering in the thousands. But we
shall see, too, how the spread of sigatoka is driving hundreds of these small
operators out of business, with the likelihood that Ecuadorian banana exports will
finally stabilize at a somewhat lower level, amd that production will be con-
solidated within a much more compact area on the better banana lands in closer
proximity to shipping ports, with a centralized rather than an individual super-
vision over the sigatoka control operations regardless of the unit size of the
banana farm proprietorships.

93

consin in the United States. Standard Fruit also maintains research
facilities with particular emphasis on variety bananas. In the absence
of such research, the world trade in bananas would long since have
withered away to a small fraction of its present size. No serious and
sustained research on banana culture has been provided under govern-
ment auspices except in Trinidad, and this has never been supported
on a scale even remotely comparable to that of the United Fruit re-
search program.

Harvesting

When a stem of bananas has matured to the stage appropriate to
the market for which it is destined, it must be harvested or it will be
lost. On every banana farm, harvesting is a year-round operation. The
consumption markets of the world have a limited degree of flexibility —
in the short run, at least, they are geared to accept about a given
quantity and no more, with seasonal variations depending upon the
availability of competing fruits. Furthermore, the reefer fleet equipped
for banana carriage has a limited capacity that cannot be quickly
expanded and the same is true of the specialized railroad and truck
facilities and the ripening room establishments in the great con-
suming markets. Additionally, at least in the North American trade,
which furnishes by far the largest market, it has been demonstrated
that moderate differentials in the price of bananas have a relatively
minor effect upon short-term demand.

Accordingly, the production, harvesting, and shipment of bananas
presents an intricately complex problem in logistics that is unique
among any food items that have a comparable importance in world
trade. Coffee, tea, cocoa, and grain products of course must be har-
vested when ripe, but unlike bananas these products may be, and
commonly are, stored for indefinite periods when the supply exceeds
export demands. Fresh meat products must be shipped promptly, but
there is considerable leeway for adjusting slaughtering schedules to
market demand. Even with fish and most vegetables and fruits there
is generally an alternative between shipment in fresh form or handling
through canning or other processing facilities. Dairy products may be
turned into butter or cheese that can be stored or turned into powdered
or canned milk. But the processing of bananas, to date, has not been de-
veloped on a volume basis sufficient to offer any consequential alterna-
tive to the requirement for moving bananas when they are ready to be
shipped as a fresh fruit item, and future developments along this line
are problematic at best.

94

Banana harvesting, therefore, has to be correlated with market
demand and geared to its transport facilities upon unusually close
tolerances. Any slippage is almost certain to result in virtually com-
plete loss. Dispositions in the local markets, as we have seen, are
both limited and where possible offer a return that is only a minor
fraction of their worth on the export market. Banana cutting has to be
arranged on a precise schedule timed to ship calls at loading ports
that may number two or three each week. The cutting must be sched-
uled so that bananas move rapidly from the farms to waiting railway
cars, or other transportation, which carry them without delays to ship-
side and stowage under refrigeration. This is another, and one of the
strongest factors, in dictating that the trade in this commodity must
be organized on a large unit basis if it is to survive at all.

The stems to be cut are carefully selected upon the basis of the
maturity classification appropriate to the length of voyage to the
port of consignment. The cutter wields a long-handled implement with
a chisel-like head with which he nicks the stalk immediately below
the bunch just enough to cause the crown with its leaves and fruit stem
to bend over gradually until the bunch rests on the shoulder pad of
a waiting carrier. The cutter then deftly severs the stem that attaches
the bunch to the stalk and the carrier deposits it on a padded cart,
traile^ or sometimes on the pack saddles of mules for carriage to
the "receiving station."

The receiving station is located on a railway siding or river bank
where it is convenient to prepare the fruit bunches for transport by
rail or barge to the port of shipment. On modern plantations, the
receiving stations are generally covered concrete platforms equipped
with overhead monorail conveyors on which the "strung" fruit (heavy
cord loops attached to the thin end of the stalk) may be hung, and
moved along to large washing vats. Washing is always desirable, and
requisite when sigatoka sprays have been used. The strung fruit is
dipped into a weak solution of sulfuric or muriatic acid, six or eight
immersions to each bunch to remove the sigatoka control chemicals
and to kill spiders or other insect hitchhikers. Afterwards it is rinsed
in clear water to wash away the acid in which it has been dipped.
Then it is carefully stacked on the butt end to dry before loading on
railway cars or barges. Again under modern practice, each fruit stem
is always bagged before shipment. A transparent bag made of poly-
ethylene, which has holes punched out at intervals to assure proper
ventilation, is slid over each bunch so as to prevent possible scarring
and damage which might result from the handling of the fruit incident
to shipment.

95

INLAND TRANSPORTATION AND LOADING ABOARD SHIP

THE HAULAGE OP FRUIT from producing farm to
embarkation port varies greatly from country to country and even
between producing areas within a given country. Generally, it is
hauled on railways, many of them built, equipped, and operated by
the large producing companies. In some cases, however, the railways
are regularly constituted public utilities, often owned by the govern-
ment. With the development of highway facilities there is an increas-
ing amount of road haulage by truck, and in some instances the farm
to shipside transport is handled by barges. In Ecuador, for example,
with its widely scattered pattern of banana production, much of the
fruit moves on crude balsa rafts down the Daule, Babahoyo, Balulu,
and Quay as rivers, sometimes all the way to Guayaquil and some-
times orily to the smaller river mouths where it is loaded on barges
for its continuing journey. The great bulk of Ecuadorian fruit moving
from the three major shipping ports of Guayaquil, Esmeraldas, and
Puerto Bolivar depends upon either raft, barge, and truck haulage,
or a combination of the three with some rail haulage added. This mul-
tiple handling under less than adequate control procedures has been
a major handicap to the condition of Ecuador's bananas upon arrival
in consuming markets.

Under the more general system of straight rail carriage that applies
in the other five countries, the procedure may be generalized as fol-
lows: The haulage between producing farm and port varies from per-
haps 10 to 75 miles. There are, however, certain longer hauls. Bananas
produced on the west coast of Guatemala, for example, move out
through Puerto Barrios on the Atlantic, a rail haul of more than 300
miles. Stowage in railway cars within the countries follows much the
same pattern as that prevailing in the United States. The cars, how-
ever, are not refrigerated and there is no need for heating. Generally,
they are of slatted construction to provide maximum ventilation, and
always before the stems are loaded, the floors and sides of the cars are
carefully padded with sheaths cut from the banana stalks and with
banana leaves to protect the fruit from bruising in transit. Many of
them are equipped with special springs to minimize jarring.

Since the average railway car in this service carries about 300 stems,
it takes some 160 cars to load a reefer of the 48,000 stem capacity,
which is about standard for the banana fleet. From the cutting of
the fruit to its final deposit in the holds, there must be meticulous or-
ganization and timing not only to reduce the period between cutting
and stowing in the ship's refrigeration chambers to a minimum, but

96

also to hold down the ship's time in port to avoid piling up demurrage
charges. Ordinarily, the entire loading operation in a port will be ac-
complished within the span of 24 to 36 hours and the internal trans-
port operation proceeds day and night to make such turnarounds
feasible.

At the better embarkation ports the facilities and procedures are
much like those described in Chapter III in connection with ship dis-
charge, except that they operate in reverse. As a ship docks, the first
cars loaded with fruit are already rolling into place on tracks parallel
to the ship's side. Hatches are opened, and a big gantry crane with its
endless belt of rubberized canvas pockets swings into place opposite
each hatch. Teams of dockworkers lift the stems from the cars, carry
them on padded shoulders over to the cranes and place each in one
of the slings that lift the stems over shipside, carry them across the
deck and down into the stowing holds. There stems are lifted off by
other workers who stack them in the refrigerator compartments in the
manner already described. As one string of cars is emptied a switch
engine shunts it away, and another set of loaded cars is pushed into
place. Inspectors note and tally every stem loaded, and those which
have been damaged in transit or are judged to be of substandard
grade or of the wrong maturity classification are discarded.

At ports like Guayaquil and Esmeraldas in Ecuador, where the
banana ships anchor offshore for lack of deep water at dockside, the
fruit is barged to shipside and carried through the side ports to the
reefer's holds. But the same inspection system is maintained, and many
of the reject bunches are thrown into the sea to be washed ashore.
We have seen cows on the Esmeraldas beaches that have never
seen a meadow, and whose sole fodder is the stems of green bananas
wafted unto their white sand pastures as if by miracle over the green-
blue waves.

THE BANANA DOLLAR IN THE PRODUCING COUNTRIES

THE ACCOUNTANCY OF OPERATIONS in the produc-
ing countries has been left until last. There is really no such thing as a
typical cost for any of the operations that we have described in gen-
eralized terms. The cost of producing a pound of bananas for ship-
ment obviously varies widely from area to area and even upon a given
division or farm from year to year.

Where sigatoka control has not been requisite, as in the El Oro
district of southwest Ecuador, the cost will be relatively cheap. There

97

are important cost differences, for example, between producing bananas
in the Santa Marta area of Colombia that is free of Panama disease
and Almirante in Panama. In the latter area a large-scale rehabilita-
tion program is in progress based on flood fallowing that entails
earth-moving operations of genuinely awesome scope on a terrain that
consists largely of semifluid mire. As this is being written in May
1957, we have just received word of a blowdown on the United Fruit
plantations in Honduras that has leveled 5 million stems, including
about 3 million stems with fruit sufficiently mature to have been in-
cluded in the company's estimated 1957 shipments of 8 million stems.
If the remaining 5 million stems are harvested and shipped, the cost
per pound of produced fruit will have to bear the additional charge
for all of the division's costs put into the lost stems together with the
costs of replanting.

There is the further question of the applicability of the United Fruit
Company's costs to those of other producers who operate without
comparable mechanization, and on lower wage scales; who provide far
less than large operators like United and Standard in the way of
housing, schools, hospitals, and community facilities in general; and
whose tax burdens are appreciably lighter. Counterbalancing this is
the fact that the yields per acre of the large plantations are generally
far above average.

Finally, it is obvious that internal transport charges will vary
greatly, depending upon the length and character of hauls from farm
to shipside, and how many shifts of cargo must be made in this process
from one type of carrier to another.

With all these qualifications, it seems worthwhile to present a table
of average costs for each step, compiled largely from the record of
the United Fruit Company's operations in the six countries for the
year 1955. At the least, it will give a good representative sample based
on accurate accounting of what is involved in the growing and shipping
of bananas in the countries of origin. And it can throw some light on
what up to now has been discussed and disputed at great length with-
out benefit of any data to tie it to reality.

A brief interpretation of Table 9 would seem to be in order. First,
as we pointed out in Chapter III, the 27 percent of the North American
consumers' dollar that accrues to the producing countries is about com-
parable to what the producers of food in the United States realize from
consumers' purchases of domestic produce when the 10 percent cost of
ocean shipment is added to the banana realization of the countries
of origin.

Second, in our accounting given in this table, we have taken pains

98

• The Breakdown of the Banana Dollar
for Six Countries
(Accounting for 1955)

Cents per
pound
stem basis a

Cents per
pound
consumption
basis*

Share of the
North Amer-
ican consum-
ers' banana
dollar
(U.S. $ or %)

1. Average farm cost per pound of
fruit produced and purchase cost
of fruit bought from others
a. Farm maintenance costs
b. Disease and insect controls
c. Harvesting costs

1.98
.97
.81
20

2.33
1.14
.95
24

.14

2. Inland transportation costs

.32

.38

.02

3. Handling costs: loading, unloading,
etc

88

1 03

06

4. Expenditures for property mainte-
nance and disaster repair

.45

.53

03

5. Income taxes paid to producing
countries.

28

33

02

6. Discrepancy for fruit in transit1* ..

.02

.02

.00

7. Total realization of producing
countries

3 93

4 62

27

B All figures in columns 1 and 2 are given in U. S. cents per pound. Since bananas
are sold on a stem-weight basis until they reach the jobber, column 1 gives
each item upon this basis. Consumers, however, purchase banana fingers by
the pound. Since there is an average shrinkage of 15 percent between the weight
of snipped stems and the weight of fruit purchased by banana consumers, we
have multiplied all figures in column 1 by 1.1764 to arrive at the column 2
figures that conform to the accounting used in Chapter III.

b The export and import figures never exactly balance. On the United Fruit
accounts for 1955 there was a slight excess of reported stems shipped over
stems received, which represents shipped fruit in transit at the year's end not
compensated by receipts at beginning of 1955 that were listed as 1954 ship-
ments.

to credit as return to countries of origin only that part of banana
export revenue that remained in the country excluding all dividend
payments abroad and additions to capital account, either from new
capital flows or reinvested earnings. On this accounting, the total
average cost of 3.93^ per pound (stem-weight basis) yielded the six
countries a direct revenue of $157 million for 4 billion pounds of
stems shipped. This compares with the total value of their banana
exports of $192 million as given in Table 7 at the beginning of this
chapter. The $35 million difference represents our calculation of the
share accruing to the accounts of both foreign and local investors

99

in banana operations within the six countries. It represents their gross
return on capital and effort devoted to banana growing, purchase, han-
dling, internal transport, and ship loading in the six countries.

We have not been able to obtain any accurate accounting on the
breakdown between foreign and domestic investment within the six
countries in the various phases of banana enterprise linked to export
trade. Hence, we do not have a firm basis for estimating how this
return of $35 million may have been divided between the two. There
is a way, however, of arriving at a rough order of magnitude.

From the export figures in Table 7, we can say that 1955 United
Fruit shipments from this area amounted to 60 percent of total exports
by value. On a depreciated book value basis, the company's invest-
ments directly attributable to banana operations in the six countries
were about $152 million. If the investment of other operators in the
area can be taken as proportionate to that of United, the total invest-
ment related to the production and carriage to shipside of export
bananas would be $253 million. There are two important considera-
tions that would call for substantial modification of this estimate, but
each operates as a counterbalance to the other.

Obviously, the company's investment on purchased fruit would be
considerably lighter than on fruit that it both produced and exported.
In 1955, almost a third of the fruit that it shipped was purchased from
independent producers. This factor would indicate that our estimate
of overall banana export investment for the area should be raised.
Against this is the consideration that United Fruit's investment in the
six countries is proportionately much higher than that of the average
domestic producer. Every phase of its procedure that has served as the
basis for our description of modern, large-scale banana operations is
capital-intensive. On this score, there would be ground for lowering
our overall estimate of $253 million. Accordingly, we are impelled
to adopt $253 million as our estimate in the absence of anything
better, with the frank admission that it is no more than a reasonable
appraisal of general magnitude.

To arrive at an estimate of the share of foreign investment in the
total, we can add to the figure of $152 million of United Fruit banana
capital perhaps $30 million to represent Standard Fruit's banana
capital commitment in this area6 and perhaps $6 million to cover the

8 Standard's 1955 balance sheet shows depreciated book value of tropical lands of
$1,265,348; cultivation, railroad, buildings, and equipment in tropics of $32,160,217;
and inventories, materials and supplies, advances, etc. (not broken down by
location) of $7,451,094. This is a total of over $40 million, the great bulk of
which may fairly be attributed to its banana operations within the area of our
consideration,

100

investment of several other large-scale foreign banana operations in
Ecuador. Foreign banana investment in the six countries, then, may be
calculated at $188 .million at least, or over 74 percent of estimated
total investment.

On this basis, about $26 million of the estimated gross profit would
be credited to foreign operations.7 and $9 million to locals. Since the
six producing countries get the $157 million of expenditure or cost
items as their share of the receipts from banana exports to which we
can add our estimate of $9 million profits accruing to locals, their
total take for 1955 from banana exports comes to $166 million. In
other words} the current income accruing to the producing countries
was 86 percent of the value of all bananas shipped — $166 million out
of $192 million without any allowance for reinvestment of earnings
on the part of the foreign-owned operators. This certainly is far from
an inconsiderable return, particularly when one takes into considera-
tion that the total amount of local capital committed to the enterprise
that produced it was probably $65 million (26 percent of $253 million) .

The $26 million profits accruing to foreign investors upon their
banana operations in the six countries amounted to just under 14 per-
cent of their total estimated capital commitment there, before income
tax charges levied upon them outside of this area. In turn, this does
not look like an exorbitant deduction when viewed either as a return
on $188 million of capital investment or as a subtraction from $192
million of gross foreign exchange earnings that certainly would never
have been realized without this foreign capital investment and the
entrepreneurship that went with it.

There is a third observation that seems worth making. If to some
the 27 percent share of the consumer dollar that was shown to be
the amount received by the producing countries seems unduly low,
it may be well to remember the elaborate distribution chain described
in Chapter III, through which bananas produced in Latin American
tropics find their way into the shopping bags of housewives from
Tampa to Sacramento, from Boston to Seattle, and from Halifax to
Vancouver.

Only 74 percent of the stems shipped from the six producing coun-
tries we have been analyzing went to this great North American
market. Therefore, only 74 percent of the estimated $65 million of

7 In our accounting procedure we included the income tax paid in the countries of
production as a cost item. Accordingly, the estimated profit returns given here
would be net for domestic producers, while foreign operators would still have
to pay income taxes due in the countries of their incorporation and often
in other countries where they carry out distribution functions.

101

local capital investment in these countries — say $48 million — can be
regarded as servicing this trade. This compares with our estimate of
$773 million of North American capital committed to all phases of
banana production and distribution from farm through retail store
facilities.

The 27^ going to countries of origin out of each dollar spent by
North American banana consumers is not small when it is realized
that investors in the producing countries have supplied only 6^ out of
each investment dollar required to establish and maintain the trade.
Their share of final receipts is four and one-half times as large as
their comparative capital contributions.

102

The United Fruit Company as an
Integrated Operation

As A FORERUNNER to detailed analysis of United Fruit's specific
operations, we have set forth a description of how the world banana
trade is organized, the volume of investment committed to it, the
amount of the annual return from the banana exports, and how this
return is divided between those responsible for the many steps in the
long production-distribution chain. In putting together a picture that
seems never before to have been assembled in other than very frag-
mentary terms, we have been forced to fill in numerous gaps in the
existing record by projecting from our firsthand study of the North
American market, of the United Fruit Company's accounts, and of
banana operations in our six Middle American countries.

Each of these sources of relatively complete and reliable informa-
tion covers a segment of the world banana trade sufficiently large to
assure that estimates of the whole based upon it will not be too wide
of the mark. Thus, the North American market provides a sample that
in 1955 represented 54 percent of world banana imports for that year.
The United Fruit Company handled about 59 percent of the banana
stems imported by North America1 and about 28 percent of all stems
reported as moving in world trade. And the six countries in which we
made detailed studies of production operations accounted for about 60
percent of the year's world banana exports.

Our accountancy for the overall world trade will be distorted to
the degree that the operations on which we could assemble reliable
data are not thoroughly representative of the remainder. Although
this qualification must be frankly stated, we are confident that the
generalized account does represent a substantially accurate picture
of the market as a whole. We believe that our samples are sufficiently
large and the cross-checks for consistency that we have been able to
make sufficiently numerous, both with respect to the data we ourselves
gathered and to other published official data, to offer this assurance.
At the very least, we can certify that our breakdowns accurately re-

1 If Canadian imports are segregated, the company's share of U. S. stem imports
was slightly lower — about 56 percent.

103

fleet the accountancy of that part of the world banana trade that is
served by the United Fruit Company.

In this chapter we shall examine in some detail the complete eco-
nomic record of that company. We have noted previously that its
operations are not entirely restricted either to the production and
distribution of bananas or, on the production end, to our six-country
study area.

THE DIVERSITY OF UNITED FRUIT OPERATIONS

ALTHOUGH BANANAS clearly represent its pre-
ponderantly most important activity, and are its essential reason for
being, United Fruit produces and sells other commodities as well.
Most notable among these are sugar from Cuba and Jamaica; cocoa
from Costa Rica, Ecuador, and Panama; and African palm oil from
Costa Rica, Honduras, Guatemala, Nicaragua, and Colombia. For
a management fee, it acts as agent for the U. S. government in the
growing and processing of abaca (Manila hemp) in Guatemala, and
formerly did so in Costa Rica, Honduras, and Panama. The abaca
installations in Costa Rica and Honduras are being maintained in
moth-balled condition. It has plantings of rubber, quinine, essential
oils, and a variety of tropical hard and soft woods. In addition to the
company's banana production and shipments from the six countries, of
which we already have taken account, it produces and ships relatively
small quantities from the Dominican Republic and from the British
Cameroons in West Africa.

The combined acreage of United Fruit's crop and pasture lands,
mainly devoted to the production of food for its 82,000 tropical em-
ployees and to the maintenance of its 49,000 cattle and 16,000 horses
and mules, is almost as great as its acreage planted in commercial
crops. It operates, as has been noted, an extensive system of railways
and tramways, and some 62 ships, under both American and foreign
flags, that are chiefly ancillary to its banana trade but that also
engage in other carriage. It owns and operates the Tropical Radio
Telegraph Company, founded in 1904 to service the company's own
line of communications for the exacting coordination of banana ship-
ments, but operating now as a regular public utility in the communica-
tion field. This radio network spreads between Boston, New York,
San Francisco, New Orleans, and Miami in the United States, through
Mexico, the West Indies, and all of Central America to Bogota, Quito,
Rio de Janeiro, Asuncion, Montevideo, and Buenos Aires in South

104

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America, and extends its coverage to all ships at sea on inter- American
routes. A wholly owned United Fruit subsidiary, the Fruit Dispatch
Company, operates as distributing agent for all United bananas sold
in the United States, and European and Canadian subsidiaries perform
similar functions with respect to those areas.

Table 10, taken from the company's 1955 annual report, gives a
reasonably complete impression of the production end of its activities
by showing its improved acreage and railways owned and operated
as of the end of that year, with breakdowns by land use and location.

All of these activities are controlled by the parent organization —
the United Fruit Company — which maintains its central offices at
80 Federal Street in Boston, Massachusetts, although the company
is incorporated under the statutes of the State of New Jersey. Under
federal law, the producing subsidiaries of United Fruit that operate
exclusively in Latin American countries qualify for the status of
Western Hemisphere Corporation. This means that the federal cor-
porate income tax rate on their profits from operations in Latin
American republics is set at 38 percent — 14 percentage points below
that which applies to U.S. corporations whose business activities are
essentially domestic or are concerned with foreign operations outside
the boundaries of the Western Hemisphere. Although there is some
variation in the pattern that applies from country to country, gen-
erally United Fruit pays an income tax of 30 percent, directly to the
Latin American countries in which its production operations are or-
ganized, upon all profits attributable to the business it conducts there.
Again, under U.S. law, these local income tax payments are deductible
from the corporate income tax that, in the absence of foreign pay-
ments, would be collected by the United States. The U.S. Treasury
Department exercises direct supervision over the apportionment of
revenues and profits between domestic and foreign transactions in
the company's total operations.

The involved corporate structure of the United Fruit Company
logically reflects the broad scope — territorially and functionally — of
what it does. Nevertheless, the manifest complexity of its organiza-
tional pattern, with numerous subsidiaries owned and controlled by
a parent company, makes it obligatory for us to present a clear
accounting on the totality of its operations. It is necessary to examine
the consolidated accounts of the company to show whether or not our
accounting of its banana operations and the rate of profits indicated
in our breakdown of the banana dollar accurately reflect the profit-
ability of that segment of the company's total business. We need a

106

T . i n United Fruit Coroany and Subsidiaries a

Consolidated Balace Sheet as of Dec. 31, 1955

Assets

Current assets $ 98 ,493 ,249

Materials and supplies at average cost 25,049,522

Planters loans and other loans and recei voles 12,700,492

Insurance fund 5 ,979 ,024

Other assets 4 ,705 ,762

Fixed assets —
lands, cultivations, bldgs., r.r., etc., at ist:

Tropical $329,887,860

Domestic 20,563,985

Livestock 3,875,941

Steamships, at cost 99 ,399 ,455

453,727,241
Less accumulated depreciation 223 ,593 ,787 230 , 133 ,454

Deferred charges 13 ,072 ,806

Total assets $390,134,309

Liabilities

Current liabilities $ 36,401 ,791

Deferred income 3 ,275 ,775

Stockholders' equity capital stock $200 ,000 ,000

(9,000,000 authorized, 8,775,000 issued)

Earnings retained in business 150,456,743

Total stockholders 'equity 350,456,743

Total liabilities $390,134,309

Statement of Consolidated Earnings for the ear 1955

Operating profit before depreciation, prop-ty

losses, etc. (after eliminating inter-commy profits) $75 ,274,571

Deduct:

Depreciation $18 ,023 ,508

Property losses, net 451 ,467

Foreign exchange 49,211 18,524,186

56,750,385
Other income (interest, etc.) 1 ,368,981

58,119,366
Provision of U.S. and foreign income taxc 24,580,000

Net earnings for the year 1955 33 ,539 ,366

Dividends declared $3.00 per share 26,324,991

Amount accruing to surplus or capital stoc account $ 7,214,375

B We give here a simplified version of le balance sheet that appears in the
company's 1955 annual report, omitta; subheadings that are not relevant
to our inquiry. The published report, f course, can be readily obtained by
anyone interested.

1C

clear and complete picture of what United Fruit as an integrated
operation has invested and what it earns.

THE UNITED FRUIT COMPANY AS AN INVESTMENT

OUR ANALYSIS STARTS with the consolidated bal-
ance sheet and income account for the year 1955. It will be noted
from the simplified version given in Table 11 that the total assets of
the company were over $390 million and its fixed assets, less accumu-
lated depreciation, over $230 million. The original cost of the fixed
assets it held at the end of 1955 is shown to have been $454 million,
of which almost $334 million (including livestock) represented invest-
ment in the tropics, $99 million represented ships, and something
under $21 million were for facilities located in North America, the
United Kingdom, and Continental Europe. (If the 1955 asset account
included the tropical investments that had been disposed of and
written off prior to 1955, the total for this category would exceed
$550 million.) Thus almost three-fourths of the company's fixed
asset investments are committed to the tropical end of its operations.

The ownership of United Fruit is vested in 9 million shares of com-
mon stock without par value, of which 8,775,000 have been issued and
225,000 are held as treasury shares. The net worth of this holding at
the end of 1955 was something over $350 million, of which $150 million
represented surplus accumulated from past earnings that had not been
paid out as dividends. Thus, the 1955 value of each outstanding share
was carried on the books at about $40. Its market valuation, as
shown by the range of prices for which the stock has traded on the
New York Stock Exchange, has fluctuated between $42 and $74 be-
tween the beginning of 1946 and the end of 19552, with an average
price of $54.50 per share for the 10-year period against an average
book value of $34. Thus for the whole period, the market placed a
value on United Fruit shares at 60 percent over their book value.
The average annual earnings after taxes on each share of United
Fruit stock during this period was $5.38. This indicates that investors
generally were willing to pay 10 times the annual earnings rate for
a share of United Fruit stock.

To provide perspective upon how U.S. investors rated United Fruit
stock, it is necessary to compare this record with that of alternative
investments. One of the most widely used yardsticks is provided by

2 From Jan. 1956-Dec. 1957, the range was between $34 and $55 per share.

108

Standard and Poor's Index of 50 Industrial Stocks. On the market
value to book value measurement, United Fruit stock ranked a frac-
tion better than ^the^ average for the entire Standard and Poor's list
(a 1.6 to 1 ratio for United Fruit against a 1.5 to 1 ratio on the
Standard and Poor's index) ; but on the more important ratio of mar-
ket price to annual earnings its 10 to 1 ratio was almost exactly the
same as that of the 50 Standard and Poor's industrial stock average.

The ratio of market price to annual earnings, however, gives us
only part of the relevant story. It leaves out completely the enor-
mously Important factor of growth. At the end of 1955, the price
index for the 50 industrial stocks on the Standard and Poor's list
was about three and one-third times its level at the end of 1946. The
average annual earnings of these 50 companies had increased more
than three and one-half times over the same period. But the average
between high and low for United Fruit stock was $48 a share in 1946,
and had risen to $55.5 a share for 1955, an increase of only 16 per-
cent in value. Its earnings after taxes had actually declined from
$39.6 million or $4.51 per share in 1946 to $33.5 million or $3.82 per
share in 1955. Its peak earnings for the period of $7.53 per share,
realized in 1950, had been only 70 percent higher than the 1946 earn-
ings, and had fallen off drastically in subsequent years.

Clearly, the financial performance of the United Fruit Company
has been substandard compared to the general growth record of United
States corporations over the past 10 years. Its status has been essen-
tially static in a dynamically expanding economy. It is not surpris-
ing then to find that the range of prices upon which United Fruit stock
was traded on the New York Stock Exchange was from $33% to
$47% per share for the year 1957, or appreciably lower than the
average for 1946. Over the period of 11 years, its shares have yielded
no capital gains to those holding them for the entire term. What is
surprising is that despite the evidence of this comparative record, and
the fact that the stock market consistently has placed a lower value
on United Fruit stock than on the equities of growth corporations,
the impression that this company is enormously profitable still has
currency in Latin America and among many North Americans who
do not follow the market returns.

UNITED FRUIT COMPANY EARNINGS

EVEN WHEN YARDSTICKS ignore the growth factor
entirely, the United Fruit Company's earnings record is far from

109

spectacular. From the 1955 income account given above, it will be
seen that the company's earnings after taxes, on its total operations
including income from its funds invested outside of its own business,
were $33.5 million, a return of something under 10 percent on the
stockholders' equity in the business. The dividend disbursement of
$26.3 million represented a return of about 7.5 percent, with the $7
million difference actually committed to new capital investments
authorized during the year.

We can compare the 9.8 percent return after taxes on net worth earned
by the United Fruit Company in 1955, with a broad computation of
the earnings records of 3,485 leading corporations compiled and pub-
lished by the First National City Bank of New York.3 This shows,
in Table 12, the picture of net income after taxes related to net
assets4 or stockholders' equity for a thoroughly representative sample
of the larger U.S. corporations.

Table 12

Income after Taxes
Related to Net Assets
1955

No. of
companies

Industrial groups

Return after taxes
as % of net assets

1,843

Total manufacturing

14 9

63

Total mining and quarrying

13 0

204

Total trade

10 9

224

Total transportation

6 0

268

Total public utilities

9 7

116
767

Total amusements, services, etc
Total finance

12.3

7.6

3,485

Grand total

11.9

United Fruit Company (consolidated)

9.8

It will be seen from Table 12 that the less than 10 percent return
realized on the United Fruit Company's net assets in 1955 was con-
siderably lower than the almost 12 percent average for all of the
companies in the leading corporation sample, and far below the
almost 15 percent average of the 1,843 manufacturing corporations.

8 The First National City Bank's Monthly News Letter of April, 1957.
* Defined as the "excess of total balance sheet net assets over liabilities," which
is the base used in our United Fruit Company accounting, under the label of
"stockholders' equity."

110

Ill

In fact, if one goes back to the beginning of the United Fruit Com-
pany in 1899, one finds that its average annual net earnings on net
assets for the entire period have amounted to just under 13 percent.
This is 2 percent lower than the 1955 earnings shown by manufactur-
ing corporations in the above tabulation. We do not have a compar-
able general series that runs back that far, but we can compare the
United Fruit position with the National City Bank series for leading
corporations that has been carried back to 1928.

• Income after Taxes
Related to Net Assets
1928-55

Return after taxes
as % of net assets

Total manufacturing '
Total trade a . .

10.3
11.4

Grand total a. .

8.2

United Fruit Company (consolidated) .

11.1

a First National City Bank series for leading U.S. corporations.

This record covering 28 years of operations shows that United
Fruit's comparative earnings record over the longer-term period is
somewhat better than it was in 1955, but it clearly establishes that
record as close to the average for larger U.S. corporations engaged
in the production and/or sale of commodities. Its long-term earnings
record shows a return after taxes about three percentage points higher
than the average for the total list including transport, public utility,
and financial companies; less than 1 point higher than the average
for manufacturing companies; and slightly lower than the average
for companies engaged primarily in trade. In short, the long-term
earnings record of the United Fruit Company, measured against net
assets, is neither outstandingly better nor worse than the average for
representative U.S. corporations, most of which are engaged wholly
or largely in domestic operations far less hazardous than any enter-
prise concerned with foreign-based agricultural operations. United's
profit margin clearly is not one that has afforded a premium to com-

112

pensate for the fact that its production is of an unusually risky type
and dependent upon international trade outlets.5

Upon the basis of the earnings record, if that were to be taken as
the sole criterion, there would be little to support the U.S. govern-
ment contention in the antitrust suit now in progress that the United
Fruit Company has a monopoly on the banana trade. Its earnings
record bears no relationship to the commonly held conception that a
monopoly position is one that inevitably results in producing exorbi-
tant profits to those exercising such control. There is equally scant
ground for the frequent charges made abroad that United's profits
have been of a dimension that represents "exploitation" — in the de-
rogatory sense of that word — of the foreign countries in which it
operates, to the point of enriching its stockholders beyond what they
might have expected to receive from investment in a purely domestic
enterprise.

Preconceptions that run along either of these lines are simply not
supported by the earnings record. Investment in United Fruit Com-
pany stock at prevailing market prices has been moderately attractive,
and no better, when measured by the yardstick of assets-earnings
ratios in the U.S. market for corporate securities. It has been woe-
fully substandard when the factor of capital appreciation is added.
If United Fruit's earnings record were judged by the returns generally
regarded as attractive to local investors in Latin American business
enterprises, the record would mark the company as a singularly un-
rewarding venture. This may be one of the controlling reasons why
almost no Latin Americans have availed themselves of the open
opportunity to acquire a substantial ownership of the company
through purchase of its securities. There has been ample opportunity
for such acquisition since there has been a continuous turnover of
United Fruit shares through trading on the New York Stock Exchange.
It may explain also why more rival firms have not been established
through the investment of U.S. capital to challenge United Fruit's
position in this field.

Finally, the financial records of the company provide a decisive

5 It is not practicable to compare the growth in the value of United Fruit's net
worth with that of the companies listed in the First National City Bank's
tabulation, since the latter represents an expanding rather than a constant
company coverage over the years. But between 1946 and 1955, the book value
per share of United Fruit's stock increased by only 66 percent, while the average
value per share of Standard and Poor's 50 industrial corporations increased by 123
percent. There is evidence that the growth in stock values of the 1,200 to 1,800
leading manufacturing corporations covered by the First National City Bank
would outstrip that of United Fruit by a comparable margin.

113

answer to any speculation as to whether or not its books have been
kept in a fashion that tends to understate the profits of its banana
business through apportioning more than their due share to shipping
or other phases of its complex operational structure.

Table 15 shows the proportions of revenues and profits before taxes
of the major segments of the company's consolidated business over
the 16-year period, 1940-1955, as shown by its accounts:

• Breakdown of Gross Revenues
and Earnings Before Taxes
(Average for period 1940-55 inclusive)

Bananas

Sugar

Steamship
traffic, etc.

Other

Total

Gross revenue
Earnings before taxes

60.3%

82.1%

17.4%

7.3%

12.7%
5.3%

9.6%
5.3%

100%

100%

Over this 16-year period, it is shown that the company's receipts
from its banana sales provided only 60 percent of its gross revenues
while accounting for 82 percent of its profits before taxes. Very
clearly, it has been the banana phase of its business that has provided
the preponderant share of the company earnings. If the company's
system of accountancy had been designed to hold down the dimension
of its banana earnings by overloading the charges against bananas for
shipping or other services rendered, the ratio of earnings to gross
revenue on the other phases of the consolidated operations would be
higher than shown for bananas. In fact, they are drastically lower
in every case. In Chapters III and IV our estimates of the profits
on banana operations were based on the proportion of total capital
that could fairly be attributed to that phase of the company's overall
business.

WHO OWNS THE UNITED FRUIT COMPANY

To MANY PEOPLE in the countries in which the
United Fruit Company's production operations are located, the com-
pany appears to be a corporate entity of truly colossal size, unlimited
resources, and virtually untrammeled power. Much of the literature
that has been written about it in Latin America reflects this concept
of a business giant, serving the interests of a few North Americans

114

of enormous wealth, and fully capable of manipulating the foreign
policy of the United States in the furtherance of its interests.

From the perspective of North American eyes, its stature hardly
lives up to this billing. Its $390 million of total assets give it a rank-
ing among the more important U.S. corporations, but there were some
34 U.S. companies (excluding banks and insurance companies), each
of which had assets in excess of $1 billion at the end of 1955.
The first 10 of these had assets ranging from six to 37 times as large
as those of United Fruit. United Fruit's 1955 gross sales of approxi-
mately $288 million (excluding steamship traffic) were exceeded by
about 120 industrial corporations and by 24 merchandising firms. The
sales of Macy's Department Store and those of Gimbel's were both
larger than United Fruit's. The total sales of at least five of the
chain food-distributing companies that handle a large proportion of
North American banana distribution at retail level ranged from 140
percent to more than 1,400 percent of the gross revenue of United
Fruit, including its shipping receipts. In the U.S. business scene, the
United Fruit Company is just one among about 500 of the larger
corporations engaged in production enterprise, with a recent earnings
record considerably below the average for this group.

The 8,775,000 outstanding United Fruit shares were owned, as of
the middle of 1955, by 72,860 shareholder accounts. A considerable
number of these accounts — particularly the larger ones — were in trust
funds of various types, so that the number of individuals dependent
upon United Fruit dividends for part of their income would be con-
siderably larger. The 141 largest accounts represented holdings of
5,000 or more shares. The combined holdings of this group amounted
to 2,424,141 shares, a trifle over one-fourth of the total ownership
interest, with an average of 17,190 shares in each of these larger hold-
ings. Since a $3 dividend was paid on each share in 1954, 1955, and
1956, the annual income realized on each of these 141 largest share-
holder accounts averaged $51,570. But at the opposite end of the
scale, there were 72,092 United Fruit stockholders owning less than
1,000 shares each. The total holdings of this group comprised 59
percent of the outstanding shares, but the average holding of each
was only 71 shares, which yielded an annual income of $213 at the
prevailing dividend rate in 1954 through 1956. Between these two
extremes, there were 627 accounts with stockholdings amounting to
between 1,000 and 4,999 shares. The average ownership bloc held by
each member of this group was 1,933 shares and the annual dividend
checks of each averaged $5,799 from 1954 through 1956.

The actual pattern of United Fruit's ownership distribution has little

115

Chart XIII

Who Owns United Fruit?

PERCENT OF TOTAL
SHAREHOLDERS

02% SHARE LOTS

5,000
or more

1,000-
4,999

500-999

101-499

100 only

50-99

25-49

under 25

0.9%

1.5%

12.2%

12.2%

20.1%

21.2%

31.7%

PERCENT OF
TOTAL SHARES
OUTSTANDING

27.6%

116

relationship to the preconceptions that are very widely held. Of the 500
largest industrial corporations in the United States, only 29 had more
individual stockholder accounts than United Fruit, and the great major-
ity of these had assets many times as large. It undoubtedly will come as
a surprise to many Latin Americans that the number of North American
investors who have a stake in United Fruit prosperity so closely approxi-
mates the 77,810 Latin American employees who in 1955 were dependent
upon the company for wages and salaries. It may be even more of a
surprise to learn that the dividend return of its average shareholder
($360 in 1955 on 120 shares) has been running at a level well below
40 percent of the average annual wage paid to each of its tropical
employees ($942 in 1955). Finally, even the dividend returns of a
trifle over $50,000 per year that represents the average taking of the
141 largest shareholder accounts are not of a dimension that would
support many racing stables, steam yachts, or estates on the Riviera —
even if they all represented returns to individuals, which they do not.
However it is viewed through North American eyes, the United
Fruit Company's stature inevitably assumes gigantic dimension to
the people of the countries in which its main production operations
are conducted. For example, in Costa Rica, Panama, and Honduras
central government revenues for 1955 totaled about $47 million, $44
million, and $30 million, respectively. In such countries, there is
bound to be a perspective different from our own upon a company
that showed a consolidated statement listing $330 million of gross
revenue, $58 million of earnings before taxes, $33 million of profits
after taxes, and $26 million in dividend payments for that year. It
is understandable that they should tend to regard a company whose
total operations dwarf their own national budgets as a colossus of
almost unlimited power and resources. The evidence given above
shows that this company's stature, in the North American scene, is
of far more modest dimension. Both sides of the picture must be
held in focus if the performance of United Fruit Company is to be
appraised in balanced perspective.

UNITED FRUIT CONTRIBUTIONS
To HOST COUNTRY ECONOMICS

A DETAILED ACCOUNTING for a year's operations

of all of the United Fruit Company subsidiaries in the six countries
is given in Tables 15 and 16. For this purpose, we have taken an
average of the separate accounts shown on the company books for

117

1954 and 1955. This procedure was adopted because a reading of the

1955 account alone would be less than thoroughly representative, since
deferred dividends from 1954 were remitted along with those for 1955,
and there were also some advances on taxes that were paid in the
latter year.

From the left-hand column of Table 15 one can read the record of
subsidiary expenditures. These total $139 million, the sum that was
left in the producing countries by the company's operations there.
About $75 million out of this total — made up of wage payments, the
value of company-produced meat for its workers, and taxes, including
duties and consular fees paid to governments — represents direct pay-
ments of the sort generally credited as contributions to national
income accounts. Something over $27.6 million covers payments by
the subsidiaries to other local producers, including payments for
bananas purchased for export. This is not income produced by the
Fruit Company's subsidiaries, but it is local business generated by
their operations and paid for out of their sales receipts. Another $35.6
million represents goods and services purchased abroad. All but a
small fraction of this is for equipment, construction materials, chemi-
cals, fertilizers, and the like, brought in and added to the production
potential of the six countries. Something under 10 percent represents
imported merchandise made available to company employees through
commissary sales. All of this foreign expenditure is paid for out of
the subsidiaries' total receipts. The final entry of $801,000 is largely
for inventory increases — that is, goods purchased but not used in the
year's current operations.

From the right-hand column of the table, one can see how the
subsidiaries derived the funds to pay for these expenditures. The
annual receipts from exports, preponderantly bananas, amounted to
$122.5 million. Receipts from domestic sales of commissaries, for
radio, railroad haulage, etc., totaled over $27 million, with another
$635,000 earned in fees from abaca operations conducted for the
account of the U.S. government. In addition, the subsidiaries' capital
accounts were increased by about $6.6 million, representing additional
investment commitments of the parent company in this area. All of
this totals up to just under $157 million.

Dividends of $17.85 million were paid by these subsidiaries to the
United Fruit Company. This represents the total amount that was
withdrawn from the producing area out of the year's total trans-
actions, upon an accounting that treats the investment of new funds
as subsidiary income.

118

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Table 16

United Fruit Company Subsidiaries
Combined Operations in Six Countries
1954-55 Annual Average
(In thousand dollars)

Expenditures

Sources of funds

Balance

Current account
Capital account

122,176
16,842

Total receipts. 150,285
Net increase in
capital invest-
ment 6,583

+28,109
-10,259

Total ...

139,018

+ 156,868

+ 17,850

Less dividends remitted

-17,850

Table 16 sets forth the same account in a slightly different form.
The same totals are broken down to show how the annual trans-
actions divided between current and capital income and expenditures.
Current receipts were $150.3 million and current expenditures $122.2
million. The subsidiaries therefore showed an operating profit of $28.1
million. During the year, however, almost $17 million was spent upon
the never-ending task of maintaining and adding to the production
potential through land development and reclamation projects and in
equipment, utility, and building investments. Of this capital commit-
ment, $10.26 million was provided by reinvesting the difference be-
tween the current-account earnings and the dividends paid out; $6.6
million represented a new capital commitment.

A few general observations are in order. The dividend payments
of $17.85 million withdrawn from the local economies can be com-
pared with the $139 million that the United Fruit operations left
behind in the producing countries. The dividends paid amounted to
less than 12 percent of the subsidiaries' current account receipts, and
to only about 11 percent of the $162 million of the company's invest-
ment in the area, appraised at depreciated book values. They were
actually a shade less than the taxes and duties paid locally by the
company to governments in the six republics and totaled less than a
third of direct payroll disbursements there.

It would be difficult to contend that these returns are immoderate
by any standards. Leaving out the commitment of new investment
funds entirely, the 1954-55 record shows that about 92 percent
($139 million out of $150 million) of the subsidiaries' total sales
receipts went into the local economies. The company's return in pre-
vious years had been only moderately larger. Average dividends
withdrawn from the combined six-country operations over the five-
year period, 1951-55, averaged $22 million per year.

120

COMPARISON WITH OTHER U.S. DIRECT

INVESTMENTS IN LATIN AMERICA

A RECENT STUDY by the U.S. Department of
Commerce6 provides data that allow us to make some comparisons
between the impact of the United Fruit Company's operations upon
Latin American economies and that of other enterprises in which
U.S. investment has played an important role. This Department of
Commerce survey was prepared upon the basis of specific question-
naires that were filled out by some 300 parent companies operating
about 1,000 subsidiaries and branches in Latin American countries.
Its coverage is estimated at about 85 percent of all U.S. direct private
investment with interests in the area in 1955.

From Table 17 it will be seen that the performance of the United
Fruit Company compares very favorably with other U.S. enterprises
with direct investment in Latin America in terms of its impact upon
local economies. The book value of its subsidiaries operating in the
six countries of our study amounted to about 3 percent of the total
for all the others covered. Its share of total sales was of the same
relative magnitude and that of its export sales much larger. Its con-
tributions to the local economies in the form of total payments were
about average, with payroll payments high and tax payments some-
what low, due importantly to the relatively large weight of petroleum
enterprises in the overall sample.

When the comparison is made with other agricultural enterprises
in Latin America in which U.S. capital has a major interest United
Fruit Company performance is outstanding. While the book value of
its assets represented only 36 percent of that of other U.S. invest-
ments in this category, its total sales amounted to 54 percent, its
exports to 55 percent, and its total local payments to 41 percent. Its
wage payments were 65 percent of those made by all others in the
agricultural group, and its taxes paid to central and local governments
combined were 69 percent of the total, or almost twice its relative
share based upon volume of funds invested.

Although the figures are not included in the above tabulation, the
Department of Commerce estimates that the foreign exchange con-
tribution on the favorable side of Latin American balance of pay-
ments accounts totaled about $1 billion for the entire group sampled
in all industrial categories. The 1955 contribution of the United Fruit
Company on this score amounted to about $80 million, or 8 percent

* Survey of Current Business, January 1957.

121

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of the total. The normal annual transmittal of earnings by United
Fruit subsidiaries appears to be quite closely in line with that of the
average for all tJ.S." investments in Latin America when related to
comparative capital assets. But when measured as a percentage of
total exports, the $80 million of foreign exchange contributed by
United Fruit's 1955 operations amounted to almost 70 percent of its
total exports from the area, compared with a 50 percent ratio for U.S.
Latin American investments as a whole.

UNITED FRUIT CONTRIBUTIONS COMPARED WITH
LOCAL AGRICULTURAL ENTERPRISE

To LATIN AMERICANS it may seem more relevant
to compare their net gains from United Fruit Company operations
with those derived from agricultural projects carried out through
purely domestic enterprise and investment. This we shall attempt to
do in Chapter VI, upon a country-by-country basis, for each
of the six countries in which we made firsthand studies. In our
judgment, this procedure is far more realistic than any generalized
account of United Fruit impact upon the area as a whole since there
is so wide a diversity in the size and pattern of the several economies
and of the relative importance of the United Fruit Company opera-
tions among them. Furthermore, the general economic statistics for
the six countries are far from uniform in coverage and probable
degree of reliability. Nevertheless, a few overall comparisons on the
combined six-country picture may be offered with some confidence
that the general magnitudes at least are of the right order.

For the year 1955, and crediting to the United Fruit operations
only the value that actually accrued to the national economies in
question, it may be stated that:

• United Fruit utilized about one-fourth of 1 percent of all im-
proved agricultural lands including pasturage (2 percent of all
croplands) and accounted for about 6 percent of the area's com-
bined agricultural production. United Fruit's output per acre
was from five to 16 times the national averages for the several
countries.

• It employed about 1.2 percent of total agricultural employees.
Its production per worker varied from three to 10 times the
national averages in the several countries, and was about five
times that of the area as a whole. In all cases, its wage rates

123

were substantially higher than the reported averages for agri-
cultural employees.

United Fruit accounted for about 12 percent of the combined
foreign exchange revenues of the six countries from exports of
all types, varying from just under 2.5 percent in the case of
Colombia to about 72 percent in the case of Panama.

The taxes paid by United Fruit in 1955 to central governments
of the six republics amounted to only about one-fifth of 1 percent
of total revenues in the case of Colombia, but ranged up to 19
percent in the case of Costa Rica. If we exclude Colombia — in
which United Fruit operations were too small to be significant
and where the total government revenues are more than three
times as large as those of the other five republics combined —
United Fruit's taxes accounted for almost 6.5 percent of total
government revenues in the remainder. This tax contribution was
about twice as large as the proportionate size of United Fruit's
operations in their overall economies as measured by its "value-
added" contributions to gross national product.

THE STABILITY OF THE MARKET

A VOLUMINOUS LITERATURE documents the thesis
that nations heavily dependent upon the export of primary products,
either agricultural or extractive, are at a serious disadvantage. The
argument is that both the prices and volumes of primary products
moving in world trade are much more volatile than those of manu-
factured goods. Accordingly, nations heavily dependent upon foreign
exchange earnings derived from primary product exports are alleged
to be at a comparative disadvantage.

This thesis has gained sufficiently wide currency to cast something
of a cloud upon the whole process of producing primary food and
fibers, or extractive minerals of any type for export. The more mod-
erate reaction has taken the form of a widespread demand for the
establishment of a variety of international stabilization programs to
protect primary product exporters from the Instabilities to which
their position is held to be peculiarly vulnerable. The extreme posi-
tion has tended to write off primary product production for export as
a venture of dubious merit at best, with disadvantages of such obvious
severity as to discount whatever advantages such trade may bring.

Any definitive analysis of the validity of this thesis would require

124

far more detailed exposition than could be justified for inclusion here.
There is considerable evidence that on the long-term record of down-
turns in foreign exchange earnings (prices x volumes traded) derived
from primary product exports as a whole have not been more extreme
or frequent than in foreign exchange earnings derived from the export
of manufactures as a whole.7 The case for the relative volatility of
trade in primary products appears to have been based largely upon
studies comparing one segment of primary products trade — such as
foodstuffs alone, industrial raw materials alone, or even trade in
individual primary commodities — with trade in all manufactures.
This merely demonstrates the statistical fact that the more the items
included in a given time series, the smoother the curve. When one
compares the foreign exchange earnings from narrow categories of
manufactured products — such as cotton textiles, or iron and steel mill
products, or machinery and equipment — with those realized from
crude foodstuffs, or agricultural fibers, or metallic minerals or petro-
leum, the frequency and severity of yearly declines are no less striking
in the former than in the latter categories.

What does seem to be well established is that foreign trade tends
to be more volatile than domestic trade, and that the returns from
any single export item may be exceptionally erratic. It is a thor-
oughly sound principle, then, for any nation to make vigorous efforts
to broaden both the base of its exports and of production for its
domestic market to the extent that this is economically feasible. Since
efficient production requires both modern equipment and technology,
and since most economies in the early stages of industrialization have
no choice but to procure the more elaborate equipment from abroad,
foreign exchange earnings are a key element in the determination of
the speed with which industrialization in the broadest sense can go
forward.

Therefore, any activity that produces foreign exchange earnings for
countries in the early stages of development should be valued and
cultivated along with import-saving enterprises. Export activities
that yield a high level of foreign exchange with a minimum of declines
from year to year will, of course, be most valuable. But even widely
fluctuating exchange earners may be better than none at all, par-
ticularly if the high returns realized in windfall years are channeled
into the development of additional activities that will broaden the
area's economic base.

'See "Folklore and Fact about Underdeveloped Areas," by Stacy May, Foreign
Affairs, January 1955.

125

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How does the banana industry rate in terms of its consistency as a
producer of foreign exchange revenue for countries of production?
Unfortunately, a direct measurement of foreign exchange yields from
this activity cannot be made over an extended period. As we already
have noted, even the current reporting of export and import values
for bananas is grossly inaccurate. An attempt to work out from
official foreign trade figures a time series covering an extended period
would result merely in a compounding of errors.

We do have, however, an accurate record of yearly stem imports
to the North American market, and of the share of this handled by the
United Fruit Company. Upon the not unreasonable assumption that
the prices and stem weights of its competitors' imports maintained
a reasonably constant relationship to those of United Fruit over the
period, we are able to construct what we believe to be reliable indices
of banana prices and total sales for this market from 1940 through
1955. We shall start by giving consideration to the price index:

Table 18 shows the behavior of banana prices from 1940 through
1955, compared with a general price index for fruits produced in the
United States, and for five individual food items, three of domestic
origin and two imported. In each case, an adjoining column shows
the percent of price increase or decrease from the preceding year. The
following comments may be useful in interpreting these indices:

• Banana prices, over the 15-year period covered by most of the
series, have shown a general upward trend, with 1955 prices 171
percent higher than those prevailing in 1940. There were two
periods of three years each in which there were sustained rises of
considerable magnitude — from the early war years 1941-43 when
shipping shortages sharply curtailed banana imports, and from
1947-49, when there was a sharp rise in all U.S. prices following
the removal of wartime price controls. There were only two years
in the series in which banana prices fell significantly, a 6 percent
fall in 1944 followed by a further 7 percent fall in 1945. This
clearly was a readjustment reflecting the re-established trend to-
ward normal volume of banana shipments as the effects of the
submarine blockade were overcome. Even with the reduced
prices, the total value of banana imports increased sharply in
these two years.

• It is evident that banana prices in this market have conformed
closely to the general price trend of the combined index for fruits
produced domestically in the United States. The trend in banana

127

Chart XIV

U. S. Banana Prices Conform Closely to
Prices of U. S.-Grown Fruit, rather than
Following Prices of Coffee and
Cocoa Imports

COCOA-

DOMESTIC FRUITS I /

BANANAS

1940 100

-11200

1000

800

600

400

200

1940 '42 '44 '46 '48 '50 '52 '54 56

128

prices has been somewhat steadier than the general index, but
except for the late war years the conformity of the two series
suggests that banana prices here are importantly affected by the
competition of other fruits that are offered to the American public.

• Banana prices have followed the general long-term price trend
of peaches, though the banana trend has been somewhat more
regular. It has departed widely from the price trend for oranges,
but the latter has been importantly affected by a revolution in
marketing procedure. To an ever-increasing extent in recent
years, oranges have been marketed in the form of frozen and
refrigerated orange juice rather than as fresh fruit. Accordingly,
the average quality of oranges sold by growers has been con-
sistently downgraded, so that the product marketed by growers
has undergone a drastic change. If banana prices are compared
with farm prices paid in the United States for milk, a food prod-
uct not directly competitive but one that presents somewhat
similar handling problems, there is again a considerable similarity
in the general trend, at least through 1952.

• When the comparison is shifted to two other major import food
crops — coffee and cocoa — the picture is quite different. Prices for
both of these commodities skyrocketed on an almost unbroken
upward trend through 1954, by which year their indices had
risen to a level more than four times that attained by banana
prices. In 1955, there was a major break in the annual averages
of both coffee and cocoa prices, of a dimension much larger than
any shown in the banana price series. The price slump has con-
tinued in cocoa, and by the first half of 1957 cocoa prices were
off almost 60 percent from their 1954 level. Coffee prices mean-
while had firmed slightly after the 1955 break, but were still al-
most 25 percent below the 1954 average. The index of banana
prices at importer level rose by 2 percent in 1955 over 1954 levels,
and then declined by a moderate 4 percent for 1956 and by an
additional 2 percent for the first half of 1957.

Although the United Fruit Company is presently being accused of
having maintained a monopoly control over banana prices at importer
level in this market, it would be hard to support this upon the evidence
of these statistics. If banana prices are compared with coffee and cocoa
prices, it would be far easier to establish a prima facie case for in-
ferring the incidence of artificial manipulation of prices with respect
to the last two than it would be for bananas. Again, the inference of

129

price manipulation by the United Fruit Company would raise puzzling
questions as to the rationale of such control, since the earnings record
of the company cited earlier in this chapter bears not the slightest
relationship to what are generally conceived to be monopoly profits.

The very strong inference from the indices presented is that banana
prices are importantly determined by the competition of domestically
produced fruits, and that there is an effective pressure that prevents
banana prices from diverging markedly from the general fruit price
trends for sustained periods. One would not expect to find such a
degree of concurrence in the case of a commodity for which prices
were "administered." With respect to coffee and cocoa, no such com-
petition from domestic crops has existed, but the large returns accru-
ing to producers from soaring prices is offset by evidence of greater
instability.

There is another line of evidence that strongly challenges the thesis
that banana prices have been arbitrarily controlled. We have tabu-
lated the average prices by months for which United Fruit has sold
its bananas in the North American market for each year from 1940
through 1955. The average deviation between the high and low
monthly prices for the period was 20 percent per year. In 1953, the
high monthly average was only 6 percent greater than that of the
low month. In 1954, there was a 37 percent divergence; in 1955, a
29 percent spread. Earlier years show both lower and considerably
higher monthly deviations than those cited. There does not appear to
have been any consistent seasonal movement in banana prices over
the years. We have been unable to visualize any rational basis upon
which an administered price policy might operate that would have
produced the price pattern that has obtained for bananas in the North
American market. In our judgment, only supply and demand, the
competition of other distributors of bananas and of other fruits, and
the general price trends in the American market could account reason-
ably for what has happened to banana prices.

From the standpoint of countries which produce bananas, the price
trends for their product in the North American market has been highly
advantageous. Not only has it shown an upward trend of extraordi-
nary year-to-year consistency, but the 171 percent rise between 1940
and 1955 has been of a dimension that has been favorable to Latin
American producers in that it has improved their "terms of trade."
The index of prices of all U.S. exports over the same period rose by
100 percent, and that for U.S. exports of all finished manufactures by
only 86 percent. Thus, Latin American banana producers could buy
over 35 percent more of general U S. exports and over 45 percent

130

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131

Chart XV

United Fruit Bananas Are a Steady but
Slowly Expanding Source of Income to
Producing Countries

1940 100

-i1200

• COFFEE

FOODSTUFFS*

EXCL. COFFEE

U. F. BANANA SALES
TO U. S. AND CANADA

I I I

1000

800

600

400

200

1940 '42 '44 '46 '48

'Value of U. S. imports.

'50 '52 '54 '55

132

more of U.S. manufactured goods in 1955 than in 1940 from their
exports to us of a given quantity of bananas.

Of far more basic importance to producing areas, however, is the
combined effect of prices and volumes shipped. A reasonable measure
of the trend in revenue obtained by producing countries from their
banana exports and how it compares with that from other traded food
crops can be inferred from the following indices of import values for
bananas, coffee, and for all crude foodstuffs with coffee both included
and excluded. In the case of bananas, we have included imports for
both U.S. and Canadian consumption since, as has previously been
noted, all but a very small fraction of the latter are transshipped from
the United States.

Column 1 in Table 19 may be read as an approximate index
of the trend of returns realized by producing countries from United
Fruit banana sales in the North American market. The indicated
increase of 168 percent from 1940 to 1955 undoubtedly understates
the increased realization of producing countries, since the rate of
income taxes paid to those countries has increased markedly in recent
years. This volume-times-price index moves in a pattern very similar
to the price index alone, except for the fact that on this index the
drastically lowered volumes during 1942 and 1943 caused by the non-
availability of shipping, and the rapidly increasing volumes from 1944
through 1948 intensify the yearly changes during those years.

One thing that stands out from the record is that the weight volume
of United Fruit banana imports to North America was virtually the
same in 1955 as in 1940. A 15 percent increase in the average weight
of each stem imported was almost completely offset by a decline in
the number of stems imported by the company. From the perspective
of the producing countries this may offer a legitimate cause for com-
plaint, on the ground that the company representing their largest
distributive channel has not been able to add the revenue increases
that would have accrued to them from enlarged volume to those that
it has provided through higher prices. Anyone taking this position,
however, is wielding a two-edged sword. Its backswing is lethally
destructive to the argument that the United Fruit Company's share
of the North American market consistently has been too big, and that
the interests of both producers and consumers would be furthered by
its relative curtailment.

Column 2 gives the realization in the North American market from
total banana sales, by United Fruit and its competitors combined,
from 1940 through 1955. On this index, the effect of price increases

133

is enhanced by a moderate 10 percent volume increase as well. While
the weight volume of United Fruit's imports to this area in 1955 was
almost the same as it had been in 1940, its competitors' 1955 imports
are estimated to have increased by almost 30 percent over this time.

This, of course, is further evidence that the weight of the United
Fruit Company's position in the North American market has been
waning rather than waxing, a situation that is hardly compatible with
a status of monopoly control. More important perhaps from the pro-
ducing countries' viewpoint is the recorded trend of how the market
as a whole has served them over an extended period. This index,
reflecting the combined influence of price and volume, indicates that
their dollar earnings from banana shipments tripled over a period of
15 years. With the shipping-short war years of 1942 and 1943 ex-
cepted, there were no instances in which overall annual foreign ex-
change earnings from this trade fell off sufficiently to present balance-
of-payment problems of any moment.

There is one negative factor in the showing that should not be
ignored — the failure of the trade to expand since 1948. It would be
plausible to impute at least part of the responsibility for this leveling
off to lack of aggressive merchandising on the part of banana im-
porters were it not for the fact that the American consumption of
all other fresh fruits combined shows an absolute decline in the same
period. Ever since World War II, the per capita consumption of fresh
fruits generally has fallen off in the United States while overall per
capita fruit consumption has advanced. All of the gain, and more,
has been accounted for in the increased consumption of processed
fruits — frozen, canned, or otherwise preserved. Since, as yet, there
has been no notable success in finding a way to process bananas in a
form to provide volume outlets, bananas have not benefited impor-
tantly from the gain in processed fruit consumption. But it is rather
remarkable that the market for this imported fresh fruit should
have held up better than that for competing fresh fruits of domestic
origin.

There appears to be an unmistakably growing preference in the
North American market for foods that are the least demanding in
carriage, storage-space requirements, and preparation. In the light
of this there is a strong implication that banana consumption in this
market is not likely, at best, to expand much faster than population
growth, except through the development of broader uses in processed
form for baby foods, ice cream, or confectionery and cereal fabrica-
tions, or in combinations for the housewife of the outlandishly wonder-
ful, ready-mix variety. Fresh bananas, of course, are not difficult to

134

cat, but they are a bulky, heavy item for the housewife to carry ; they
take considerable space; and have a limited holding period in the
vanishing American pantry or on the increasingly typical kitchenette
shelf. As everyone knows from Chiquita Banana's admonitions, they
are a tropical fruit not well adapted to storage in home refrigerators.

Columns 3, 4, and 5 provide yardsticks for comparison of bananas
and imported crude foodstuffs in general. It is obvious that foreign
exchange earnings from the banana trade have expanded far less
rapidly than from crude foodstuff exports as a whole to this market.
Coffee clearly has dominated the general index, with price increases
on this commodity far outweighing the increases in volume traded.
When the banana index is compared with that of crude foodstuff
imports other than coffee (Column 5) the showing is better but is
still under average by about 25 percent in terms of overall growth.
When judged on the stability factor, the showing of the banana trade
is definitely superior.

The horizon of opportunity for countries producing bananas is by
no means limited to the North American market. Europe, in the years
immediately preceding World War II, consumed a relatively low per-
centage of world banana shipments. From 1941 through 1945, Western
Europe imported scarcely any bananas. Then, with the vigorous re-
sumption of postwar economies, the flow of bananas to that area was
resumed. By 1950-51, the volume had regained its prewar levels, and
the upward trend continued through 1956. In the latter year, Western
Europe's banana imports were well above 50 percent higher by stem
count than the five-year average of 1935-39. Since the per capita
banana consumption in Europe is still well under that of the United
States, there would seem to be considerable room for further expan-
sion of the volume that Europe can absorb.

We have not been able to obtain satisfactorily complete price data
on European banana imports. From the record of Latin American
bananas exported to Europe, however, it is evident that the price
trends at importer sales levels have differed widely between Europe
and North America. As we have explained previously, European
prices per pound of stem weight have been consistently higher than
American prices on the same basis. In 1940, European import prices
per pound averaged 55 percent higher. When volume trade was re-
sumed in 1946 after the wartime stoppage, European banana prices
averaged 130 percent higher. Since then, there has been a gradual
closing of the gap as North American prices have risen and European
prices have fallen off 30 percent. By 1955 and 1956, Latin American

135

bananas shipped to Europe were sold by importers at a price only
about 10 percent more per pound in that market than they were
bringing in North America. A large fraction of the price differential
between the two markets in these two years represents the higher
freight costs of shipping Latin American fruit to Europe.

Thus, for the past several years, the profit margin on bananas
exported from Latin America to Europe has been decreasing. This
factor may blunt somewhat the appeal of the greater growth capacity
of the European market. There is a distinct possibility also that,
under the proposed tariff standardization program of the European
Common Market, bananas from overseas European dependencies may
be given a general advantage over those coming from Latin American
republics. If so, the latter may find it more difficult to export their
product to some European countries in which they now find outlets.

The role of the United Fruit Company as a supplier of the European
market has shown a steady decline. Before World War II, United's
proportionate share of the European market was quite comparable to
its share of the North American market. Since the end of the War,
the company has never supplied more than 12 percent of European
banana imports, and in most years its stem shipments to Europe have
been well under 10 percent of the total. Its current position in that
market is obviously not of a dimension that would allow it to exercise
any important influence upon price or volume trends; yet the record
of recent years shows that prices and even volumes in the two markets
are drawing closer together in a way that suggests a growing competi-
tion between them for the available supplies of acceptable fruit.

IN SUMMARY

OUR CONCLUSIONS on the economic record of the
United Fruit Company can be summarized in the following terms:

United Fruit is a large .but far from a giant corporation by U.S.
standards. Over the years, its business has been only moderately
profitable as measured by return on value of funds invested when
compared with other large U.S. corporations doing primarily a domes-
tic business.

The earnings record of the United Fruit Company has been sub-
standard when measured by the criterion of growth. Holders of United
Fruit stock have realized no capital gains, on the average, from sales
on the New York Stock Exchange over the past 11 years.

136

The ownership of the United Fruit Company is very broadly dis-
persed, even when judged by U.S. standards. The company has almost
as many stockholders as it has tropical employees and the annual
dividend return of its average shareholder is less than 40 percent of
the wage earned by its average tropical employee.

On the basis of the record of United Fruit's 1955 operations in the
six countries in which all but a small fraction of its bananas are pro-
duced, the company's direct contributions to the national economies
are surprisingly large. They have amounted to about 95 percent of
its total revenues from export and domestic sales in the area. On
the very important item of net foreign exchange contributions, the
local economies retain about 70 percent of the value of the total
export sales of the company.

When United Fruit's contributions are compared to other direct
U.S. private investments in Latin America its comparative record is
outstandingly favorable among total investments in the agricultural
category upon virtually every count. When compared with U.S. direct
private investments in Latin America in all fields, its comparative
contributions are far above average in employment and wage pay-
ments, for export trade generated, and for foreign exchange returns
accruing to local economies; its total contributions to local economies
are about average; its tax payments somewhat below average, which
reflects the fact that its total earnings have been relatively modest.

Compared to locally owned agricultural enterprises of all types,
the efficiency of United Fruit operations and the returns that accrue to
local economies from them are uniquely high. By a wide margin, no
purely local agricultural ventures contribute as much per acre or per
man employed as producing countries derive from United Fruit
operations.

Finally, on the controversial issue of whether or not the returns
from primary product exports are so comparatively volatile as to prej-
udice their value to countries importantly committed to such activity,
the record of banana exports has been consistently excellent. The
value of banana imports into North America tripled between 1940 and
1948 (and have since held about level), with price increases account-
ing for all but about 10 percent of the gain. The only serious set-
backs in the period occurred in 1942 and 1943, and were directly
chargeable to the submarine blockade. The price index for European
banana imports has been far more irregular, but the effect of this
on banana export earnings has been more than offset by the far
greater and remarkably steady increase of the volume of European

137

banana imports in the postwar period. In recent years, prices in the
two markets have been drawing closer together and currently the
price per pound of Latin American bananas shipped to Europe exceeds
the price of their North American shipments by little more than
enough to cover the freight differential. Similarly, the volume of per
capita banana consumption in Europe is gradually drawing nearer
to the North American level, though the latter is still appreciably
higher.

The weight volume of United Fruit banana imports to both North
America and Europe was about the same in 1955 as in 1940. Other
importers accounted for the small increase in the former market's
volume and the much larger increase in the latter. United Fruit now
accounts for so small a fraction of the European trade that there could
be no reasonable ground for assigning to it a capacity to influence
price trends or marketing policies in that area. In the North American
market, where it is still the principal importer though to a less degree
than formerly, the preponderant evidence indicates that banana prices
are importantly determined by the general price level for domestically
produced fruits with which bananas must compete for the consumer's
dollar. There appears to be as little ground for crediting United Fruit
with having maintained a price structure that has been genuinely ad-
vantageous to the interests of producing countries as there would be
to chide it for the failure of the North American market to absorb
ever-increasing quantities of banana imports. In both instances, what
has taken place appears to have been largely caused by factors beyond
the capacity of the United Fruit Company to control.

There is a final comment that seems worth recording before we pro-
ceed to an examination of the economic impact of the United Fruit
Company's operations on a country-to-country basis. The picture that
has been drawn of the banana market, as one that has offered a reg-
ularly increasing return to producing countries with remarkably few
and exceptionally mild annual recessions, is accurate when applied to
producing areas as a whole. The record for individual countries, or
even for specific areas within a given country, has been far less stable.

Within the Western Hemisphere, banana production in Cuba,
Jamaica, Mexico, British Honduras, Nicaragua, Dutch Guiana, and
the Windward Islands has blossomed and withered within the past few
decades. In Costa Rica and Panama it first flourished on the Atlantic
Coast, then died out there and was reconstituted on the Pacific side
of both countries, followed by recent signs of rehabilitation on the
original sites. In Ecuador, banana culture has flowered in the classic-
ally exuberant pattern that has characterized its early stages in other

138

areas, and is now undergoing the historic travail that has beset this
venture in country after country in the past.

Unless and until more efficient control measures are devised to
check known banana diseases, and in all likelihood new blights that
are as yet unknown, it is likely that the locus of large-scale banana
cultivation will keep changing, sometimes from plot to adjacent plot,
and sometimes in leaps spanning hundreds of miles. So long as the
recurring floods and blowdowns continue to decimate annual banana
cultivations in a given country, it seems inevitable that large markets
like North America and Europe will need multiple sources of supply,
rather than one or two, in order to assure the continuity of their
import volumes.

Because of the inherently perishable nature of this tropical com-
modity and the huge distances that it must travel in order to keep
every corner of its far-flung markets supplied without shortage or
glut, there is no prospect that the future will tolerate any relaxation
in the precise time and flow schedules that banana distribution has
been forced to meet in the past.

All of these considerations — disease incidence, natural disasters, and
the exceptionally demanding logistics of banana distribution — promise
to keep the pattern of enterprise in this field one in which large-scale,
vertically integrated operators predominate. Without them, it is
difficult to visualize how world trade in bananas can be maintained on
a scale that is uniquely large for a commodity of this general type.

For over half a century, the United Fruit Company has been the
outstanding pioneer in this field. To a unique degree the world banana
trade is its creation. It has initiated most of the procedures, from
cultivation through distribution, that have built the trade to its pres-
ent dimension. Whether its relative position in the industry is main-
tained or continues to decline, the general organizational patterns it
has established seem likely to persist.

This does not mean that there will not be a continuing evolution in
the detail of procedure, or even in the basic organizational pattern
of some important segments of banana enterprise as a whole. The
direction of a number of the more important changes that appear to be
in the making will appear as we turn now from the general to the
particular. In Chapter VI we shall weigh and appraise the impact
of the United Fruit Company's operations upon the several economies
of the six countries that produce most of the bananas that enter into
world trade and examine some of the problems and trends that are
indicated by this record.

139

Contribution to the Several Local
Economies

1WO CONDITIONS, we believe, must be satisfied before invest-
ment funds will move from one nation into another: First, the return
to the investor supplying the funds must be satisfactory in that it
compares favorably with alternative uses of funds in his own nation.
Second, the net return to the host nation, after deducting all out-
payments, must make a contribution to the local economy that would
not otherwise be realized and that compares favorably with the con-
tribution of locally financed activities. If these conditions are met,
both sides have an interest in encouraging private investment.

In the previous chapter we looked at United Fruit's operations from
the standpoint of an investor in the company's stock. We saw that it
has yielded a steady, though far from spectacular, return to the
shareholder. The main purpose of this chapter is to measure the eco-
nomic impact of United 's operations in the six countries that produced
about 92 percent of North American banana imports in 1955 — Costa
Rica, Honduras, Panama, Guatemala, Ecuador, and Colombia. In
the process, we shall try to show how the company's production
operations differ from nation to nation, thus amplifying the general
discussion presented in Chapter IV.

How should one go about measuring the economic impact of the
United Fruit Company on these nations? There are various pro-
cedures that have been used in measuring a company's contribution
to the economy in which it operates. One widely used procedure is
to measure what is termed the "value added" by a company's opera-
tions. The cost of purchased materials, services, parts, and fuels that
a company purchases from other business concerns is deducted from
the market value of what it sells and the remainder is the "value
added" by the company's operations to the gross national product
of the country in which it operates. Depreciation and indirect taxes
are deducted to compute the value added to national income by the
company's operations.

Such calculations would in some respects understate and in others
overstate the United Fruit Company's contributions to the nations in

140

which it operates. Since its banana plantations have literally been
hacked out of the jungle, all of its expenditures within a nation where
it operates represent an addition to the economy of that nation. Its
purchases of materials and supplies within the nation add to produc-
tion and employment. Moreover, the major portion of its imports
increase the supply of consumer goods or the stock of capital avail-
able in the country. It pays taxes to central and local governments.
Moreover, it reinvests part of its net earnings after taxes and fre-
quently brings in capital to support new investment. On the other
hand, the portion of earnings remitted to the United States by the
wholly owned subsidiaries of United Fruit cannot appropriately be
regarded as a contribution to the economies in which it is earned — it
should be deducted from the accounts in measuring United 's contri-
bution to host nations.

UNITED FRUIT'S NET CONTRIBUTION

FROM THE COMPANY'S ACCOUNTS we have as-
sembled a set of statistics which measure the "net contribution" of
United Fruit operations to each nation for the years 1951-55. Stated
briefly, this method takes the company's total expenditures1 upon
both current and capital account within each country in a given period
and adds the value of imports. The resulting figure shows the amount
that remains in the country as a result of the company's operations.
The funds to pay for these contributions come from the total receipts
of the company's subsidiaries within a given country — from its ex-
ports, fees derived from abroad for services, and local sales — plus
net additions to their capital accounts representing new company in-
vestment commitments. When dividend transmittals are subtracted
from this total, the remainder represents the sum of payments within
the country plus the value of imports added to the country's stock
of capital or consumers' goods.

Wherever available statistics permit, we shall compare the United
Fruit contribution with that of other economic activities in the six
countries in terms of the return to the nation per acre for farm prod-
ucts, per man employed, and per dollar of investment. We shall look
also at the contribution to foreign exchange availability and to gov-
ernment revenues. Our objective is to measure as accurately as pos-

1 Measured on an accrual basis as is usual in accounting statements. Thus, the
figures will differ from those on a cash expenditure basis to the extent that cash
payments are made before or after obligations are incurred.

141

sible what the company's operations leave in each nation both in
absolute terms and in comparison with other agricultural and in-
dustrial operations. In doing this we shall see whether United Fruit
is making the sort of economic contribution that should encourage
continued hospitality on the part of host countries. In later chapters
we propose to consider the social and political impact of the com-
pany's operations on the six nations.

As was pointed out earlier, the economic impact of United's opera-
tions differs markedly among nations. Accordingly, we propose to
consider first the three countries in each of which the impact is clearly
of major importance to the local economy in that the company
accounted for more than a third of export receipts in 1955. These
nations are: Costa Rica, Honduras, and Panama. Then we shall
turn to Guatemala, Ecuador, and Colombia where the United Fruit
Company's contribution to exports was considerably smaller.

COSTA RICA

DURING 1955, United Fruit shipped 6,910,000
stems from Costa Rica, or one-fifth of the company's total shipments.
Over nine-tenths of the company's total Costa Rican shipments came
from its Golfito Division, located near the southern boundary on the
Pacific Coast. The remaining production came from the Quepos
Division further north on the Pacific side which was going out of
banana production during 1955.

General Description

The Golfito Division was set up between 1937 and 1939. The com-
pany built a pier and established a port. Then a railroad was driven
back into the virgin jungle behind a low range of coastal hills and
the banana plantations were set up. In 1955, the company had 25,000
acres in bananas at Golfito. In addition, United Fruit was purchasing
bananas under contracts with local producers operating 4,600 acres.
(In connection with such purchases, United installs, maintains, and
operates the sigatoka control system, provides irrigation, and furnishes
transportation to the port.)

If any division of United could be said to be an average division
in 1955, Golfito was it. Production per acre (210 stems in 1955) and
cost per stem were close to the divisions average. In housing, transpor-
tation and most physical aspects Golfito is also close to average.

142

Golfito does, however, have certain special problems. It is particu-
larly susceptible to flood damage. In 1954, floods wiped out a major
portion of the division. In the Palmar region, 11,000 acres were hit
by floods two years running. In addition, Golfito has certain special
labor relations problems, a point we shall return to in Chapter VIII.

United's Costa Rican operations also encompass production of
cacao, African palm oil, and abaca. At Quepos, 10,000 acres are
planted in African palm and 5,000 in cacao. Near Limon on the
Atlantic side the company has almost 19,000 acres in cacao as well
as 5,000 acres in abaca (under a contract with the U.S. government) .
Almost as much land is planted in these other crops as in bananas.

Before turning to an examination of United's contribution to the
Costa Rican economy, it might be well *to set forth the facts relating
to present and past land use. Experience in Costa Rica points up
the problem of what to do about abandoned banana lands in perhaps
its sharpest perspective. In 1955, the company owned almost 500,000
acres of land, or almost 4 percent of the national total. Slightly under
a fifth of company land was planted in crops or was in pasture, but
including the land in use for roads, structures, drainage, etc., perhaps
a fourth of landholdings were in use.

Part of the idle landholding is being held in reserve. If flood fallow-
ing proves economical, it would be possible to set up a division in
the Limon area. It might also be possible to establish a division on
a tract of swamp land held in the Quepos area through the use of
pump drainage and silting. Virtually none of these lands could be
used for commercial production if they were released, so the fact that
United Fruit is keeping them in reserve imposes no limitation on Costa
Rican agricultural development.

The company has turned over large tracts of land to the govern-
ment. Company policy is to offer land which it has purchased but
cannot use to the government as a part of the consideration involved
in working out a new contract with the government. Thus, the com-
pany has expressed a willingness to sell excess land to individuals
or to turn it over to the government under reasonable terms.

Land Problems at Quepos and Limon

The history of the Quepos Division points up the problem of
making more effective use of land that is forced out of banana produc-
tion by the advance of Panama disease. Quepos was developed in the
mid-1930's as a major division. World War II slowed the growth of
the Quepos Division, but production rose rapidly after the war. In

143

1947-48, banana production topped 2 million stems a year and 25,000
acres were planted in bananas. However, Panama disease spread so
rapidly that banana production ceased in mid- 1956. The 10,000 acres
in African palm and 5,000 acres in cacao at Quepos furnish employ-
ment for 700-800 persons as compared with a peak employment of
5,600 in 1947. The company provided financial aid to farmers who
wanted to go into rice production. And it set up a program to transfer
employees to other divisions (most employees elected to take their
severance pay instead).

The government discussed the possibility of taking over parts of
the property, and the company would have been willing to work out
a reasonable arrangement. However, the government lacked the funds
to take over and develop the land for other uses. Consequently, most
of the land has gone into subsistence farming.

Land that has gone out of banana production is first-class land
for most crops that thrive in the tropics. Moreover, it is land that
has been cleared, drained, irrigated, and provided with transportation
and other facilities. In a nation that needs to expand agricultural
output both to provide food for a growing population and to increase
export earnings, it would seem self-evident that every effort should
be made to shift abandoned banana land into commercial production
of other crops.

The economic waste involved in the failure to make most effective
use of land at Quepos is actually the second such experience in Costa
Rica. Near Limon, United Fruit once had a large division that went
out of banana production in 1942. Acreage planted to bananas there
had reached a peak of 34,600 in 1908 and as late as 1931 exceeded
8,500 acres. However, the inroads of Panama disease forced abandon-
ment of banana production. In addition to United Fruit's 10,000 acres
in cacao and 5,000 acres in abaca in the Limon area, local farmers
are growing cacao, some of it on land formerly in bananas. Most of
the remaining acreage is in local food crops.

Nevertheless, the Costa Rican economy has suffered in the process.
Despite continued efforts by United Fruit to improve cacao yields,
cacao has not as yet made a significant contribution to the nation's
total production or exchange earnings. Results during 1955 showed
that the contribution to the local economy from cacao was far below
that from bananas on a per-acre or per-employee basis. Thus, output
per acre of banana production was more than five times that per acre
in cacao. This, together with the low level of earnings by United
Fruit on cacao operations (and, hence low tax payments), explains

144

ECONOMIC CONTRIBUTIONS
TO HOST COUNTRIES

There are marked differences in the levels of economic accom-
plishments, as there are in cultural patterns and social develop-
ment, in Colombia, Costa Rica, Ecuador, Guatemala, Honduras,
and Panama. And within each country there are sharp contrasts
from area to area. Each contains vast undeveloped areas, iso-
lated and primitive farms, and bustling cities which are becom-
ing increasingly modernized.

.«M 1

Although mechanization is moving forward, there is still a great deal
of dependence upon primitive tools and animal power.

AN INDEPENDENT FARMER and his
family in Costa Rica is one of many who
profit from United's policies designed
to encourage production of bananas
and other crops by local growers.

By developing land that other-
wise may have remained un-
used for decades, United Fruit
has stimulated new settlements
around its plantations and pro-
ductive activities by local entre-
preneurs who can take advantage
not only of the company's trans-
portation, communication, and
purchasing facilities, but also its
research and advisory services.

COI/P.VNV

RAILROADS which United has built for its own use benefit the countries as a
whole. These Panamanians, bound for a holiday outing, board a United Fruit train.

LAND DONATED by United Fruit is
used for this governmental agrarian
project in western Guatemala. Since
1935, the company has reduced its total
acreage of land by about one-third, and
a great portion of such land has been
deeded to central or local governments.

By constant improvement of fa-
cilities vital to its own integrated
operations, United has helped to
reduce barriers to communica-
tions in host countries.

I

AS EARLY AS 1903, United began working on radio and telegraph services; in
1904, it was first to put commercial radio on shipboard; by 1910, uninterrupted
radio communication between the United States and Central America was estab-
lished. The Tropical Radio Telegraph Company, incorporated as a subsidiary of
United Fruit, now operates as a regular public utility.

ANY IMPROVEMENT IN PORT FA-
CILITIES by United is also shared by
the public in its host country. And there
have been vast improvements during
the past half century, as indicated by
the 1924 scene below and the present-
day port in Latin America.

One of United Fruit's most important economic contributions to host
countries has been the introduction of needed new skills. Many
thousands of nationals of the six countries during the span of United' s
existence have had on-the-job training in the varied skills needed in
large-scale development and operation of /arms, in communications
and transportation facilities., in processing plants, in depots and ma-
chine shops, and, importantly, in laboratories and business offices.

MODERN managerial methods
and business machines are put
into practice in such offices as
this accounting section.

SKILLS in hydraulic engineering are acquired in the process of clearing land and
constructing the many facilities necessary for United's integrated operations. The
intimate knowledge of tractors, cranes, and other mechanical processes learned
at United installations is adding to the trained labor pool in each host country.

Continuous research and advance
planning is particularly impor-
tant in the cultivation oj a fruit so
susceptible as bananas to the
hazards oj weather, disease, and
spoilage. In addition to providing
research data to local farmers
from whom it buys, United also
supplies findings to competitors,
educational institutions, and gov-
ernment officials.

COMPANY SPECIALISTS map every farm development to show areas best suited
to banana production. United Fruit research teams visit their own and other
farms whenever blight, insects, or other factors impair production of fruit.
Samples of earth disclose adaptability for growing bananas; chemist takes field
tests of seed-sterilizing solution.

The Pan American Agricultural School in Honduras was founded and
is financed by United Fruit. However, none of the graduates of the
three-year course in all aspects of agriculture and farm management
is allowed to enter United's employ. The school is dedicated to the
formation of a growing corps of trained and experienced farmers who
will be able to disseminate their knowledge and techniques to their
fellow Latin Americans. Many graduates become teachers, agricultural
extension agents, and farm managers.

YOUNG LATIN AMERICAN learns A GOVERNMENT EMPLOYEE, grad-
the correct time to harvest papayas at uate of the Pan American School, sur-
the Pan American Agricultural School, veys land for a local farmer.

PROFESSOR of cattle raising at a ANOTHER GRADUATE of the United-
government-sponsored school in Hon- sponsored school of agriculture, now a
duras is a graduate of the Pan Amer- government agent, talks with a farmer
ican School. Here he explains tractor about insects found in a cotton crop,
mechanics.

DIVERSIFIED CROPS

United Fruit has almost as much
land in other crops as in bananas.
And it conducts research in each
and offers advice to many pro-
ducers in host countries. None of
the other crops — which include
African palm oil., abaca, and
cacao — yields a profit to United
comparable to its banana opera-
tions, but local economies are
benefiting from United' s intro-
duction of some new crops and
its improvements in planting
stock and growing methods for
others.

AFRICAN PALM OIL — a fairly new crop grown in Costa Rica and Honduras—-
now supplies an important portion of local demand for edible oils and soap, thus
saving foreign exchange. Shown here are United Fruit seedlings, the fruit, mech-
anized harvesting, and the first step in processing.

ABACA— introduced by United Fruit Company during World War II when other
sources of Manila hemp were closed — is grown under contract for the U. S. govern-
ment. United's abaca operations in Panama, Costa Rica, Honduras, and Guatemala
have shown that the Western Hemisphere can meet its requirements for rope fibers.
Here stalks are loaded at railroad tracks alongside abaca field for trip to the factory
where they are pressed, shredded, and dried for baling before shipping to the
United States.

CACAO RESEARCH has resulted in measurable increases in United's yields per
acre. Developing high-yield, disease-resistant strains of the cacao plant and
improving agricultural practices are benefiting both the company and local
producers. Cacao plants, started from cuttings at United's propagating beds, now
grow many clones. After roasting, beans are sorted and graded before being bagged.

CATTLE RANCHES and dairy herds
are maintained and other crops grown
on United's plantations to assure ade-
quate food supplies for its employees.

RESEARCH AND DEMONSTRATION
on still other agricultural resources and
practices is geared to a variety of needs
felt in the host countries. These range
all the way from reforestation and pres-
ervation of timber to spraying of crops
by helicopter.

A measure of United's economic contributions in agriculture alone is
indicated by figures on yields per acre and per worker and on wages.
The yield per acre of land owned or contracted to United Fruit in
the six countries was more than 20 times the average for all other
improved agricultural land; and from the company s cropland it was
three times the average from all other cropland in the host countries.
Similarly., yield per worker employed in agriculture on United's
operations was about five times as high as the average for the six
countries. And wages paid were substantially higher than the average
for agricultural employees.

why cacao has made a lesser contribution than bananas. Similarly,
experience in abaca and in African palm oil shows lower returns both
to the local economy and to the company than banana operations.

Problems of Developing Other Crops

As a broad generalization, United's experience with crops other than
bananas — not only cacao, abaca, and African palm oil, but also rubber
and timber (mainly teak) — has proved disappointing earnings-wise.
Despite this experience, it may be that efforts to develop better meth-
ods of producing other crops could produce better results in the future.

Progress in increasing yield per acre in cacao production at Limon
would appear to be most encouraging. The work in developing high-
yield, disease-resistant strains of the cacao tree and in improving
agricultural practices may benefit both the company and local pro-
ducers if the cacao situation should favor production in the Western
Hemisphere as related to Africa in the years ahead. African palm oil
production in Costa Rica and other nations has developed to the point
where it supplies an important portion of local demand for edible oils.
In this manner, a saving in foreign exchange is effected. As local
demands grow, it may be possible to expand acreage in palm oil.

The problem of utilizing most economically lands no longer suitable
for bananas is not unique to Costa Rica. For example, in Honduras
an entire banana division at Trujillo in the late 1930 's was lost to
Panama disease — the area was given to the government and has since
largely reverted to jungle; disease led to cessation of United's banana
production in Nicaragua in 1942 and to the virtual elimination of
production on the east coast of Guatemala by 1955. As was pointed
out earlier, the ravages of Panama disease in all producing areas have
spread over 900,000 acres in the past half century, or six to seven times
as much land as United Fruit now has planted in bananas.

In most cases, as in Limon and Quepos, the opportunities offered
by the termination of banana production have not been fully realized.
Abandoned banana land, with its improvements and supporting fa-
cilities, represents an investment by United Fruit in today's prices
of some $2,000 per acre. Production of other crops would not entail
as heavy an investment. Even so, the investment needed to set up
farmers in production of other crops on retired banana lands is ob-
viously far less than that required to develop virgin jungle lands.
Thus, the cessation of banana production offers a great opportunity
to establish commercial production of other crops. They may not
yield as great a return to the nation as bananas, but they will yield

145

far more than if the land goes back into jungle or is used for sub-
sistence crops.

In general, the company's efforts to develop other crops represent
the sort of technical assistance that U.S. companies can offer to other
nations. Thus, it would seem that such efforts should be continued,
and that they might offer one solution to the problem of making
efficient use of abandoned banana land.

A National Responsibility

The chief responsibility, however, for making the most economical
use of abandoned banana acreage must rest with the national govern-
ments. It is clearly their responsibility to provide the education neces-
sary to teach people to operate successful commercial farms and to
provide such credit facilities and technical assistance as may prove
necessary to enable them to take over lands released from banana
production.

At the same time, the United Fruit Company, or any similar com-
pany, would seem to be under obligation to cooperate fully with
national governments in working out feasible arrangements to shift
land no longer suitable for bananas to the most productive uses. This
responsibility includes such measures as: providing as much advance
notice as possible of acreage that could be used by local farmers; dis-
posing of such surplus lands at reasonable prices ; furnishing transpor-
tation and other services at reasonable prices to local farmers; and,
in general, facilitating local efforts to make good use of the land.

At least in the period covered by this study, the general policy of
the United Fruit Company has been fully in line with these specifica-
tions. There has been an understandable tendency to use surplus land
as a bargaining point in negotiating contracts with local governments,
a process which in some cases may have delayed the transfer of re-
tired banana lands to local users. In addition, the transfer of land that
forms part of a banana division still in operation poses special prob-
lems. For efficient operation of banana farms it is necessary to control
a complex system of rail and road transport, irrigation, and drainage
facilities. Thus, there may well have been a general reluctance on
the part of managerial personnel in the field to expedite the process
of turning land over until large tracts went out of bananas.

Consequently, it may be that United Fruit's land policies should
be set forth more explicitly for the guidance of field personnel. Field
managers might be specifically directed to facilitate the transfer of
Panama disease-infested lands to local production. In their capacity

146

as good agriculturalists with intimate knowledge of the local situation
they might do much to stimulate local production.

As a practical matter, however, the national government must take
the initiative in this matter. Up to the present, the major problem
has been a lack of funds to provide agricultural credit and the edu-
cational services that are provided by a trained agricultural extension
service. Thus, the failure of the Costa Rican government to take ad-
vantage of opportunity presented at Quepos was due to a lack of
money and trained personnel.

This would seem to be a fruitful field for the International Bank for
Reconstruction and Development and the Export-Import Bank to
investigate. Loans to support supervised agricultural credit programs
in areas where further abandonments of banana land can be expected
would appear to constitute sound and desirable undertakings for these
institutions. In addition, programs to resettle persons from Europe
might well be geared to utilize such retired banana lands.

Sources of Funds

Now that we have considered the problem of using to best advantage
land forced out of bananas by disease, let us turn to the contribution
made to Costa Rica from United Fruit operations on land it is using.
United Fruit owns or controls some 5 percent of Costa Rica's agri-
cultural land and about 10 percent of acreage under crops. In the
five years 1951-55, the average annual contribution from all United
Fruit operations worked out to $34,414,500. That amount was equal
to about 20 percent of the value of the country's total agricultural
production.

To see how the measurement of the United Fruit contribution is
derived, consider the accounts for the year 1955.2 The company's
exports were valued at $35.9 million in that year. Bananas made up
92 percent of the total, while cacao accounted for most of the re-
mainder. The company also took in $7.7 million from sales of mer-
chandise in Costa Rica and receipts from Tropical Radio and other
local operations. Thus, total receipts from current operations amounted
to $43.6 million.

In addition to these funds generated from current operations, capital
funds were increased by $13.2 million (of which over $3 million repre-

aln the case of Costa Rica as well as each of the other nations studied, these
statistics are based upon, and are consistent with, United Fruit's accounting rec-
ords. These records are, of course, reviewed by independent accounting firms and
by the U.S. Treasury Department.

147

sented advance payments on income taxes). Thus, the total funds
available to United's operating company, the Compania Bananera de
Costa Rica, amounted to $56.8 million. Dividends of $14.8 million
were remitted to the United States. Thus, the amount remaining in
Costa Rica was $42.0 million.

In other words, the amount remaining in Costa Rica equaled to
96 percent of United's receipts from sales of all products and services
in 1955. The year 1955 happened to be unusual in two ways. In the
first place, income tax liabilities were doubled as a result of a new
contract which raised the tax rate from 15 percent of net earnings
to 30 percent. A second factor is that dividend payments were un-
usually large in 1955 — no dividends were paid in 1954 and dividend
outpayments in 1955 represented two years' return from the standpoint
of the U.S. company. Tax considerations in the United States led to
the decision to defer dividends from 1954 to 1955.

Uses of Funds

The $42 million remaining in Costa Rica during 1955 was used in
these ways:

Wages and salaries $15.3 million or 36%

Taxes 8.8 million or 21%

Purchases of goods and services 4.5 million or 11%

Imports of capital goods, materials, and of

goods sold in commissaries 9.9 million or 24%

Other (largely additions to inventories) ... 3.5 million or 8%

The $15.3 million for wages and salaries covers the costs of fringe
benefits. For example, the company operated three major hospitals,
39 dispensaries, and 62 schools. Average annual earnings of the 15,500
persons employed amounted to almost $1,000 per employee, well above
the average for the nation as a whole.

United's tax payments in 1955 accounted for over 18 percent of the
central government's revenues. That was about double the share in
1954. The increase was caused partly by the new contract which in-
creased the company's income tax liability and in part by the fact
that the company made substantial advance tax payments in 1955.
However, if an adjustment were made for the advance payments, the
company's contribution to government revenues would work out to
about 15 percent. The United Fruit Company's operations accounted
for 8 percent of Costa Rica's national income in 1955 (national in-

148

Chart XVI

Sources and Uses of the

United Fruit Company Contribution

to the Costa Rica Economy in 1955

The United Fruit Company
in Costa Rica had receipts
from all sources totaling

$56.8

(in millions of dollars)

$32.9

SOURCES OF INCOM

came from
banana exports

$77 from
domestic sales" and $13.2

1 $3.0 from new caP'ta
other exports was «nvest«

^Includes General Services Administration fee.

Of the $56.8 ...

$14.8 was paid out in
dividends*

USES

$42.0 remained in

Costa Rica and was used in this manner:

inventories and misc.

9.9

4.5

8.8

15.3

imported goods
and equipment

local purchases
taxes and duties

wages and salaries

* No dividends remitted in 1954; 1955 dividends covered both
1954 and 1955 operations.

149

come was estimated at $300 million while value added by United's
operations was $24.1 million).

Other Comparisons

We have seen that the United Fruit Company owns or controls
about 5 percent of Costa Rica's agricultural land and about 10 percent
of land planted to crops (the last census covered only about one-third
of the nation's land area, so exact figures are not available). In 1955,
the company owned or had under contract about 65 percent of acreage
planted in bananas. The amount left in the nation by United's opera-
tions amounted to between a fifth to a fourth of the nation's total
farm output in the 1951-55 period, and to one-fourth to one- third of
total crop output. The company accounted for 90 percent of banana
production and over 98 percent of export receipts from bananas.

Thus, the contribution to Costa Rica's economy from each acre of
banana land owned and controlled by United Fruit was more than five
times as great as the average for all cropland, almost five times the
return on acreage devoted to banana production for domestic consump-
tion, five and one-half times the return per acre on cacao, and three
times the return from coffee.

United Fruit employs about 5 percent of the total labor force and
almost 10 percent of those working on farms. The contribution to the
economy per person employed by United is two to two and one-half
times as great as the average output per worker in agriculture gen-
erally.

United's exports at $35.9 million accounted for 44 percent of the
nation's total foreign exchange receipts in 1955. Coffee exports were
somewhat larger; they amounted to $37.4 million or 46 percent of the
total. In neither case, does the gross export figure give an accurate
reading of the net foreign exchange returns to national balance-of-
payment accounts. For United Fruit operations, such contribution
amounted in 1955 to $24.4 million.3 This would work out to an
average of about $381 per acre of net foreign exchange earnings for
each of United Fruit's 64,000 acres planted to its export crops.

This may be compared to the foreign exchange return that Costa
Rica derived from coffee, a crop that is grown preponderantly by
local producers so that no considerable deduction for dividend trans-
mittals abroad is Involved. Costa Rica's foreign exchange return in

8 $49.1 million (exports of $35.9 million plus net capital commitments of $13.2
million) minus $24.7 million (imports of goods, materials, etc., of $9.9 million
plus dividends remitted at $14.8 million) equal $24.4 million.

150

1955 from each of the estimated 119,000 acres4 planted to coffee that
was exported works out to about $315.

The net foreign exchange return per acre is clearly higher in the
case of United Fruit's" operations, even though this net is derived by
deducting both dividend payments abroad and the cost of all imported
goods and materials from export receipts. There undoubtedly were
foreign purchases of equipment, fertilizers, chemicals, and the like by
coffee growers. These should be deducted from coffee export receipts
to make our accounts strictly comparable, but the requisite data for
this are not available.

On every economic measurement, therefore, the company's contri-
bution to the Costa Rican economy compares most favorably with
the contribution of domestic activities. By the same token, United
Fruit's operations make a substantial contribution to the nation's
growth and prosperity.

HONDURAS

BANANAS HAVE BEEN GROWN in the fertile soil of
the Ulua River valley of Honduras since the earliest days of the
banana trade. In 1955, United Fruit had 34,100 acres planted in
bananas, of which 13,000 were not yet mature. In addition, the com-
pany purchases fruit from independent farmers operating 6,400 acres.
Plantations stretch for some 50 air miles along the winding banks
of the Ulua River. The river carries unusually heavy amounts of silt
from the continual erosion of the mountains through which it flows.
As a result, the riverbed lies well above the surrounding lands.

The physical characteristics of the river affect the company's opera-
tions in several ways. In the first place, huge drainage canals had to
be dug on either side of the valley to drain swampland and carry
away flood water. The main canals are as wide as ship canals and
approximately 20 miles long. Secondly, operations are especially
vulnerable to floods so that a large network of dikes and water con-
trol facilities had to be built. Despite these precautions, the planta-
tions were inundated in 1954, wiping out an entire crop and damag-
ing facilities extensively. Operations are also subject to the hazards
of blowdowns (in early 1957 high winds flattened the farms and 6
million stems were lost).

*The total acreage planted in coffee was reported as 137,000 acres f9r 1955, but
13 percent of the coffee produced appears to have been consumed in the local
market rather than exported.

151

However, there are some favorable aspects. The heavy silt content
of the river makes it possible literally to create new banana acreage.
A complex system of flood gates and dikes diverts flood waters into
cleared land. When the water is trapped the silt is deposited. This
process is repeated for several years until five or six feet of new soil
has been built up. Then bananas are planted. New banana acreage is
also obtained by the process of pump drainage. Dikes are built by drag
lines to surround swampland and then huge pumps are set to work to
remove the ground water and thus make the land usable.

Flood Fallow

The amount of heavy engineering work involved in the company's
Honduran operations is increased by the effort to develop flood fal-
lowing. As was explained earlier, this process involves the erection
of dikes around each farm so that water can be let in to flood the
land for the period necessary to kill the fusarium that bears Panama
disease. In 1956, plans called for 15,000 acres under flood fallow,
supplemented by enough other land from siltation, pump drainage,
and continued use of land not yet affected by Panama disease to
keep 35,000 acres in banana production.

While the company holds 300,000 acres and leases 67,000 acres in
Honduras, the amount of land that can be planted economically in
Gros Michel bananas is being used up. Uses of the land owned or
controlled by the company line up this way :

Thousand acres

Banana acreage owned by United Fruit 34.1

Banana acreage under contract 6.4

Pasture 31.0

Palm oil 4.0

Abaca 5.0

Timber 4.0

Forest to protect reservoir 5.0

Floodways and spillways 40.0

Leased to individuals for food crops 19.9

Held for future banana planting 12.0

The remaining 200,000 acres consists largely of land that cannot be
used for banana production. Most of it is jungle, swamp, or hillside
acreage.

In the 1950-55 period, the company disposed of 65,000 acres, most
of which was donated to the Honduran government. Of this total,

152

20,000 acres was cleared, drained, and served by roads. Most of this
area is now being used by squatters for subsistence farming. As was
the case in Costa Ripa, an opportunity to shift abandoned banana
land to productive use by commercial farmers was allowed to go by
the board.

Contract Farms

Before sigatoka hit in the mid-1930's, the company bought bananas
from a large number of independent producers. Their farms were
wiped out by disease. However, the company drained and planted
6,440 acres of land in the El Higuerito district and turned the farms
over to 120 Honduran citizens, most of whom were former employees.
United provides the disease control and technical assistance. The
planters sell their bananas to the company under a long-term contract
which provides for a deduction from the price of each stem to pay
off the loan made to finance purchase of the farm.

The successful development of flood fallow would probably preclude
a large-scale extension of the contract system. The heavy investment
required and the large units involved (usually 1,000 acres), to say
nothing of the fact that the land is out of production a considerable
part of the time, combine to make operation by an individual farmer
impracticable. However, the land created by silting or pump drainage
could be used to set up contract farms.

Research Center

The company's tropical research activities are centered in Honduras,
although smaller stations are in operation in Costa Rica and Colombia.
Currently, United's budget for fundamental research on banana
culture is well in excess of $1 million a year. Such a sum is not out
of line with the amounts spent by other enterprises facing similar
problems (the Hawaiian sugar and pineapple companies spend 1
percent to 1.5 percent of sales on fundamental research, or a some-
what higher proportion than United).

However, the United Fruit Company has been striving to build up
its research activities in the past five years after a long period of
inactivity in the field of basic research. It takes time to recruit and
train a staff for the sort of specialized activities required. A brief
review of the history of the company's research activities may help
provide perspective on current problems.

Panama disease first became a serious problem as far back as 1915.

153

Initial research efforts began before World War I but were suspended
during wartime. In 1922, two plant pathologists were added to the
staff and a program of basic research that was notable for the times
was set in motion. A number of fundamental studies of Panama
disease were completed and published between 1922 and 1933.

In 1926, the Lancetilla experiment station was set up as the head-
quarters for agricultural and horticultural studies. While research
activities have been shifted to La Lima, Lancetilla has been main-
tained as a unique horticultural center. Plantings there include vir-
tually every variety of tree or shrub grown anywhere in the world's
tropical areas. Propagations from Lancetilla have been used to start
company operations in such fields as rubber, African palm oil, teak,
abaca, and cacao. Planting stock of new and improved varieties of
tropical fruit and ornamental trees and shrubs has been supplied to
all who will make use of them as well as to the company's own
divisions.

Fundamental research was a casualty of the great depression of
the 1930's. The research staff was cut back drastically after 1929 and
remaining efforts were concentrated on day-to-day operating problems.
In 1935, United was faced by what might well be termed its most
serious crisis. Sigatoka disease began to spread like wildfire through-
out Central America and Colombia. (This wind-borne banana leaf-
spot disease originated in the Sigatoka Valley of Fiji as early as 1913.)
In a year, it had infected 80 percent of the Honduran crop and it
spread rapidly to other areas.

By an heroic effort, the research workers discovered a practical
control method within a period of months. Further experimentation
showed that the most economical disease control method consisted of
the periodic applications of Bordeaux mixture (described in Chapter
IV) through central pumping installations, each serving up to 1,000
acres through a network of spray pipe. By 1939, virtually all produc-
ing acreage in Honduras, Guatemala, Costa Rica, and Panama had
been equipped with spray installations — over 100,000 acres were
covered with 5,200 miles of pipe.

In a very real sense, the banana industry in Central America and
Panama was saved from extinction. Export production was decimated
in Mexico, where effective disease control methods were not under-
taken. And many independent producers were wiped out in other
countries. Sigatoka control requires both a relatively high level of
technical skill and a relatively high investment. In 1955, the United
Fruit Company spent an average of 56.4^ per stem (44 percent of

154

total farm cost excluding depreciation) on spray. At the time, few
independent producer^ were able to undertake control measures.

By the late 1930's research emphasis shifted to Panama disease
and the first flood-fallow experiments were undertaken in 1939-40.
Flood-fallow had been tried on other crops — notably on sugar cane
to wipe out insect pests. Initial experiments on bananas were promis-
ing, and work was renewed after World War II. In recent years, the
company has undertaken a massive investment in flood fallow while
simultaneously supporting an expanded program of basic research on
Panama disease. At the end of 1955, land surrounded by dikes and
set up for flood fallow in all divisions represented an investment of
about $2.25 million — or more than had been spent in research on the
characteristics of the disease.

To date, results from flood fallow have been mixed. Some farms
have become infested with Panama disease within a discouragingly
short time after being subjected to flooding, while other areas seem
to show a good resistance. Meantime, experimental work has con-
tinued along such lines as: draining the land and plowing under the
soil and reflooding; and the use of fungicides to treat lands after
flood fallowing. It should be pointed out that considerable travail
always surrounds attempts to introduce new techniques on a mass
scale. Thus, the difficulties surrounding flood fallow may well be
worked out as more experience is accumulated.

Even if such favorable results are obtained, however, it would seem
desirable to continue and intensify efforts at basic research. One
estimate is that United Fruit spent $140 million in the 1946-56 period
on Panama disease and sigatoka control. This should constitute a
considerable incentive to support research designed to seek out more
economical methods of dealing with the disease problem. Lines of
approach that might prove promising (and some of which are now
being pursued) include: those pertaining to basic plant physiology;
the assimilative processes of the banana plant, its biochemistry, its
ecology; the influence of interactions of plant nutrition and environ-
ment on plant growth and on fruit quality; cytogenetics, variety
selection, and breeding; broad studies of fauna, particularly banana
insects and other insects in the banana zones — their parasites and
predators; micro- and macro-floral studies; the biology (contrasted
to the chemistry) of the soil in "natural" and modified cultural states;
and other fundamental and basic studies.

In general, it would seem that the company has not, until recently,
devoted a sufficient effort to research directed at the basic characteris-

155

tics of banana growing and banana diseases. This is, of course, a
judgment that is based on a quick review of the evidence. Moreover,
it should be tempered by the understanding that: 1) research efforts
have been intensified in recent years; 2) the problems of putting out
the "brush fires" of sigatoka and a host of less difficult diseases and
insects have been dealt with in exemplary fashion; and 3) the general
progress in raising productivity per acre and per employee through
improved farming methods constitutes an outstanding achievement.
In addition, research has played an important role in the introduc-
tion of new crops or in improved procedures for handling existing
crops. Production of African palm oil in Honduras and Costa Rica
fills a substantial portion of local needs for margarine, shortening,
and soap. The abaca operations in Costa Rica and Guatemala have
shown that the Western Hemisphere can meet its requirements for
rope fibers. And research has resulted in spectacular increases in
yields in cacao production.

Standard Fruit and Steamship Company

An alternative approach to flood fallow is being tried by Standard
Fruit and Steamship Company on its division near La Ceiba, some
75 miles east of the United Fruit plantations. Standard has about
19,000 acres planted in varieties which are resistant to Panama dis-
ease. Apparently the Giant Cavendish variety has proved most satis-
factory, although a considerable acreage was also in Lacatan bananas.
While the varieties are resistant to Panama disease, they are subject
to sigatoka and have certain significant disadvantages. They are
subject to chill damage if the temperature drops below 57° F. for
several hours. The Gros Michel banana will not chill until the tem-
perature drops below 54°. In Honduras, the temperature frequently
gets down to 56° but seldom goes below 54°. Thus, Standard lost
an important portion of a banana crop through chilling in early
1955. Its shipments from La Ceiba dropped from 4 million stems
in 1954 to 3 million in 1955. The Giant Cavendish is also more
difficult to handle because the stem is less compact.

Certain disadvantages of the Giant Cavendish banana from a
marketing standpoint were set forth earlier. For all these reasons,
United Fruit has persisted in attempts to perfect flood fallow and in re-
search directed at finding other methods of controlling Panama disease.
If this disease can be controlled, the basic pattern of banana produc-
tion will be altered markedly. Production would be stabilized in given
areas and it would no longer be necessary or economical to hold

156

Chart XVII

Sources and Uses of the

United Fruit Company Contribution

to the Honduras Economy in 1955

(in millions of dollars)

The United Fruit Company
in Honduras had
receipts from all
sources totaling:

$27.3

SOURCES OF INCOME

$17.6

came from
banana exports

$7.6 from
domestic sales

$0.5 from
other exports

and $1.6 new
capital was
invested by
UFCO.

1 '

The $27.3 million* was
paid out as follows:

wages and Wwi.*/
salaries

$15.8

imported
goods and
equipment

local
purchases
taxes and r— •• -i

$8.4

and decline
in inventories
amounted to

duties $1.1 $40

i k

1 1

—$2.0

fNo dividends were paid by U. F. subsidiaries in Honduras for either 1954 or 1955.

157

vast tracts of land to move to when planted current acreage became
infested by Panama disease. Thus, many of the problems surrounding
land acquisition and use would be solved.

As a matter of fact, a complete failure of the attempts to combat
Panama disease might well lead to the adoption of variety bananas
by United Fruit. The costs of opening up new banana lands under
today's conditions might well force such a shift.

Impact on the Local Economy

The United Fruit Company is by far the largest enterprise operat-
ing in Honduras. In the 1951-55 period, its operations contributed an
average of $35 million a year to the local economy. That was almost
one-sixth of the nation's total production. (On a value-added basis,
United 's contribution works out to about one-tenth of national pro-
duction.) To be as large relatively in the United States, General
Motors would have to be more than four times its present size. The
mere fact that United 's operations are so big in relation to anything
else in the nation raises a series of social and political questions which
are discussed in later chapters. The objective here is to see how the
company's contribution compares with other economic activities
when measured on a common basis.

The 40,500 acres of bananas owned or under contract to the United
Fruit Company amounted to 2 percent of land planted to crops in
1955. By contrast, United 's contribution to the economy — the amount
left in Honduras after all out-payments of dividends were deducted —
came to $27.3 million in 1955. That was almost 20 percent of the
estimated value of total agricultural production.5 On an overall
basis, then, United's contribution per acre was 10 times as great as
the average return to the local economy from other farm activities.

The contribution per man employed by United Fruit was more than
seven times the national average in other farming occupations. The
company had 14,800 people on its payrolls or 2 percent of the esti-
mated 740,000 people employed throughout the nation. Production
per United Fruit employee worked out to $1,791 in 1955 as against
an average of $245 for all farm workers.

While the statistics are subject to many qualifications, estimates

5 This measurement (and similar ones later in this chapter) may overstate the
relative contribution made by United Fruit. Estimates of the value of total farm
output are probably based on prices at the farm, whereas the company's con-
tribution is based on an adjusted export value computation.

158

show that United's operations account for about 8 percent of the in-
vested capital in the nation and for about one-fourth of investment
in agriculture. Therefore, output per unit of capital was only a little
better than the national average, a fact that reflects the huge invest-
ment per acre involved in United's operations ($830 per acre for
United compared with an average of $32 per acre in other farming).
It is the huge investment made by the company that supports the
high level of output per acre and per man employed.

In 1955, United's exports accounted for 35 percent of foreign ex-
change receipts. Tax payments were unusually low in 1955 because
of the blow dealt to the company's production by a strike in 1954
and floods in 1955, but for the five years 1951-55, they amounted
to almost 10 percent of central government revenues.

Every available statistical measurement shows that the United
Fruit Company's operations made a substantial contribution to the
Honduran economy in the five-year period covered by this study.
In that period, the overall contribution averaged $35 million annually.
In contrast, dividends paid out to investors in the United States
averaged only $4.35 million, an 11 percent return on the book value
of the United Fruit Company investment.

Stable Contribution

Experience in Honduras during the five years 1951-55 provides
an excellent example of the stabilizing influence of the United Fruit
Company operations. Although the company's banana exports in 1955
were only slightly more than half what they had been in normal
years, primarily because of floods, United rather than the Honduran
economy bore the brunt of this loss. Wage and salary payments
actually increased as the company set about rehabilitating planta-
tions. The overall contribution of the company's operations declined
by one-fourth — but about half the decline was accounted for by
a reduction in inventories and lower imports of fertilizers, chemicals,
and other materials.

In all, a reduction in United's earnings from exports during 1955 of
almost one-half from the previous good years was accompanied
by a decrease in its direct payments to Honduras of only about
one-eighth. In other words, U.S. investors and foreign suppliers
absorbed three-fourths of the adjustment, whereas only about one-
fourth had a direct impact on the local economy. This illustrates one
of the major advantages of foreign investment to the host nation —
risks of loss as well as actual losses are shared.

159

Chart XVIII

Sources and Uses of the

United Fruit Company Contribution to the

Panama Economy in 1955

The United Fruit Company
in Panama had receipts from
all sources totaling:

$43,300,000

Two-thirds of that amount
remained in Panama:
$43,300,000

new capital p
investment 1

other exports]

domestic

sales

banana
exports

15,000,000

2,500,000

7,500,000

2,800,000

5,300,000

10,200,000

{ paid out as dividends*
( remitted to the U. S.

inventories and misc.

imported goods

and equipment $28(300,000

local purchases

taxes and duties

wages and salaries

remained

in
Panama

*No dividends remitted in 1954; 1955 dividends covered both
1954 and 1955 operations.

PANAMA

UNITED FRUIT OPERATES two divisions in Panama,
one at Almirante on the Atlantic side and the other at Armuelles on
the Pacific. In 1955, Armuelles was the company's top division — it
shipped 6.6 million stems from 22,000 acres and had the lowest-cost
and the best-quality bananas. It was in every way a prosperous and
active division with good housing, and all buildings and grounds kept
up in fine fashion. Armuelles is located in Chiriqui province, the most
advanced agricultural area of the nation and one that has a thriving
cattle industry.

The Bocas Division at Almirante presents a dramatic contrast. It
is being rehabilitated after having been completely out of banana pro-
duction from 1936 to 1953. Bocas was one of the large fruit producers

160

early in the century, but Panama disease struck in 1911 and com-
pletely wiped out production by 1936. Some abandoned banana land
was planted in cacao. In 1950, the company decided to re-establish
banana production in the Bocas Division by use of flood fallow. Since
rain is virtually continuous in that area, the building of dikes for
flood fallow involves most difficult engineering operations in moving
mud and muck under extremely unfavorable conditions. In 1955,
12,000 acres had been planted and shipments reached 1.7 million stems.
The goal is 17,000 acres and 5 million stems a year. The hope was
that flood-fallowed lands would produce in volume for an average
of at least five years before flooding would have to be repeated. How-
ever, many farms have become infested with Panama disease in two
years or less. So the future of Bocas hangs on the company's ability
to combat Panama disease successfully.

Contribution to the Economy

United Fruit's overall contribution to the Panamanian economy
totaled $28.3 million in 1955 and averaged $21.5 million in the 1951-55
period. The company's earnings from Armuelles were unusually high
in 1955. However, the major portion of these earnings were, in effect,
reinvested in the rehabilitation of Bocas. From the standpoint of the
Panamanian economy, United Fruit's operations yielded more in 1955
than the company earned from exports. Thus, banana exports were
valued at $25.2 million and cacao brought in another $900,000, while
the company's contribution was $28.3 million.

Comparisons With Other Activities

United Fruit owns or controls a bit more than 2 percent of the
nation's total agricultural land and its plantations account for 4.5
percent of all crop lands. About 4 percent of the labor force is em-
ployed by the United Fruit Company.

Unfortunately, the statistics necessary to compare the amount left
in Panama by the company's operations with alternative activities
are not available. A very rough estimate would place United's total
contribution at about 5 percerrt of total economic activity in the
nation. Its exports accounted for 72 percent of total export receipts
in 1955, and tax payments equalled 12 percent of the central gov-
ernment's tax receipts. The company's income tax payment — $4.6
million in 1955 — compares with the U.S. government payment of $2

161

million on the account of the Panama Canal. In overall terms,
United's contribution to the Panamanian economy is probably 75 to
80 percent of that provided by net transactions with the Canal Zone.
The company's contribution per acre planted to crops works out to
$1,000 for 1955. No comparable statistics are available for local crops.
However, the value of output of rice, coffee, and sugar crops in 1954
is estimated at $15 million, while cattle slaughter was valued at
$6,850,000. In addition, production of local food crops might be esti-
mated roughly at around $20 million. These very rough calculations
would point to total agricultural production (excluding United's out-
put) of around $50 million, yielding an output per acre of cropland
of $80 per annum. That is less than 10 percent of the per-acre con-
tribution of the company's operations. Using the same rough esti-
mates, output per worker in local farming activities would come to
about 20 percent of the contribution per worker on United Fruit
farms.

United Fruit's Contribution to Development

Continued growth of the company's operations could make a most
significant contribution to the development of the Panamanian econ-
omy. In economic terms, Panama's problem is to develop new activi-
ties in the agricultural, manufacturing, and distributive fields to pro-
vide an expanding standard of living for a growing population.
Earnings accruing to the Panamanian economy from banana produc-
tion can provide an important source of the foreign exchange needed
to support general economic development.

GUATEMALA

THE UNITED FRUIT COMPANY enjoys the unenvi-
able position of being by far the largest private economic entity and
of contributing a major portion of foreign exchange earnings in Hon-
duras, Costa Rica, and Panama. In Guatemala, United Fruit is also
the largest private enterprise. However, its impact on foreign ex-
change earnings and on the economy generally is relatively smaller
than in the three countries already discussed.

As in Costa Rica and Panama, United Fruit operates plantations
on both coasts of Guatemala. The major operation is in the Tiquisate
Division on the Pacific side where the company has 18,000 acres in

162

bananas. In addition, the company has contracts with local producers
operating 10,000 acres.

Tiquisate has several notable characteristics. It is one of the plan-
tations where overhead irrigation is used — revolving nozzles on steel
towers spray a circle covering an area of 3.3 acres. The newer plant-
ings, however, are equipped with "under-tree" irrigation — small
sprinklers placed in concrete sockets arranged to provide an even
distribution of water among the group of plants served by each hose.

A second noticeable characteristic of Tiquisate, and one particularly
evident from the air, is that it is pock-marked by areas that have
gone out of production because of Panama disease. Unlike most other
divisions, where banana plants form a smooth and level lawn when
viewed from an airplane, Tiquisate is marked by patches where
bananas can no longer be grown. Each of these patches is planted
to corn or beans — virtually all improved land is in use. The company
rents land that has gone out of bananas to its workers or to others
for $1.00 per year (which is seldom, if ever, collected).

To turn to more technical considerations, banana production on the
Pacific side is subject to two main hazards: First, the advance of
Panama disease, while slower than in many other areas, is inexorable.
In general, a farm will last about 10 years before Panama disease
forces its abandonment. Flood fallow is not practical because the
porous subsoil would not permit flooding for an extended period.
However, the company holds enough potential banana land to main-
tain production by new plantings for 30 to 40 years at the current
rate of advance of Panama disease.

A second hazard is that of blowdowns. In the past 10 years, the
company has lost about half its potential production to the winds
that sweep in from the Pacific, usually in the month of May. Even
15 minutes of moderately heavy winds suffice to blow the entire
18,000 acres flat. It is thought that present plantings are in a "wind
corridor" created by air currents flowing between Guatemala's two
largest volcanos. New plantings are being made in the area between
present acreage and the ocean in the hope that these lands will prove
to be outside the wind corridor.

Bananas grown on the Pacific side are shipped by rail some 300
miles over the volcanic highlands and down to the Atlantic at Puerto
Barrios. That is by far the longest rail haul of any division. We shall
return to this point in a later section.

Bananera, on the Atlantic Coast of Guatemala, was for many years
one of the company's major divisions. Peak production of more than

163

6 million stems a year was reached about 20 years ago. Panama dis-
ease forced successive abandonments and, by 1955, exports had de-
clined to 400,000 stems.

However, a new contract was signed with the government in De-
cember 1956 which will result in the revival of production at Bananera.
The initial program calls for an investment of at least $5 million to
bring 5,000 acres into production. Most of the new production will
come from lands created by pump drainage. However, flood fallow
will be used to rehabilitate some lands formerly planted in bananas.
If the initial program is successful, it might be expanded in the future.
It might be possible to build new banana acreage by silting. And
success in flood fallow might make it economical to rehabilitate a
larger acreage. In addition, the company was in the process at the
close of 1957 of giving the government 110,000 acres of land on the
Atlantic side for use in a resettlement program.

Contract Operations

In 1955, the company was purchasing bananas from independent
operators who had 10,700 acres in bananas. As in other areas, United
provides sigatoka control and other services and buys acceptable
banana stems at a fixed price. About 10,000 acres consist of land on
which bananas are being grown as shade for new coffee trees. How-
ever, the inroads of Panama disease have been reducing the amount
of contract production near Tiquisate.

Standard Fruit has a substantial contract-purchasing operation in
the area around Retalhuleu (north of Tiquisate on the Pacific Coast) .
In 1955, Standard exported 400,000 stems. However, reports are that
Standard hopes to have 10,000 acres under contract by 1960 (as com-
pared with 6,200 in 1955). The usual contract obligates the Standard
Fruit Company to provide spray, technical and financial assistance,
and to buy acceptable bananas at stipulated prices, and the farmers
must sell exclusively to the company. Thus, the terms are comparable
to those in United Fruit contracts with independents.

Land-Use Problems

Experience in Guatemala emphasizes in dramatic fashion some of
the points made earlier about the importance of making the most effec-
tive use of abandoned banana lands. United Fruit donated to the
government a large tract of almost 100,000 acres on the Pacific side
(of which about 10,000 acres consisted of good banana land) to sup-

164

port the government's resettlement program. Most of this was un-
cleared land and Point 4 experts estimated that it would cost around
$150 per acre to clear the land and provide the necessary roads and
other facilities to move farmers onto the land. In addition, each
farmer was expected to take on credits of $1,000 to $1,500 to cover
the cost of seed, equipment, and other expenses of starting operations.
In all, the investment per acre was estimated at $800 to $1,000.

An investment of this magnitude represents a considerable drain on
the supply of investment funds in Guatemala. When you consider the
fact that the program calls for the establishment of 1,200 families in
the resettlement area, it is clear that the effort involved, while most
commendable, can make no more than a small dent in the problem
of agricultural development in the nation as a whole. And it seems
equally clear that every effort should be made to make the most
effective use of any abandoned banana acreage, in Guatemala or else-
where, to avoid the heavy capital costs of opening up new and un-
cultivated areas.

International Railways of Central America

United Fruit's relationships with the International Railways of
Central America (popularly known as IRCA) constitute a major —
and perhaps the major — source of irritation surrounding the company's
operations in Guatemala. In view of the considerable publicity these
relationships have received, not only in Guatemala but also in the
United States (as a result of a minority stockholders' action in the
U.S. courts), it may be useful to set forth our findings about IRCA.
In an important sense, the developments over the years provide an
interesting case study of some of the problems encountered by a large
foreign company in carrying out its business.

Without going into the complete history, the origins of IRCA can
be sketched this way. Set up, largely with British capital, IRCA
was a part of Minor Keith's ambitious plan to develop a railway net-
work covering all of Central America. By the early 1930's, IRCA's
rail lines extended from Puerto Barrios on the Atlantic Coast over
the central mountain ranges to the Pacific plain, and a connecting
line ran into El Salvador. At the time, the nation was better served
by rail than any of the neighboring Central American nations.

In 1933, however, the IRCA was virtually bankrupt. It had several
million dollars in obligations coming due in the near future and no
liquid funds available to buy new equipment. Moreover, the contract
signed between the government and United Fruit to establish banana

165

plantations at Tiquisate included a provision obligating the United
Fruit Company to build a port on the Pacific Coast. No satisfactory
port existed, and IRCA derived a major portion of its gross revenues
and an even higher proportion of its net revenues on the long-haul
business it received from transporting coffee and other products from
the Pacific side to the nation's major trade outlet at Puerto Barrios
on the Atlantic. Construction of a Pacific port would have led to bank-
ruptcy and subsequent deterioration of the IRCA. A Pacific port
would have benefited shippers on the Pacific side (though not as much
as might be thought off-hand, because ocean freight rates are so set
as to equalize the total cost to the Guatemalan exporter of rail and
ocean shipments via either coast). On the other hand, deterioration
of railway service would have handicapped the rest of the nation.

In this situation, IRCA officials had no recourse other than attempt-
ing to induce United Fruit to ship bananas from Tiquisate over the
300-mile run to Barrios. They demonstrated that such a long haul
was feasible and economical. United Fruit then undertook the task
of saving IRCA from bankruptcy and probably ruin by providing
financial aid and by getting the government to release the company
from the obligation to build a Pacific port. Governmental approval
was secured. In 1936, United Fruit put up $2.6 million to pay off
IRCA's obligations in return for a 3.5 percent note for $1.75 million
plus 186,000 shares of common stock. That stock acquisition, plus
the 17 percent which United held before 1936, gave the company
42.6 percent of the stock in IRCA.

The United Fruit Company has also invested $5 million in banana
cars and locomotives (or much more than the cost of a Pacific port)
to supply a major part of the rolling stock available to the railway.
These cars and locomotives are used by IRCA to haul other cargo
when they are not transporting United's cargo. Banana haulage ac-
counted for only 9 percent of IRCA gross revenue in 1955 (the peak
postwar ratio was 13 percent in 1953), so that United's equipment
is used much of the time to transport coffee and other cargo.

Under the 1936 agreements, United Fruit handles the spotting of
cars and the pickup and makeup of trains on its own rail lines. Com-
pleted trains are delivered to IRCA at Tiquisate. United agreed to pay
$60 per car of bananas moved over IRCA lines to Puerto Barrios; the
rate has been increased in later years to $90. United receives rentals
from IRCA equal to 4 percent of the book value of railway equip-
ment (5 percent on diesel locomotives). These rentals are less than
half the cost to IRCA of financing equipment purchases on its own.

166

And, in fact, the inherent risks of banana haulage might make it hard
for IRCA to get financing without a firm agreement with United Fruit.

Consequently, it would appear that the 1936 agreement was a life-
saver for IRCA. It may also have been beneficial to the Guatemalan
economy by helping to keep in being a railway artery that served to
move both imports and exports at lower cost than in neighboring
nations, and at a lower overall cost than would have resulted if a
Pacific port had been established.

Nevertheless, the arrangement was bound to create misunderstand-
ing and doubts on the part of the public. It set up a special arrange-
ment for United's bananas, with the company paying $60 per banana
car moved while competitors paid $130. A part of the differential
could be justified by the fact that the rental paid by IRCA for com-
pany-owned equipment was lower than conditions would have justified.
Moreover, the company spotted the cars and assembled complete
trains for IRCA to haul, whereas service to competitors involved
much shunting about of freight cars and assembly of individual
banana cars into trains. The determination as to whether the spread
in the rates charged United and those charged competitors was justi-
fied by cost differentials is a most complex and technical task.

However, even if it were completely justified, the special arrange-
ments made for United's bananas was certain to arouse public sus-
picion and create misunderstanding. It would have been far better
public relations to have set a uniform rate for all bananas and ad-
justed IRCA rental payments to cover the full cost of the use of
United's equipment. The company's investment in IRCA has been
a major handicap in its dealings with the government and in its
reputation with the general public. Every time a train is late, or a
rate raised, or a passenger train shunted to a siding to let a
banana train by, the public blames United Fruit. There is a widely held
belief that rates are far too high and that the railroad yields huge
profits. Actually, rates averaged 5.11^ per revenue ton-mile in 1955,
lower than rates in neighboring nations, and IRCA's net earnings av-
eraged nine-tenths of 1 percent of its invested capital in the 1951-55
period. Yet the belief IRCA does not serve the national interest persists.

With the benefit of hindsight, it would seem that the company
should have sold its interest in IRCA years ago. In addition to the
continuing criticism emanating from Guatemalan sources, the position
of United as both an important stockholder and customer of IRCA
has been attacked by other minority stockholders of the railroad as
prejudicial to their interests. (A group of minority stockholders,

167

virtually all of whom are U.S. citizens, are suing on grounds that the
amount charged on United Fruit bananas was unjustifiably low. A
Referee appointed by the New York State Courts has handed down
a $5.5 million judgment in their favor which the company has stated
it will appeal.) Meantime, Guatemala is building a new highway
system which will parallel IRCA. Over the long run, the growth
in the national economy may provide enough traffic to enable the
railway to secure an adequate volume of traffic. The immediate
effect, however, will be to take traffic away from the railroad. Thus,
it may be difficult for the company to dispose of its holdings in IRCA.

Contribution to the Economy

United Fruit owns or controls less than 2 percent of Guate-
mala's land area. Acreage actually in use by the company or its

Chart XIX

Sources and Uses of the

United Fruit Company Contribution to the

Guatemala Economy in 1955

The United Fruit Company

in Guatemala had receipts from

all sources totaling: $20,900,000

ALL of the
$20,900,000* remained
in Guatemala, as ...

^~800 090 "SW

n'.t.UW.tyVV: ; j ;-;;•-:•;• -T,i|-;i,:

new capital
investment

domestic receipts

900,000 ~
5,000,000

inventories and misc.

imported goods
and equipment

local purchases
taxes and duties

wages and salaries

4,400,000

1,900,000

banana exports

8,700,000

'No dividends were paid by U. F. subsidiaries in Guatemala for either 1954 or 1955.

168

contractors amounts to slightly less than 1 percent of total agri-
cultural land. The company's total contribution to the economy,
including its purchased fruit, amounted to $20.9 million in 1955, a
figure that was about 5 percent above the average contribution in the
five years 1951-55. Total agricultural output was estimated at $200
million in 1955. Thus, United Fruit's contribution equalled 10 percent
of the total — or 10 times as much per acre as the national average.

As compared with coffee, the nation's largest crop, United 's contribu-
tion per acre is three times output per acre in coffee. Output per
man-day worked on United's plantations was two to three times the
average on coffee farms. The average daily wage on coffee farms was
$1.10 to $1.25 as against $2.25 to $2.60 on United Fruit farms.
Investment per acre (at today's prices) would run to $275 to $390
for coffee as compared with $1,200 to $1,500 for United's bananas.

The company's exports contributed $14.9 million to foreign ex-
change receipts, or almost 14 percent of the total. It paid $1,860,000
in taxes, 2 percent of total government revenues and 2.5 percent of
central government revenues. In general, therefore, United's opera-
tions have made a substantial contribution to the Guatemalan econ-
omy. The amount of money remaining in the nation as a result of
the company's operations is substantially greater than the economic
contributions made by comparable local activities.

ECUADOR

IN THE PAST DECADE, Ecuador has experienced
a phenomenal growth in banana production. In 1947, exports amounted
to about 2.7 million stems and bananas were a minor factor in the
local economy. Then the government started building roads from the
central highlands down into the fertile coastal plains. At that time,
sigatoka was not a problem in Ecuador. Thus, bananas could
be planted in the exceptionally fertile tropical lands merely by cutting
away the jungle, and grown at costs per stem far below the costs in
Central America where extensive disease control and irrigation systems
had to be installed. Bananas offered the ideal cash crop to support
the opening up of Ecuador's coastal plain.

By 1955, there were an estimated 284,000 acres planted to bananas
on more than 40,000 farms. That is more than twice the entire acre-
age United Fruit had in bananas in all its divisions throughout Cen-
tral and South America. Ecuador exported 23.9 million stems in 1955
—almost nine times the total exported in 1947. Bananas accounted

169

for almost three-fifths of the nation's exports and were three times
as important as coffee, which up to that time had been the lead-
ing export.

Thus, the development of banana production has provided major
support to the nation's economic development in recent years. Crop-
land in cultivation has been increased by more than 10 percent and
the basic facilities for further agricultural development in the low-
lands have been installed. Export earnings from bananas have given
the nation the growth in import potential needed to support general
development. Finally, and this may prove to be the most significant
fact, the banana boom has opened up Ecuador's Pacific Coast
frontier by demonstrating that the nation's greatest asset lies in
these fertile lowlands that can produce crops in competition with
any other tropical area.

United Fruit Share

United Fruit has played a minor role in this development. The
company began to produce fruit in Ecuador in the mid- 1930 's when
it set up a small division at Tenguel. Production rose from 234,000
stems at the end of World War II to 1,284,000 in 1955. In 1955,
United 's production amounted to only 2 percent of the national total,
and exports of company-produced fruit amounted to somewhat more
than 5 percent of total banana exports.

In addition to exporting its own fruit, United has been buying
bananas from independent producers on the open market. In so doing,
it has been one of 25 to 26 exporters, of whom five could be classed
as major exporters. Several of these exporters operate sizable plan-
tations. Under marketing practices prevailing in 1955, exporters
bought bananas in three ways: (1) The exporter's agent bought
bananas ready for shipment at the farm; (2) an independent buyer
bought small quantities of bananas from a large number of small
farms and usually arranged for shipment to the port where they were
sold at shipside; and (3) the exporter bought at shipside bananas
which farmers had transported to that point. During 1955, the com-
pany purchased 3.8 million stems in the Ecuadorian market. Thus, its
total exports amounted to 5.1 million stems or just over one-fifth of
the nation's banana exports.

In other words, United Fruit has been a relatively small factor in
the Ecuadorian banana industry. In contrast to the situation in Cen-
tral America or Panama, the company's major business has consisted
of purchasing bananas from independent producers in the open market

170

and exporting them to the North American market. Because of
the manner in which volume banana production developed in Ecua-
dor, it was in 1955 the only major exporting area where sizable
quantities of bananas could be purchased on the open market. The
United Fruit Company has operated as just another exporter, although
it has been one of the larger exporters.

Problems of Ecuadorian Producers

So long as bananas could be grown easily and cheaply in Ecuador
and so long as the world market would absorb increased supplies at
good prices, the Ecuadorian banana industry prospered. The extensive
blowdowns and floods in Central America in 1954 and early 1955
made it possible to market increasing quantities of Ecuadorian ba-
nanas. However, experience during 1955 placed in sharp focus the
problems the nation would have to cope with in continuing develop-
ment of the banana industry. These problems might well be summed
up under three headings: production, quality, and marketing.

The production problems are a result of the spread of sigatoka
through vast areas of Ecuador in 1955. It seems clear that farmers
will have to adopt control measures if they are to produce marketable
bananas. This will increase costs and may well rule out production
by the very small farmers who cannot afford the outlays for disease
control and by farmers operating hilly lands where disease control
would be too costly.

Efforts to control sigatoka by use of oil spray have apparently met
with success. This method uses only a fraction of the gallonage per
acre applied in Central America in the form of Bordeaux mixture.
Oil spray can be applied by mobile units drawn by tractors or by
airplane and helicopter. Thus, it is possible that the cost of sigatoka
control will be significantly lower than present costs in Central Ameri-
ca. (This may result in part from the fact that the disease seems to
be less virulent in Ecuador — it has not yet become a problem in the
Tenguel area.)

However, the advent of sigatoka plus the fact that Panama disease
is present should emphasize the importance of high productivity per
acre. To stand the cost of disease control, including the amortization
of the investment over the period before Panama disease hits, output
per acre will have to be increased.

As delivered in world consuming markets, Ecuadorian bananas are
frequently inferior in quality to those from other areas. The primary
quality problem is one of handling. In contrast to the tender care

171

with which bananas are handled in Central America, most Ecuadorian
bananas &re piled high on a truck, bounced over unimproved roads
often for 30 to 40 miles to the port, loaded on a lighter and then
transferred to a ship's hold in an open harbor. Bananas grown in the
Esmeraldas region are loaded on rubber rafts and floated down the
Esmeraldas River through a series of rapids. In the process of handling
throughout Ecuador, bananas are bruised and scraped. The problem
is intensified in periods when volcanic dust, which is peculiarly abra-
sive, blows down from the highlands and falls on banana areas.

As was explained earlier, one of the characteristics of the banana
is that the effects of rough handling are seldom apparent until the
banana ripens. Fruit that looks perfectly good in its green state in
Ecuador is decidedly inferior when it reaches the grocery shelf in the
United States. Compared with fruit from Central America, Ecuadorian
bananas after ripening show black spots, black streaks and areas,
and present a generally unattractive appearance. In many cases, the
pulp of the banana is not affected by surface defects. However, the
housewife has no way to distinguish between surface blemishes that
are no more than skin-deep and those which indicate serious damage.
Thus, Ecuadorian bananas will not sell well even at lower prices if
plentiful supplies of high-quality fruit are available. Even in periods
when supplies of high-quality fruit are relatively short, banana job-
bers -and retailers will take Ecuadorian fruit only at lower prices.

In addition, Ecuadorian bananas are inferior in size and quality
during the dry season since few farms are equipped with irrigation.
As farmers take steps to increase production per acre, many of them
may turn to irrigation, a step that will also maintain the quality of
produced fruit during the dry season.

The major measures that are called for involve the education of
everyone concerned in the importance of careful handling of fruit
at every stage. Much could be done by relatively simple and low-
cost measures to stress the need for care in every step of transporta-
tion from cutting to market. The simple act of washing the fruit
after cutting, which will be essential for sprayed fruit, might yield a
marked improvement in quality. However, surfaced roads may well
prove necessary to reduce damage during the journey from farms to
ports. A loan from the International Bank for Reconstruction and
Development of $14.5 million negotiated in October 1957 will help
improve the road system.

Steps to improve the quality of Ecuadorian fruit as it reaches con-
suming markets would go far to solve the nation's marketing prob-
lems. There is no reason why high-quality fruit from Ecuador would

172

Chart XX

Sources and Uses of the

United Fruit Company Contribution

to the Ecuador Economy in 1955

The United Fruit Company
in Ecuador had receipts from

sources t

otaling S

i
i
ba

15,600,000:

m,6oo,ooo SOURCES OF INCOME

:ame from
nana exports

and $2,700,000

ffl lAAftArt °* neW CaP't0' WOS

$1,100,000 mvestedby UFCO.

from VUU,UUU
domestic sales from

1] other exports

Dut of the
>1 5,600,000

$3,401

5,000 was

paid out in
dividends

USES

inventories and misc.
imported goods and equipment

local purchases

taxes and duties
wages and salaries

jjjf

—0.5 —
1.3

$12,200,000
remained in
Ecuador

5.9

1.8

2.7

*No dividends remitted in 1954; 1955 dividends covered both
1954 and 1955 operations.

173

not sell on a competitive basis in world markets. Emphasis on quality
would help lift Ecuador from its present position as the residual
supplier in the world market in the sense that Ecuadorian bananas
move readily to market only when floods or blowdowns cut produc-
tion in other areas.

However, marketing procedures within Ecuador may need to be
altered before the problems of producing high-quality bananas can be
solved. At present the producer assumes the major share of the mar-
keting risk. The price he gets for his bananas depends on the state
of the market when he has to sell his fruit. It may be difficult for
small or medium-sized producers to finance the costs of measures to
control sigatoka and improve fruit handling if they must face the
full hazards of the market.

One possible solution would be to work out a marketing pattern
along lines developed in Central America and Colombia. The ex-
porter signs a contract with the local producer under which the ex-
porter is obligated to supply disease control, technical assistance, and
often financial help, and in return agrees to buy all acceptable ba-
nanas at a price fixed once a year (arrangements can also be included
to provide a bonus to the grower if market prices rise above specified
levels or to reduce the base price if market conditions worsen).

Such a system would help stabilize the Ecuadorian banana industry
and would encourage investment to improve the quality of the fruit.
It would raise certain problems — small farmers, particularly those in
inaccessible locations, could not be brought into a contract system;
and production would probably be feasible only in a few of the areas
presently in bananas.

Contribution to the Local Economy

United Fruit's cultivated land equaled less than one-half of 1 per-
cent of the nation's total cropland in 1955; its acreage in bananas
represented less than 2.5 percent of the national total. The company's
contribution to the local economy in 1955 ($12.2 million) equaled
about 3.5 percent of the nation's total agricultural production. The
return to the local economy per acre of United's cultivated land was
four times the national average per acre, and United's banana acreage
yielded a return of 34 percent greater than the per acre results from
other banana plantings. Moreover, the return to Ecuador per acre
of United's banana lands was slightly greater than that from coffee
acreage and 75 percent higher than the average acreage in cacao.

174

United Fruit sales, of company-produced and purchased bananas
combined, accounted for 10 percent of the value of Ecuador's total
banana production and for 19 percent of its banana exports in
1955. United Fruit exports brought in 9.5 percent of total export
receipts from all products. The company had 3,000 workers on its
payroll, or two-fifths of 1 percent of the total working in agriculture.
The contribution to the local economy per worker was three to four
times the output per worker on farms for Ecuador as a whole. United's
tax payments amounted to 2 percent of central government receipts
in 1955. In contrast, its operations accounted for only seven-tenths
of 1 percent of national income, so its tax payments were three times
its relative economic weight.

COLOMBIA

THE COLOMBIAN OPERATIONS of United Fruit
differ from those in other nations in several notable ways: First, the
company's operations are smaller in relation to the total economy
than in any of the nations studied in this report. It owns or controls
less than a twenty-fifth of 1 percent of all agricultural land and
slightly less than 18 percent of all banana-producing land. Its
contribution in 1955 amounted to just over 1 percent of the value
of all crops produced in Colombia. Second, over 70 percent of the
bananas exported in 1955 were purchased from local producers under
a contract arrangement that makes the local farmers partners with the
company. Third, two local cooperatives compete with United Fruit
in purchasing and exporting bananas grown by local farmers. Fourth,
Panama disease has never appeared in the area where the company
operates for reasons that as yet baffle the scientists. And, finally, the
railway over which the company ships fruit has been owned by the
government since 1932 and operated by the government since 1947.
In a number of farms, trucks moving over black-top roads are used
to haul bananas to the main rail lines.

Brief History

The United Fruit Company exported both its own and purchased
fruit from Colombia from 1900 to 1942. The wartime shipping short-
age forced the virtual abandonment of the company's banana produc-
tion, and United exported no bananas in the five years 1943-47. The
management of United Fruit Company was reluctant to resume opera-

175

tions in Colombia after World War II. Prewar experience had been
marred by considerable controversy over payments to local producers,
as well as over operations of the Santa Marta Railroad and the
docks at Santa Marta.

However, a new contract was worked out with the Colombian gov-
ernment in 1947 which established a new and unique pattern of
operations. Under this contract, the company agreed to offer purchase
contracts to local farmers and provide sigatoka control and other as-
sistance to them. Purchase contracts obligate the company to take
all acceptable fruit at prices mutually agreed upon, to provide disease
control and other services, and to handle the marketing of bananas.
In addition, the company provides the financing necessary to set local
farmers up in banana production and to carry them when their banana
crops are destroyed by blowdowns (the major hazard) or other causes.
The company also gave up its management contract over the
railroad and ceded the wharf at Santa Marta to the government to
facilitate construction of a new government wharf.

The Colombian pattern of operations offers a number of important
advantages both to the company and to the local economy. The
company gets an assured supply of quality fruit with a minimum in-
vestment of its own funds. It escapes many of the risks and responsi-
bilities of operating farms and from the responsibilities of operating
a railway and a port. The cost of purchased fruit is comparable with
that of fruit grown on farms owned and operated by the company.

From the point of view of the local farmer, -a contract with the
company offers definite advantages. The disease control and technical
assistance provided by the company are important in increasing yields
and thus earnings. While the company provides an assured market
for quality fruit at reasonable prices, the farmer has the option of
shifting to one of the two local cooperative marketing agencies if he
is dissatisfied with his United Fruit contract. Moreover, the company
shares part of the risks both of marketing and of production in that
it buys at a fixed annual price and makes loans to rehabilitate farms
hit by blowdowns.

During 1955, United Fruit contracted with 225 local farmers
operating 12,900 acres of mature banana plantings and producing
3.6 million stems. On the average, local farmers received $260 per
acre in gross revenues during 1955 (with United handling disease
control, fertilizer and transportation). That was at least 50 percent
higher than the average gross return on coffee land where local pro-
ducers bore all costs.

176

Chart XXI

Sources and Uses of the

United Fruit Company Contribution

to the Colombia Economy in 1955

The United Fruit Company
in Colombia had
receipts from all
sources totaling-

SOURCES OF INCOME

$14.7
million

came from banana exports

$14.0
million

domestic sales .bu» there was «
brought in declme m caPlta|

million -$1.0 million

out of the
$14.7 million ..

881

w «*••«*

imported goods and equipment

local purchases

taxes and duties
wages and salaries

was paid out
in dividends

$2.0
million

$12.2
million

$6.2
million

^ ^

remained in Colombia

million

$4.6
million

offset by "^ decline in inventories
million Ond misc

*No dividends remitted in 1954; 1955 dividends covered both
1954 and 1955 operations.

177

Possible Future Pattern

Many of United Fruit's present and future problems in other nations
might well be mitigated if the general type of contract arrangement
with local farmers developed in Colombia could be extended to other
areas. Ecuador is an obvious example of an area where the contract
system might be extended to the mutual benefit of the company and
local producers. In other producing nations, it may prove more diffi-
cult to develop a partnership arrangement with local farmers. For
one thing, the technical and financial requirements for flood fallow
may make contract arrangements impractical.

Nevertheless, the merits of the Colombia contract system are so
striking that it would seem that every effort should be exerted to
extend it to other producing areas where conditions permit. Obviously,
United could not shift overnight into a full-scale contract opera-
tion. Yet it may well be that a long-run objective should be to en-
courage the maximum possible shift from growing bananas on its own
plantations to the system of purchasing bananas from local farmers
under mutually advantageous contracts. As the nations within which
the company operates develop, the opportunities for such arrange-
ments should expand. By adopting a positive policy of encouraging
local farmers to grow bananas, United might secure on a broader basis
the sort of benefits it now enjoys in Colombia. At the same time, the
local economies would benefit by the resulting strengthening in their
agricultural base.

Contribution to the Local Economy

Since United owns or controls less than a twenty-fifth of 1 percent
of all agricultural land and less than 18 percent of all banana-produc-
ing lands, its contribution is bound to be small in relation to the total
economy of Colombia. Nevertheless, comparisons with other activities
show that United's operations yield real benefits to the nation. Here
is how some of the comparatives line up :

1. Output per acre on land owned and controlled by United Fruit is
several times the average for the nation as a whole. Value added
per acre of United's bananas is more than 3.5 times as great as
the average for all cropland and more than 2.5 times the average
per coffee acre.

2. Gross return to Colombia from United Fruit operations in 1955
($12.2 million) works out to $430 per acre as compared with an

178

average return of $135 per acre for all land planted to crops
in Colombia.

3. Value added per United Fruit worker was 2.5 times as great as
for all agriculture and 1.5 times that in coffee.

4. United Fruit exports brought in slightly more than 2 percent of
the nation's total export earnings and almost three-fifths of for-
eign exchange receipts from bananas. Each acre of United Fruit
or contract bananas produced $700 of foreign exchange as against
$288 per acre coffee land.

5. In 1954, when United Fruit tax payments were unusually high,
they accounted for three-tenths of 1 percent of total government
revenues, or somewhat more than United's contribution of two-
tenths of 1 percent to Colombia's national income.

6. Comprehensive statistics on the relative return to people em-
ployed on banana farms and those employed elsewhere are not
available. In 1955, the average worker employed by United Fruit
on a daily wage basis earned $800 per year (the daily rate ranged
from $1.60 for unskilled labor to $8.00 for machine operators;
if you assume 300 days a year, the average is $2.66 per day). In
addition, United paid social benefits which amounted to one and
one-third times daily wage payments on the average (not includ-
ing housing and schools) :

Percent of daily wage

Sunday time 12.92

Holiday time 6.51

Sick time 3.05

Accident time 3.05

Vacation 5.74

Medical treatment 30.30

Ration carda 46.60

Shoes and overalls 0.007

Yearly bonus 11.50

Severance pay 11.50

131.177

* Basic food items, sold at frozen prices and below wholesale cost, are as follows:
beans (red and white), coffee, flour, lard, onions, potatoes, rice, sugar, spaghetti.

For comparison, the average daily wage on coffee farms ran to $1.70
in 1955. "Usual wages without board" for farm workers are reported

179

to have ranged from 80^ to $2.00 per day in the 12 Departments for
which statistics are available, with nine of the Departments averaging
$1.60 per day or less. While comparable figures are not available, it
seems reasonably clear that United workers are receiving in wage
payments and social benefits double or more the amount received by
other agricultural workers.

In summary, the comparative figures support the conclusion that
United Fruit's operations make a contribution to the Colombian
economy substantially greater than that provided by most local activi-
ties. While the company's contribution is relatively small in relation
to the total economy of Colombia, it makes a contribution in provid-
ing some small diversification in export earnings, and it makes a very
considerable contribution to the economy of the province in which it
operates. Consequently, it would seem clear that the returns to
Colombia from United Fruit's operations are sufficiently great to make
it definitely in the national interest to provide continued hospitality
to the company.

IN SUMMARY

A BRIEF PICTURE of the United Fruit Company
contributions to the six nations studied is presented in Table 20.
Because of lack of precision in the data, the comparative figures shown
are rounded. However, data difficulties are not sufficiently great to
vitiate the general conclusion that United 's contribution in every
nation is substantially greater per acre or per man employed than in
agriculture generally.

On a per acre basis, the company's contribution is from two to 12
times the national average in farming. On the basis of per person
employed, the company's contribution ranges from two to nine times the
local average in farming. Even when measured against export crops,
United's contribution per acre ranges from one and three-quarters to
five and one-half times that from coffee or cacao or other locally
financed export crops.

United Fruit's tax payments are substantially greater as a per-
centage of government receipts than the company's share in national
income, except in the case of Guatemala. And, in view of the fact
that virtually all United's land was created from swamp and jungle,
its tax payments (which amount to more than 10 percent of govern-
ment revenues in two of the nations) clearly represent a net gain to
the local economies.

180

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181

Consequently, this summary shows that the company's operations
in each of the nations studied measure up to the criteria set forth in
the opening section of this chapter. There we stated that for con-
tinued hospitality towards foreign investment it must be demonstrated
that the foreign investment makes a contribution to the host country's
economy that would not otherwise be realized and that compares
favorably with that of locally financed activities. The United Fruit
Company operations meet these tests fully.

182

The Company's Record in Social Welfare

FACTS AND PROBLEMS of a human and social nature
that are part and parcel of the banana business usually are not en-
countered by large companies operating in the United States. Some
of these problems arise from facts which have been previously noted.

All of the banana production is carried on in foreign countries and
the plantations are usually located in areas that were previously
undeveloped and in many cases practically uninhabited. The working
force, recruited from local populations, naturally has a somewhat
different background than it would have if composed of North Ameri-
cans. In most of the regions where plantations have been established
there were at the start none of the public and private services that in
more settled areas are usually provided by the local community, the
state, or local private enterprises. Among these are housing, health,
education, recreation, places for religious worship, retail merchandis-
ing, transportation, and communication. The United Fruit Company
has consequently found that provision for the needs of its workers
was a part of its obligations. As a result, its overall production pro-
gram includes many activities and organizational features that have
nothing directly or technically to do with the production and shipping
of bananas per se.

Another set of problems arises from the fact that the company, as
a large and integrated enterprise, operates in a number of relatively
small sovereign nations. Its program, therefore, not only must be
equipped to deal with governments and official agencies, but must be
sufficiently flexible to adjust to the varied shades of national public
opinion of the several jurisdictions.

It is true that for various reasons, mainly legal, the United Fruit
Company carries on its business through a series of subsidiaries oper-
ating in the respective countries, but these are known to be controlled
by the central organization. In informed and responsible Latin Ameri-
can circles it is also understood that such control and integration of
activities is required by the nature of large-scale banana production.
The fact that this aspect of the business is not always appreciated in
certain sectors of "public opinion" creates a number of problems.

183

Here we briefly review some aspects of the United Fruit program
that are oriented toward some of these human and social problems.

HOUSING

ACCORDING TO COMPANY SOURCES, about 60,000
persons were in the United Fruit work force in the six countries here
considered in 1956. Free housing is furnished workers and, in most
cases, to their immediate families or other dependents who live with
them. Several designs are used in workers' housing on the company
plantations. For the past several years, a program has been moving
forward for the eventual replacement of the older types of labor hous-
ing with one-family and two-family dwellings. On those farms and
divisions where the latter types of structures have been placed in use,
there has been a significant increase in worker morale and sense of
community responsibility. Again, according to company sources, the
newer type of single- family dwelling units now being built by United
cost from $1,500 to $2,000 each. On this basis, new housing for the
present work force would require a replacement investment of from
$90 to $120 million.

The older standard type of workers' dwelling units on the farms
may be described in the following general terms. As previously men-
tioned, each producing division is divided into a number of farms. On
each farm is a "camp" where the work force is housed. The camp
usually consists of four lines of barracks (barracones) , one on each
side of a large and open grass rectangle laid out as a soccer football
field. A barracks is a multiple-unit building constructed of sawn
lumber, usually painted light gray, and raised on stilts about 12 feet
above the ground surface.

In the majority of barracks, the contained dwelling units are oc-
cupied by single families, although in some camps one building is
reserved for bachelors. Generally speaking, a family has two rooms
upstairs, plus a kitchen and wash place to the rear on the ground
surface. The ground under the living rooms usually is paved with
cement and often the individual families screen this off into separate
units that provide each with a third room or lounging place. Toilet
and bathing facilities are provided in a separate common building
usually located at the rear of each barracks. The roofs of the
buildings are usually of corrugated galvanized iron or composition
material and are watertight, an important consideration in the tropics.

184

In the basic plan, a macadam road runs around the outer borders of
the central field and jn front of the barracks. Often there is a cement
sidewalk on the barracks side of the road, and in front of each dwell-
ing unit a small plot that may be planted to flowers. In the older
types of barracks, there is no electric light and no running water in
the kitchens. Light is furnished by kerosene lamps or candles and
water is obtained from a central outside faucet serving a single bar-
racks or several dwelling units. Even the older constructions, however,
are systematically sprayed with DDT, which effectively eliminates
both the danger and the annoyance of mosquitoes and other insects.
The older type of stove is of native pattern, consisting of a wooden
platform covered with a thick layer of clay on which a small wood
or charcoal fire may be built.

Improved barracks-type design includes electric lights, a water tap
and sink in the individual kitchens, screening of one or more of the
dwelling rooms, and toilet-bath houses provided with flush latrines
and showers. In some camps, there are separate wash houses where
the women may do laundry. In all camps, the water supplied to the
taps is safe for drinking.

There are many small variations on the basic barracks plan. The
most striking is at Sevilla, Colombia, where, because of the good ver-
tical drainage, the barracks are built of brick and on the ground rather
than on stilts. Most family units are painted a distinctive color to
set them off from their neighbors and the occupants have planted
small gardens around the doorsteps.

Present plans calling for the eventual replacement of the barracks-
type dwelling with single-family and double-family houses have two
basic designs. One is called the "airplane type" because of its appear-
ance from above. It is a two-family dwelling on stilts with a common
roofed stairway leading down to the kitchen in back. Each of the
dwelling's units has two rooms upstairs, and the space underneath
may be walled in to make another room. Each also has its own toilet
and shower, and there is a water faucet in the kitchen. It is reported
that the workers and their families rapidly learn to take care of the
private toilets and that these facilities need less service personnel than
the older public facilities of the barracks.

The newest type of worker's house is called "Guatemala type,"
"T-type," or "breezeway." It is a single-family dwelling built on the
ground rather than on stilts, with a cement floor. The living quarters
in front are connected by a roofed breezeway to a smaller structure in
back containing a kitchen and a small private bath and toilet room.

185

A small fenced garden space is provided at the side. At the Tiquisate
division in Guatemala these houses are prefabricated in central shops.
One can be erected in about seven and one-half hours and, in 1956,
they were being put up at the rate of about one a day. The Sevilla,
Colombia, one-family and two-family houses not only are constructed
of brick, but are of somewhat different plan, with cement floors and
gabled, corrugated, and composition roofs.

Whatever the type of dwelling, the cost of fuel is usually paid by
the occupant. During the past few years, the company has made
available, at cost or less, small efficient kerosene cooking stoves, and
these are rapidly replacing the older wooden-platform kitchen stoves.
Maintenance of buildings and grounds is provided at company ex-
pense. A sanitary squad regularly cleans up the grounds, collects
trash, and scrubs out public toilets and bathing facilities.

Usually a number of other buildings are associated with each camp.
Outside the rectangle of the workers' dwellings are located the houses
of the supervisory personnel. These are usually single-family struc-
tures surrounded by a fenced-in yard. Many camps have a commis-
sary store and a school house. If neither of these is present in a given
camp, one will be found at another camp within no more than two to
three kilometers' distance. Many camp communities have a workers'
club house, for which the company provides the building. And all
have some provision for showing movies at least once a week, either
in the open air, in the space under the raised barracks buildings, or
in the club, school house, or some other roofed space. A dispensary is
present, or one is located at some other camp a short distance away.
A camp settlement may also include other types of nondwelling
buildings, such as sheds and garages for machinery and vehicles, a
pumping station, a railroad siding and loading platform, and so on.

The basic patterns of housing sketched above are also provided
to workers living in division headquarters and other larger settlements.
Although in such centers the dwellings may not always be laid out
around a rectangular football field, the basic planning provides easily
accessible and large open spaces in all settlements. Nowhere are the
workers' dwellings crowded into block after block of solidly built
structures, such as are characteristic of many workers' neighborhoods
in Latin American cities.

Those familiar with living conditions of workers in the six countries
involved would need no elaborate statistical survey to satisfy them-
selves that the standard set and maintained by the United Fruit Com-
pany is, in material aspects at least, definitely higher than that gen-

186

erally available to native workers outside the company installations.
And the company standards are constantly rising. One problem, com-
munity development and morale, is recognized and will be discussed
later.

It was stated earlier that the vast majority of all United Fruit
workers in the producing divisions are provided with free housing. A
few exceptions should be noted to complete the record. In some of the
shipping ports, which are independent local communities, a portion of
the labor force, such as stevedores, live in private housing not provided
by the company. At various points along the north coast of Honduras
are groups of so-called Black Carib Indians who work at least occa-
sionally or periodically for the company but who, while doing so,
commute from the independent villages in which they live.

The housing of clerical, supervisory, and executive personnel is
equal, in most cases superior, to that available to persons of similar
income status in the United States. Except for single persons in lower
grade positions, who are usually provided with club-like dormitories,
such employees are generally furnished single-family houses sur-
rounded by private yards or grounds. The quality and size of the
accommodations rise with the employees' rank in the hierarchy, and
this pattern, of course, serves as an incentive for acceptable work and
promotion. The dwelling, its basic furniture, its maintenance, and
utilities are free, and the yard and grounds are cared for. And, in the
higher grades, house servants or an allowance to hire them, and special
furnishing are among the perquisites.

HEALTH AND SANITATION

THE EFFICIENCY AND STABILITY of a large labor
force in the low, wet tropics depend in large measure upon the ability
to maintain the people in good health. In addition to the health
hazards familiar to dwellers in the temperate zones, the jungle areas
from which the United Fruit plantations are carved present the con-
stant threat of malaria, yellow fever, intestinal parasites, yaws,
typhus, bubonic plague, and other tropical scourges. Effective meas-
ures must be taken to combat them and to control the conditions in
which they develop and spread. One of the basic, but often misunder-
stood, facts is that control of health conditions and treatment of illness
must in such situations be both comprehensive and coordinated —
provided either by the company or by a government agency. Neither

187

control nor treatment can be left to the individual discretions of the
workers or their families and the ministrations of private physicians
alone.

These problems were early recognized by the United Fruit Com-
pany. In the year of its formation, 1899, the company's first hospital
was opened in Bocas del Toro, Panama. Today, an efficient and far-
flung medical organization serves all parts of United's tropical
installations through hospitals, clinics, dispensaries, and mobile health
units. The services of qualified physicians, nurses, and pharmacy per-
sonnel are available to all employees. Medicines, medical and nursing
care, and hospital treatment are available to spouses and children liv-
ing on the plantations, as well as to workers on the regular payroll.
(Certain types of occasional and temporary workers are not offered
the full coverage, except in cases of accident or emergency.) This
medical organization is generally conceded to be the largest and best
qualified medical service under private auspices in the American
tropics.

United's medical service does not carry on an extensive research
program in tropical medicine, but it is often in the forefront in the
application of new findings. The results are indicated by a few typical
figures. In Guatemala, in the company's properties on the Atlantic
side, 21.9 percent of personnel were infected with malaria in 1929;
this incidence had declined to 0.3 percent in 1955. On the Pacific-side
properties, the incidence of malaria fell from 15.3 percent in 1938 to
0.2 percent in 1955. Between 1945 and 1955 in Costa Rica, admissions
of malaria patients to hospitals declined by 88 percent in Quepos; by
98 percent in Golfito; and by 99 percent in Limon. Yellow fever,
typhus, and bubonic plague are now practically nonexistent; yaws is
sporadic, but very rare. Dysentery and other intestinal afflictions are
somewhat more difficult to control absolutely, because their incidence
depends somewhat upon the personal habits of the people. They have
been reduced to a nominal rate, however, through the provision of
pure drinking water, sanitary disposal of human excrement and gar-
bage, and the provision of fresh vegetables grown under sanitary
supervision.

The general policy calls for medical examination of workers at the
time of application for employment. Those with chronic and infec-
tious diseases as a rule are turned down. In some divisions those with
early-stage venereal diseases are accepted, but are required to take
a free antibiotic treatment. In several centers, workers and their
dependents are periodically examined by X-ray and other methods

188

for tuberculosis, and infected cases are placed under treatment. This
pattern will be made universal as soon as facilities permit. These and
a variety of other measures of preventative medicine are oriented
toward the selection and maintenance of a relatively healthy working
population.

According to company accounts, its net cost (over and above con-
tributions from wages) for hospital service alone in the six countries
in 1955 was over $2,984,000. This does not include interest or depre-
ciation on capital invested in the facilities or the cost of other non-
hospital aspects of the program. In addition, the company's records
show that the sanitation service cost over $993,000 in 1955. Excluded
from this figure are capital funds laid out for camp drainage systems,
sewage disposal, and sanitary facilities in housing developments.

In Colombia, comprehensive coverage is given to the worker and
his family completely free. In the other countries, workers contribute
by withholdings from their wages. In 1955, such contributions of
laborers to the company medical program did not exceed 2 percent
in any country. (Employees with higher salaries in some cases con-
tributed proportionately more, up to 6 percent in one country.) In
some countries, the workers — and the company — were required to con-
tribute small additional amounts to the national social security pro-
gram. Because of the rise of national social security systems in the
various countries, a variety of detailed arrangements between the
company and public health services are involved, which it is not nec-
essary to analyze here. In no country, in 1955, was an individual
laborer required to contribute more than $5 or its equivalent per
month for comprehensive medical service to himself and those mem-
bers of his family living with him on company property.

All of the nations considered here with the exception of Honduras
have enacted national social security legislation aimed at eventually
making full medical and hospital services available to all the nations'
workers on a contributory basis. If and when such systems become
effective, and are extended to workers on its installations, the United
Fruit Company will be relieved of the necessity of maintaining its
own program, although it will contribute according to the legal rates
to the national programs. In an agreement made with the Costa Rican
government in 1954, the company offered to turn over its hospital and
dispensary facilities to the government, but as of 1957 the national
authorities had not exercised this option. The Panamanian social
security system was authorized by law in 1954 to extend its services
to the two United Fruit divisions in that country but, because of peti-

189

tions of the company's workers to the President of the Republic, had
not done so as of 1957. The labor unions took the position that their
members' contributions to the government system would cost twice as
much as the company program and cover only the worker, not his
family.

There has been no rivalry or criticism of the company's medical
and health systems by either organized private medicine or the
national social security systems. All of the medical and nursing per-
sonnel on duty in the six countries are nationals, although the majority
of the physicians have had some of their training in the United States.

EDUCATION

ANOTHER SERVICE usually provided by govern-
ment elsewhere, which United Fruit has been obliged to carry on at
its own expense, is education of the children of its laborers and other
employees. Free elementary schools are provided on all producing
installations at a total cost to the company in 1955 of $779,000. All
of the countries have legislation requiring compulsory elementary
education of all children, although the number of years of schooling
required varies. Colombia has the lowest legal minimum — two years.
The United Fruit Company complies with all legal requirements and
in most cases offers more than the prescribed minimum. School build-
ings are well constructed and equipped, and salaries offered to teachers
and administrative personnel are usually higher than in the public
schools off the limits of United's properties. In all headquarters settle-
ments and in some other locations, six-year schools are maintained
although the legal requirement may be only two or three years.

In several places — for example in La Lima, Honduras — parents have
organized secondary schools going beyond the sixth year. In such
cases, the company supplies the building and furniture and the
teachers are paid from private tuition fees. The company also aids
the education of employees' children in the United States. Provided
the parents can raise the funds for the first two years, United Fruit
pays the last two years of secondary school tuition and provides free
transportation from the tropics to the United States or Canada.

The standards of instruction in the company's schools are somewhat
higher than those prevailing in the average local elementary schools
of the countries concerned. The need for more vocational training in
the content of the curriculum is now recognized, however, and present

190

plans include provision of more workshops for boys and domestic
science equipment for girls in the company schools.

One problem, not"1 of the company's making, presents some diffi-
culties. This is the fact that national legislation has established mini-
mum ages at which children may be gainfully employed. In no case
is the minimum age less than 14. Most of the children are 10 to 12
years of age when they have finished the sixth year of school, and
three years younger if they have gone through only the three required
years. The result is that there is a gap of several years between the
end of school and the time when they can go to work, during which
time many children are somewhat at loose ends. Some of these chil-
dren obtain employment off the company properties where minimum-
age laws are frequently ignored by local authorities. But if they
remain with their parents on United Fruit installations, the company,
in compliance with the legal requirements, refuses to hire them until
they are eligible.

Although the United Fruit Company itself has not taken responsi-
bility for adult literacy training, it has actively and sympathetically
encouraged private efforts, through the provision of buildings or rooms
for night classes with the necessary furniture, blackboards, pencils,
and other equipment. In some locations, the labor unions have organ-
ized "anti-illiteracy" instruction on a voluntary basis. In others,
outside organizations dedicated to this sort of teaching for adults
have been of help. The classes meet at night and the workers may
attend or not as they wish.

Another type of education which the company has generally encour-
aged, although not under its own auspices, is the instruction of house-
wives in more modern and efficient household management than has
been their customary heritage. In a Honduran division, for example,
a number of social workers supported by one of the United Nations
agencies carried on this type of work for a time, with both govern-
ment and company approval. In other cases, religious workers have
occasionally taken part in this sort of work.

In addition to financing its own school program, upon occasion the
company also has made substantial financial contributions to schools
operated under outside auspices. For example, it contributed nearly
two-thirds of the cost of the new $100,000 government school erected
at Puerto Armuelles, Panama. In the same division, it contributed
in 1954 a dormitory which was turned into a convent and the land on
which was built a new secondary school operated by the Maryknoll
nuns.

191

A new program of education just getting into full gear at the time
of this writing has to do with labor relations. Heads of labor relations
departments in the company's various divisions are called together
periodically at some central location for short courses and discussions
with top-level personnel from New York and Boston. These meetings
are now being implemented by intensive programs of training foremen
(capitanes, capitaces, etc.) at the "grassroots" level. It is realized
that advanced principles of labor relations are of little value if under-
stood only at executive and management levels, and need to be put
into actual practice by the supervisory personnel in intimate daily
contact with the workers.

AGRICULTURAL TRAINING

THE PANAMERICAN AGRICULTURAL SCHOOL at Za-
morano, Honduras, is an educational activity of the company that
has nothing directly to do with the education of the families of its
own workers and employees. But through it, the United Fruit Com-
pany has made an outstanding contribution to Spanish American
agriculture. This Escuela Agricola Panamericana was founded in
1942 by Samuel Zemurray, then President of the United Fruit Com-
pany, as a practical symbol of the company's appreciation for the
collaboration of the Spanish American people.

A good automobile road leads southeast from Tegucigalpa, the capi-
tal city of Honduras, and after crossing a mountain ridge at 5,100
feet dips into the broad valley of the Rio Yeguare. The valley has
an average elevation of 2,400 to 2,700 feet above sea level. Here lie
the neat buildings of the School, made of volcanic tufa in Spanish
colonial style. Under the direction, until recently, of widely-famed
Dr. Wilson Popenoe, the institution has an attendance of 160 young
men between the ages of 18 and 21, selected from applicants all of
whom must be Spanish Americans. None of the graduates is allowed
to enter the employ of the United Fruit Company.

The boys, who come from various strata of society with agricultural
backgrounds, follow a three-year practical, vocational course in all
aspects of farming and farm management. About half the training
at Zamorano consists of actually working in the fields, gardens, and
animal barns — a program intended not only to increase the students'
technical knowledge, but also to overcome the traditional Latin Ameri-
can feeling that work with the hands and the soil is demeaning.

192

Although a few win scholarships for further study in the United States,
the great majority return to agricultural work in Spanish America.
They are in great demand as agricultural extension agents and also
as farm managers.

The School, which has won excellent standing in international agri-
cultural circles, is maintained entirely at United Fruit Company
expense. An applicant must have six years of elementary education
and preferably about two years of secondary. Once he is accepted,
the School pays all his expenses, including travel from his home,
clothing, board, room, even haircuts. (The chief barber in 1956, by
the way, was the famous Honduran "primitive" painter, J. Antonio
Velasquez.) The average cost per student in 1956 was $1,400.

As of 1956, the United Fruit Company had invested over $6.5 million
in the School, including cost of land, buildings, equipment, libraries,
laboratories, and the cost of operation — which at present runs to about
$250,000 per year. The policy has been steadfastly maintained that
the School is not for the training or improvement of the company's
own personnel, but represents an outright and disinterested contribu-
tion to the improvement of agriculture in Spanish America. As
Zemurray has said, "This was one way in which the United Fruit
Company undertook to discharge its obligation of social responsibility
in those countries in which it operates — and even to help others."

The students live in modern dormitory rooms that they care for
themselves. It is hoped that they will aspire to something as good
or better when they return home. Every day except Sunday they are
up at 5:30 a.m. and out doing practical work until 11:30. After lunch
and a siesta they attend classes from 1:00 to 4:00 in the afternoon.
Then they have two hours for sports, dinner at 6, and must be in their
quarters studying from 7 to 8:45. Lights are out at 9 p.m. During
the first year, they concentrate on horticulture; on field crops, the
second year; and animal husbandry, the third. The classroom studies
cover the fundamental principles of tropical agriculture, plus English
and simple applied mathematics. At first, the English courses were
concerned only with the development of reading ability, because much
literature of interest to farmers is published in that language. After
the early years, however, the students asked to be taught to speak
as well as to read English, and as of now all graduates are able to
carry on at least a simple conversation in English.

Zamorano was not designed to be a center of higher theoretical
studies or of basic scientific experimentation. It is dedicated to the
formation of a growing corps of trained and experienced farmers who

193

will disseminate their knowledge and techniques to their fellow Spanish
Americans. Between 50 and 60 students graduate each year.

The company's contributions to tropical agriculture made at the
Lancetilla experiment station in the Tela Division of Honduras, have
been traced briefly in Chapter VI. That research station was founded
in 1925 by the same Dr. Popenoe who formerly headed the School at
Zamorano. He had previously established a reputation as a plant
explorer with the U.S. Department of Agriculture. The Lancetilla
station, with a compound and farm lands of its own separated from
the producing banana plantations, carries on experimental plantings
and genetic studies of useful or potentially useful plants from all parts
of the tropical world with a view to adapting them to various condi-
tions in the Western Hemisphere and adding them to the agricultural
resources of Latin America.

Botanical and agricultural research primarily for the benefit of the
United Fruit Company takes place at the Research Institute for
Tropical Agriculture, located at La Lima, Honduras, with a staff of
about 100 scientists.

COMMISSARIES AND FOOD SERVICES

BECAUSE PRODUCING DIVISIONS are located in out-
of-the-way places, the United Fruit Company provides for its workers
certain consumers' merchandising and production services that in
other situations are usually in the hands of local private business. It
operates, on all of its producing properties, commissaries which are
there in lieu of private grocery stores and other retail outlets usually
operated by "small enterprises." To supply these emporia, the com-
pany in each country has become a large importer of foreign-made
consumers' goods, quite apart from its importations of materials
directly concerned with banana production.

The company is also a producer of consumer goods. At one place
or another, it is in the dairy business and not only manages extensive
herds of milk cows, but also pasteurizing and bottling plants. It is in
the meat business and maintains sizable herds of beef cattle, plus the
necessary slaughtering and processing plants. In some places it is in
the bakery business, and produces bread and pastries. It is in the busi-
ness of wholesale merchandising and buys large quantities of con-
sumers' goods on the local national market, particularly textiles,
clothing, and shoes.

194

It would be too much to say that these phases of United Fruit's
operations are exempt from criticism by local retail business interests,
chambers of commerce, and the like. The local business interests do
not claim that the company is dishonest, underhanded, or anything
of the sort, but they sometimes assert that such activities should be
in the hands of local merchants. Company officials agree, at least
informally, that such matters should not be the business of an organi-
zation whose main interest is the production of bananas. They feel
that the company would be better off if it could get out of such con-
sumer services once local enterprise demonstrates that it can fill the
consumer needs of company workers efficiently and economically.

For the six countries combined, company accounts show that its
total commissary sales have been averaging about $15.5 million per
year, which amounts to about 30 percent of their net pay receipts.
The commissaries regularly sell a variety of staple items at prices
below cost, sometimes under arrangements written into its labor agree-
ments. On an overall basis, however, the company tries to run its
commissaries without either a profit or a loss. We have examined
the commissary accounts for the six countries over the five-year period
from 1951 through 1955. They show receipts and expenditures in
almost exact balance for the period as a whole, with profits and losses
in individual years never amounting to more than a fraction over 1
percent.

This record makes two things clear. The first is that the wages of
United Fruit employees are appreciably upgraded by the privilege
exercised of buying so large a proportion of their supplies from com-
missaries operated on a break-even basis in countries where high retail
markups are usual. The second is that the company runs this phase
of its operation as an accommodation rather than as a business.

In addition to commissaries, United Fruit maintains slaughter houses
like the one in Sevilla where an average of one head of beef is killed per
day, about 400-450 pounds of usable meat. Here, as in other installa-
tions offering beef, two kinds of meat are provided. "Regular" meat
is the product of a beef carcass, including bones, sawed into chunks
with a circular power saw. "Cuts" in such cases are purely geometrical
— and the customer takes what comes his way. Conventional meat
cuts are sold to those who wish to pay a higher price. In Colombia,
company cattle herds, including dairy cattle, average about 3,000
head. A new pasteurizing plant was in operation in April 1956, serv-
ing the produce of 421 milking cows, milked with machines. The
plant makes its own butter for sale. In Colombia, according to the

195

Labor Code, each worker must be given free work clothes and shoes
twice a year, and to each new worker must be given a free machete
and shovel, to be returned if he quits within two months. In 1956, the
following staples were sold in company commissaries at fixed prices
much below those in surrounding independent shops (prices in centavos
of Colombian pesos).

UFCO
Item commissary Ordinary shops

Sugar (Ib.) 11 .25

Potatoes (Ib.) 12 .40

Lard 65 1.50

Coffee (roasted, ground) 96 1.10

Flour 20 .80

White beans 35 .40

Red beans 38 .40

Onions 20 1.50

Spaghetti 30 1.00

In the Golfito Division of Costa Rica, by agreement with the com-
pany, the national government established in 1956 a store for the
sale of essential foods. In 1956, the government store was operating
in a building rented to it by United Fruit. More are planned, and the
company professes itself as welcoming them, so that workers can
compare prices. In 1956, prices in company stores and the govern-
ment estanco averaged out about equal, even though the government
estanco was not obliged to figure overhead as part of the cost to the
consumer. By agreement with the labor union signed in October 1955,
the company undertakes to sell the following items at cost price:
coffee, rice, beans, sugar, lard, flour, powdered milk, rolled oats, kero-
sene, matches, files, and washing soap. According to the Costa Rican
Labor Code, the employer must provide all work tools and replace
them when worn out.

At Tenguel, Ecuador, according to an agreement signed in August
1954, the company agreed to sell certain basic foodstuffs at below the
cost price in Guayaquil: rice at 20 percent discount; sugar and coffee,
25 percent; oatmeal and lard, 15 percent; all other basic foodstuffs,
10 percent. Every worker here is also entitled to two pounds of meat
per week for each member of his family at about one- third the free-
market price. In order to allow "free competition" the company per-
mits a free market in Tenguel on Saturdays, which is attended by an
average of 50 merchants who come by launch from Guayaquil.

196

At the Tlqui'sate Division in Guatemala, the labor union signed an
agreement in 1955 whereby, in return for a wage raise, the company
was allowed to sell certain basic items at cost, rather than at a fixed
price below cost. These are corn, beans, rice, sugar, coffee, lard, and
some types of shoes. Here the company supplies meat through a
private contractor. Although United maintained a dairy herd of 118
cows and a pasteurizing plant, in 1956 it was producing an average of
only 710 liters per day for some 25,000 people. The deficit was made
up by imported powdered milk sold in the commissaries.

In both Panama districts certain basic food items are sold at cost,
nothing below cost. Here the cost is clearly indicated to the buyers
as invoice, plus freight, plus import duties and other taxes and licenses,
plus 10 percent for overhead. This itemization of cost to the con-
sumer, at least as of 1956, was not made so clear in other divisions.
If it were, some needless criticism might be eliminated.

In Honduras basic food items are sold at cost, including taxes,
plus 10 percent overhead.

From the company point of view these retail services and food
supply operations are a necessary nuisance borne for the convenience
and security of its workers and made mandatory by the general isola-
tion of its farms, and even division headquarters, from established
town or urban centers. As of 1956, all workers' purchases were made
in cash or on accounts to be settled monthly in cash. The company
did not permit the use of scrip or other discountable paper in the
settlement of commissary accounts.

IN SUMMARY

THE SERVICES provided by the company can be
measured by one or several yardsticks, and one's appraisal of per-
formance would vary widely depending upon which standard of meas-
urement is applied.

The newest type of housing in Tiquisate, Guatemala, would suffer
by comparison with the modern living quarters of a Detroit auto-
mobile worker. And it would probably come out second best if com-
pared with a new housing development for industrial workers in any
of several Latin American cities. But it is by far the best in housing
for agricultural workers in the tropics. Even the old barracks-type
dwellings are an improvement over the typical hut on stilts to be found
in the rural areas surrounding them.

Most problems arise and most complaints are heard from workers

197

living in the old, drab barracones. Most of the labor force comes from
rural isolated farms in the wilderness where in some cases the nearest
neighbors live miles away; therefore, they have no experience in
community living. When brought into close contact with other people
of the same background, and with shared facilities, difficulties are
bound to appear.

The new type of housing attempts to solve these problems by sur-
rounding each family with a greater degree of privacy. The company
is carrying out a program designed to replace all of the older struc-
tures within a period of 20 years. Unfortunately, this program cannot
be carried out with the dispatch that the workers would like to see
because of the large capital investment involved. Anything that could
be done to step up the program for construction of new, comfortable,
gay-colored houses to replace the old, depressing, grey barracks
throughout all the divisions would pay handsomely in better per-
formance by the working force and improved material well-being.

Workers sometimes complain of delays in making repairs. There
may be some ground for this in cases where normal maintenance
procedures have been curtailed because plans for replacing the houses
in question by new structures have been approved. There probably
have been occasions where the gap between promise and fulfillment of
new housing provisions has been longer than called for by the original
scheduling.

The workers and their families have not always taken full ad-
vantage of the improvements put at their disposal. To move from a
primitive shack in the jungle into a cottage with running water and
toilet facilities is a drastic change indeed. Unless trained personnel
is assigned the task of teaching these rustic people how to make the
most of their new surroundings, much of the expense and effort in-
volved can be wasted.

While the buildings and appointments of company hospitals hardly
could be expected to rival those to be found in the more modern
U.S. health centers, the performance record of the company's medical
services commands a very high rating. United Fruit has played a
pioneering role in introducing throughout this area effective procedures
for protecting the health of a large labor force working in tropical
lowlands that present formidable health hazards. The hospital at La
Lima can be catalogued among the best to be found anywhere in
Latin America.

The general impressions that register most strongly from our re-
view of United Fruit's performance in health, education, housing, and

198

general provision for its workers' welfare can be summarized as fol-
lows:

United Fruit's record in all of these fields is substantially better
than the prevailing standards for agricultural enterprises in the area.
In a number of respects, performance falls considerably short of
matching the more advanced standards of modern practice that have
been developed in countries like the United States. Despite the
evident, and increasingly intensified, effort of management to make
improvements, the company has not succeeded in fully disarming
local criticism, particularly with respect to housing. Most such criti-
cism comes from those who visualize it as a wealthy and prosperous
enterprise beyond limit, and have no realistic appreciation of the
pressure upon management to hold down costs from stockholders who
have legitimate concern over its relatively mediocre profits showing.

Perhaps the strongest impression is that of the enormous complex
of responsibilities that a company like United Fruit has been forced
to assume for activities only indirectly related to the business of
growing bananas. Faced with the necessity of organizing its pro-
duction operations in virgin wilderness areas of countries unable to
take responsibility for furnishing the normal complement of com-
munity services, the company could not avoid taking on multiple
activities that range far beyond the scope of the average corporate
enterprise. Inevitably, this has involved extra expense, administrative
burden, and above all ramification of the difficult problems of human
relationships.

There can be little doubt about the direction in which it is desirable
to move to free the company from the weight of paternalistic responsi-
bilities. The evolution will necessarily be gradual, but a clear policy
leading to the transfer of more and more of these nonbusiness activi-
ties to governments and communities will serve the long-term interests
of everyone.

199

Labor Relations and Public Relations

.HE ESSENCE OF THE PROBLEMS of the United Fruit Com-
pany in its relations with Latin American employees, the Latin Ameri-
can general public, and Latin American governments lies in the
fact that the company is at present controlled and staffed in its execu-
tive branches mainly by North Americans. These people are quite
naturally conditioned by value patterns dominant in the United States.
In order to carry on the production of bananas in Latin America, they
must come to terms with people — ranging from common laborers to
presidents of republics — who have been trained in a somewhat different
value system.

Latin Americans do not always see things in the same context as
their North American opposites. Their area is undergoing a phase of
sociocultural and economic development that frequently expresses
itself in terms of extreme nationalism and the rejection of anything
that, realistically or not, symbolizes for them the suggestion of foreign
domination or imperialism.

The basic problem of the United Fruit Company, then, insofar as
it concerns Latin American people, is to develop policies under which
the company can live with the Latin Americans to the mutual benefit
of itself and of them.

LABOR RELATIONS

WITH THE CHANGES — economic and social —
which occurred in Latin America during the late 1940's and early
1950's came the realization that the company's labor relations policies
should be made uniform in all divisions.

The present system of labor relations offices throughout the United
Fruit Company's tropical divisions was standardized early in 1956.
These offices were set up after a field study and recommendations
had been made by a labor relations expert of long experience who
had been retained by the company following a series of difficulties
that came to a head in 1954.

200

A company policy statement issued at the time stated: "Labor
problems of the last few years have convinced all of us of the great
need to examine our labor relations program. Those recent problems
and expensive strikes require us to assure ourselves that we are
doing everything possible to avoid discontent among our workers
which may result in strikes, stoppages or lowered productivity.
. . . All Division Managers realize that our policy of striving for
and maintaining the best possible relationships with all our em-
ployees is of vital importance. Our thinking and day-to-day labor
relations must be modernized and kept up to date. We must
recognize that great social changes are in process. It is essential
that we develop a fair and constructive policy of dealing with
labor."

As a result of this directive all divisions and most districts now
have a labor relations officer who devotes full time to the program and
the larger administrative centers have fully staffed labor relations
offices. Previously in some divisions no such office existed. In others,
grievances were handled by the company attorney or the superin-
tendent of agriculture, or perhaps the manager.

The newly established or reorganized labor relations offices proc-
ess new workers, do the formal hiring, and are required to keep
individual employment records for all workers. They are charged also
with seeing that close, friendly, personal contact is maintained between
the supervisors and the laborers. Similarly, the higher levels of manage-
ment are directed to seek more frequent personal contacts with the
laborers. An effective grievance procedure is set up, channeling through
the supervisor and superintendent to the labor office. In most places,
the labor relations officer now holds weekly meetings with the repre-
sentatives of the workers, even when there are no complaints to be
heard. The basic directive states: "Under no circumstances should
anyone be directly or indirectly hurt because he presented a grievance
to the company. Our primary emphasis must be to get rid of the
trouble — not the person who reports it."

The labor offices are also responsible for establishing procedures
to increase the efficiency of the work force through monetary and
other incentives, and for reducing turnover. In some farms, the turn-
over previously had amounted to 100 percent per year. And in many
the great majority of workers finish the agreed-upon task quotas
(tareas) upon which basic wages are set by laboring only four to five
hours per day. "We should encourage higher monthly earnings pro-
vided we get increased productivity. A worker with higher earnings

201

is a more satisfied worker who will stay on the job." The labor service
is also required to collect data for future collective bargaining —
statistical data on wages, monthly earnings, hours of work, cost of
living indices, wages being paid by other employers in the area and
in comparable industries, etc. And these offices are also charged with
inspection of safety and health programs, supervision of motion picture
programs, sports, labor clubs, and the improvement of worker morale.

The labor relations offices are subject to control by the manager of
each division, but are to be given equal status and prestige with other
departments, and are required to work closely with all departments.

Most of the decade ending in 1954 had been marked by a series of
strikes and labor troubles on company properties in Guatemala. In
that year a long and expensive strike took place in Honduras, where
company officials had thought that organized work stoppages were
almost unthinkable. In 1955, a large-scale strike at Laurel, Costa
Rica, was ended only after the company agreed to make important
concessions.

These and other labor troubles brought the realization that labor
was organized and capable of inflicting severe damage upon the com-
pany interests. Hence, the reorientation of policy. The nature of banana
production makes shutdowns far more costly to the United Fruit Com-
pany than they are to most industrial enterprises. The product is perish-
able, ripens continuously throughout the year, and must be harvested
and shipped according to very tight schedules. Furthermore, in most
sites sigatoka control must be maintained constantly. Any significant
stoppage in harvesting, shipping, and blight-control activities — all of
which require large numbers of properly coordinated workers — results
in serious financial loss, in addition to severe and lasting damage to
the company's public relations in the countries in which it operates.

At present, the company recognizes labor unions in all of its divi-
sions, and through its labor relations officers maintains continually
open channels of communication with union representatives. Where
the law or an agreement with the union requires it, the payroll office
collects union dues by checkoff from wages and turns them over to
the union. A few details may be given for each country to convey
some idea of the variations in the pattern of unionism in the com-
pany's several divisions.

At Tiquisate, Guatemala, the union has an executive committee
composed of nine secretaries, five of whom are changed each year in
elections. It has headquarters in a building on company property that
formerly belonged to a workers' cooperative that failed. In addition

202

to the general executive committee, each of the 24 farms in the divi-
sion elects four representatives to a general council. According to the
present labor code, th£ employer is obliged to check off dues, fixed
by the union at 1 percent of wages. Also the law guarantees the jobs
of five members of the executive committee during the year that they
are "on leave" from the company to serve the union. And, by agree-
ment with the union, the company provides free transportation of
union representatives from the farms twice a month to attend meet-
ings at the Tiquisate headquarters. The union here seems to be quite
independent of company influence. At the Bananera Division, which
has been practically out of production because of Panama disease,
there has been no union organization since 1954, although the com-
pany representatives state that they are willing to honor an agreement
signed in 1953 with the union, once the latter is reorganized. Puerto
Barrios in 1956 had an independent union of dock workers, and the
railway workers had a union of their own.

In Honduras, labor organization had not been authorized by the
country's laws from 1933 until after the strikes of 1954. As of 1956,
United Fruit workers were represented by three unions with which the
company bargains. The principal union, Sindicato de Trabaj adores
de la Tela Railroad Company, claimed a membership of 7,000, with
dues assessed at 2 lempiras ($1.00 U.S.) per month, collected directly
without a checkoff agreement. There is a subsection of this union
on each United Fruit farm and in each of its workshops, and each
subsection elects five representatives to a central "congress." Seven
members of a central executive committee are on the Sindicato pay-
roll, and the company grants them leave of absence while they serve
and agrees to rehire them when their union service terminates. The
dock workers, in Puerto Cortes, were organized in a separate union
claiming 280 members, as were approximately 300 mechanics and
machine shop workers.

In 1956, the situation in Costa Rica was complicated by the exist-
ence of three unions each competing for the allegiance of company
workers: Rerum Novarum (Catholic-inspired), Federacion de Traba-
jadores Bananeros y Anexos (FOBA), and Federacion de Trabaja-
dores Bananeros (FETRABA). The first was insignificant in the
banana business in 1956. As of that date, FOBA was strongly in-
fluenced by Costa Rican communists, and FETRABA was slowly
evolving, with many errors caused by the inexperience of its leaders,
into an independent democratic union. There is little doubt that there
is an active, well instructed, and intelligent communist element in

203

Costa Rica ready and willing to exploit the labor situation by all
possible means and at every opportunity. (One of our consultants
had long talks with two of the top leaders.) This indicates the necessity
of a high order of labor relations statesmanship in Costa Rica.

In Panama, company officials in both the Armuelles and Almirante
divisions refuse to recognize more than one union and have placed
effective blocks in the path of other organizations. Both of the com-
pany-recognized unions in these divisions are accused by a variety of
sources of being "tame" and company-controlled. The weakness of
union organization there was acknowledged to one of our interviewers
by company officials in Almirante, where in 1956 the union had fallen
into desuetude and the company representatives were making efforts
to revive it.

In Colombia, the banana workers union is affiliated with the national
Colombian Workers' Union (UTC), which in turn is a member of the
anticommunist International Confederation of Free Trade Unions
(ICFTU) and the Inter- American Regional Organization (ORIT).
Relations with the company are very good. The union collects dues
of two pesos per month (about $0.40 U.S.) plus an initiation fee of
three pesos. It has its headquarters in a building erected and
presented by the company, but which is located off company property
in a nearby town. The dock laborers in Santa Marta have their own
closed-shop union that is not affiliated with any national or interna-
tional association. It is one of the oldest labor organizations in Co-
lombia and bargains not only with United Fruit and its subsidiaries
but also with other banana export groups. There is no social security
coverage for the dock workers, and they have brought and lost three
lawsuits against the United subsidiary in an effort to force it to pay
pensions. In 1956, United Fruit officials were trying to work out a
joint plan for pensions in collaboration with the government and the
two national banana-exporting groups.

At Tenguel, Ecuador, the union was organized in 1944 by a local
small-businessman, a Socialist, who still continues to direct it.
The company, to help him, has given him the beer and soft
drink concession at the workers7 club, since he receives nothing
from the union. Dues of 5 sucres (about $0.25 U.S.) are collected
by checkoff. Only some 500 workers (of a total of nearly 2,000)
belong. The union formerly belonged to the Guayaquil Workers'
Federation, but withdrew because of communist influence in that
group. It is not currently associated with any larger organization.
Although not large, this union is not company-controlled and is quite
aggressive in negotiations.

204

Although some docks and loading facilities are organized on a
closed-shop basis, this is not true of any of the banana plantations
in the six countries.

Thus, the United Fruit Company recognizes and deals with or-
ganized labor unions in all of the six countries in which we made
firsthand studies. It has, however, had some misgivings about the
possible future implications of a general drive to affiliate the unions
with which it deals with ORIT. This organization of affiliated local
and national unions throughout Latin America was set up with the
help of the AFL-CIO, is supported by the Organization of American
States, encouraged by the U.S. Department of State, and is affili-
ated with the ICFTU which comprises most of the anticommunist
trade movement of the world. It was originally organized to offset
the influence of the Latin American Workers' Confederation (CTAL)
which has headquarters in Mexico and whose policies are strongly
influenced by the communists. Before ORIT, Latin American trade
unions had nowhere else to go if they wished to unite on a regional
basis.

United Fruit's fears concerning ORIT obviously stem not from the
latter's anticommunist position, but from the integrated, international
nature of the company's operations. If all the local unions with which
the company deals were united in ORIT, it is feared that any small
labor dispute of a local nature could lead to a general sympathy strike
throughout company properties in all countries where it operates, and
even interrupt shipments to and within the United States and Canada.
This is an understandable apprehension on the part of company policy
makers, although ORIT has to date threatened no actions of this type.
A dilemma, however, is created for both company and Panamerican
policy groups, which deserves attention and should not be too difficult
to resolve so that all interests may unite in forwarding ORIT's major
aim. Perhaps some assurance might be offered that ORIT will not
become an instrument for organizing international sympathy strikes
or hot-cargo embargos. Such assurance would go far toward removing
such doubts about ORIT as United Fruit and other internationally
operating enterprises in Latin America now entertain.

THE LABOR FORCE

THE HETEROGENEOUS CHARACTER of its WOrk f OrC6

raises other labor relations problems for United Fruit. As stated
previously, in the six countries we are concerned with the great major-

205

ity of laborers are Spanish American nationals, with the loyalties and
values of such people. However, a variety of ethnic groups is also
represented. Since the banana farms were originally located in
sparsely settled areas, in each instance practically all of the laborers
initially had to be attracted from more thickly populated sectors.

In the Tenguel Division of Ecuador, which is located in the low, wet
coastal zone southwest of Guayaquil, 68 percent of the workers in
1956 were migrants from the sierra — the inland, intermountain, high-
altitude region. Their move to Tenguel involved a considerable change
in climate and customs.

At Sevilla, Colombia, by contrast, most of the workers are from
the surrounding coastal region, which, although low in altitude, is here
much drier than at Tenguel, and there is little problem of acclima-
tization. However, the Sevilla work force is about equally divided
between mestizos and Negro-mulattoes.

The Panama divisions have the greatest variety of racial and
cultural backgrounds among their work forces. The Puerto Armuelles
Division in its Panamanian District (another district is located
in Costa Rica, but administered from Panama) has a labor force
consisting of mestizos and Negro-Panamanians in about equal propor-
tions, plus some 1,000 Guaymi Indians, and a few San Bias Indians.
In the 1920 's, the Almirante Division on the Atlantic side was so badly
hit by Panama disease that it was thought the company would have
to abandon its Panama lands entirely. However, it was finally de-
cided that bananas could be grown on the Pacific side and, in 1928,
operations began at the present Armuelles Division, an area covered
by tropical jungle interspersed with swamps. It was inhabited only
by a few scattered families debilitated by malaria, so that labor had
to be sought outside. Recruiters were sent into the mountains where
the Guaymis live, a population of docile Indians at that time with-
drawn from civilization. Many of them do not speak Spanish even
today. In the beginning, they were the principal labor force at
Armuelles, but now they are used mainly for sigatoka spray work.
Gradually the Guaymis are settling down, stimulated by the Labor
Code of 1948, that grants all workers a full month's vacation with
pay after each 11 months of steady work. Although they are an in-
dispensable element of the work force as presently constituted, the
company has not yet provided family housing for them; women and
children of the men live in barracks built for single workers. Negroes
and mulattoes working at Armuelles live in an unofficially segregated
company village near the beach, and are the most stable labor element
in this division.

206

The Almirante (Bocas del Toro) Division on the Atlantic side of
Panama presents an even more complicated picture. Here the prin-
cipal elements of the work force are Chiricanos (mestizos from
Chiriqui Province), about 1,200 Guaymi Indians (locally called
cholos and cricamoles) , some old Negro Jamaicans and their de-
scendants, plus an average contingent of about 300 San Bias Indians.
In 1956, a literate Guaymi was hired by the company to work
with his fellow Indians, teaching them to save their earnings,
to keep time, and to stick to one name. A source of seriocomic
annoyance, both here and at Armuelles, is the fact that the Guaymis
choose whatever English name tickles their fancy and think nothing
of acquiring a new one every week. The Guaymis here have their
own little farms in their home territory and tend to come and go to
their banana plantation jobs somewhat irregularly. They are steady
workers, however, when sober.

The San Bias or Kuna Indians constitute another significant
element of the labor force. They live a semi-independent life on
islands in the Gulf of Darien and the mainland fringe facing it.
They are tribally organized under their own chiefs and headmen.
The San Bias men join gangs or cuadrillas at home which are sent
to Almirante, usually for six-month periods, under the supervision of
their own leaders, who are responsible for their work and good be-
havior. In 1955, 386 completed their six-month contracts with the
company. Through agreement instigated by their tribal authorities,
half their pay is given to them while on the job and the other half
at the time they leave for home. This deferred pay allotment for the
386 men in 1955 was $72,391.01, or an average of $187.54. The highest
liquidation figure was for one group of 27 who collected an average
of $245.62 apiece. The company provides a bunk house and a cook
for each gang, and also pays the expenses (about $100 a visit) for
occasional trips of one of the tribal chiefs who comes to the planta-
tions to see how things are going with the men and to report back to
the tribe upon their welfare.

In the Golfito Division of Costa Rica practically all the workers
are whites or mestizos, about 70 percent Costa Rican, the remainder
Nicaraguan. Labor turnover here and at Laurel (a Costa Rican dis-
trict which is attached to the Chiriqui Land Company subsidiary and
is administered from Panama) tends to be heavy. Many of the
workers have small farms of their own in the interior, and come to
the plantations only a few months each year to make some extra
cash. The bulk of the labor on the Division at Limon on the north
coast — now closed as a banana operation but still producing cacao

207

— was Negro or mulatto. The government refused the company's
offer to resettle these workers on the Pacific Coast when it opened
new banana divisions there on the ground that it would
upset the racial pattern of the country and possibly cause civil com-
motion.

About 20,000 workers make up the labor force in the Honduras
Division. The great majority are Honduran mestizos, but about 15
percent come from other Central American countries, mainly El
Salvador. In the vicinity of Tela there are many Negroes, most of
them descendants of West Indians imported in the early days of the
development. Also scattered along the coast are several villages of
Black Caribs, who work for the company mainly as stevedores when
they have the opportunity. They also carry on some farming and
fishing independently and provide their own housing. A few Indians
from the interior have joined the work force, but they are acculturated
to Honduran ways, speak Spanish, and wear European-type clothing.
The bulk of the labor force here is stable, and there is little seasonal
migration.

On the Guatemalan plantations, practically all of the labor force
by 1956 consisted of Guatemalan mestizos (ladinos), settled down with
their wives and families. Formerly there was a heavy turnover of
highland Indians who came to the plantations for a few months to
earn extra cash. At Puerto Barrios on the Atlantic side, a high pro-
portion of the dock workers are English and Spanish-speaking Negroes,
mainly from neighboring British Honduras.

In view of this variety of backgrounds among the workers, with the
difference in languages, traditions, customs and levels of culture that
are involved, one can understand that labor relations officers and other
management personnel require a considerable range of knowledge and
sympathetic understanding to achieve results in winning the loyalty of
the workers to the company, increasing their motivation for produc-
tive effort, and minimizing frictions between its worker groups.

One further factor in the social changes affecting the problems of
labor relations needs to be mentioned here. This is the fact that all
the governments in recent years have established labor codes or other
legal labor regulations which guarantee certain rights to the workers,
whether they are organized or not. The company attempts to obey
the laws in all cases, but has recourse to the courts and other estab-
lished media of appeal against decisions it considers unjust.

Among the reasons for the rather tardy establishment of the pres-
ent modernized labor relations program was the feeling in the company

208

EMPLOYEES
AND THEIR FAMILIES

About 60,000 persons in 1955 worked for United Fruit in
Colombia, Costa Rica, Ecuador, Guatemala, Honduras, and
Panama. Together, they received approximately $53 million in
direct wages and $8 million in fringe benefits. Added to this
were free housing and the provision of supplies at break-even
commissaries which stretched take-home pay. The company
spent a further $4.25 million on schools, hospitals and infirma-
ries, welfare programs, and sanitation services. The places of
worship, recreational facilities, and athletic fields and equip-
ment provided for United' s workers are upon a scale matched
by few, if any, locally owned agricultural enterprises. And many
of the company's community services to workers are also avail-
able to members of other settlements that often grow up on the
fringes of company divisions.

WORKERS' CHILDREN enjoy
their introduction to the outside
world through movies.

EMPLOYEES of United Fruit
celebrate a fiesta.

HOUSING

SEVERAL HOUSING DESIGNS are
used on company plantations. Not all
are ideal, but all are a great improve-
ment on anything found on farms in sur-
rounding areas (as illustrated by houses
at right), and a program is moving for-
ward for eventual replacement of the
older multiple-type housing on company
plantations.

Free housing is furnished for the
vast majority of workers on
United Fruit farms and, in most
cases, their immediate families or
other dependents. Adjustment of
workers to community life often is
difficult since most of the labor
force comes from isolated farms,
where the nearest neighbors often
live miles away.

WHERE NEW single-family housing has been constructed, worker morale and the
sense of community responsibility have significantly increased. These houses have
roofed breezeways, private baths and toilets, electric lights, and gardens. Some
are of brick. Where old-style barracks still exist, the worker's family usually has
two rooms upstairs, plus a kitchen and wash place to the rear of the ground level
and a paved space for additional activities. Toilet and bathing facilities are in a
separate common building.

SEVING MACHINES made possible by
better-paying jobs, access to well-stocked
markets, and the convenience of elec-
tricity, running water, and the kerosene
stoves now widely used on Ijnited Fruit
farms make housekeeping somewhat
simpler than in many rural area* of
host countries, as seen at right.

THE HOUSING of clerical, supervisory- and executive personnel is equal in many
cases superior, to that available to persons of similar income status in the Lnited
Slates. The dwelling, its basic furniture, its maintenance, and utilities are free, and
the yards and grounds are cared for.

HEALTH

United* s first hospital was opened in 1899; today its medical organi-
zation serves all parts of its tropical installations through hospitals,
clinics, dispensaries, and mobile health units.

THIS COMPANY HOSPITAL has 300 beds divided among private and semi-
private rooms and wards, X-ray equipment, and a complete laboratory.

THE MEDICAL AND NURSING per-
sonnel on duty in the six countries are
all nationals, although the majority of
the physicians have had some of their
training in the United States.

WORKERS CONTRIBUTE, by with-
holdings from wages, for comprehensive
medical service for themselves and
members of their families living on com-
pany property in all six countries except
Colombia, where comprehensive cover-
age is completely free.

IN SEVERAL CENTERS, workers and their dependents are periodically examined
by X-ray and other methods for tuberculosis and infected cases are placed under
treatment. These, pre-employment examinations for chronic and infectious diseases,
and a variety of other preventive measures are oriented toward the selection and
maintenance of a healthy working force in traditionally disease-ridden tropical
environments.

VISITING NURSES from United Fruit
hospitals and dispensaries make daily
calls on convalescent patients.

THE JUNGLE AREAS in which
United's plantations are developed pre-
sent a constant threat of malaria, yellow
fever, intestinal parasites, yaws, typhus,
bubonic plague, and other tropical
scourges. One of the measures taken to
combat such diseases and control condi-
tions under which they develop and
spread is the spraying machine, con-
stantly at war with the mosquito.

EDUCATION

Free elementary schools are provided on all producing installations.
Although the legal requirements in the host country may be for only
two- or three-year schools, six-year schools are maintained in all
headquarters settlements, and in some other locations.

WELL-CONSTRUCTED SCHOOL
buildings are better equipped and the
salaries of teachers and administrative
personnel usually higher than in the
public schools off the limits of United's
property. Most teachers are nationals
of the host countries.

fr"*.i$

MS*

STANDARDS OF INSTRUCTION in
the company's schools are somewhat
higher than those prevailing in the aver-
age local elementary schools. However,
the need for more vocational training is
now recognized and present plans in-
clude the provision of workshops for
boys and domestic science equipment
for girls in the company schools.

PARENTS HAVE ORGANIZED secondary schools going beyond the sixth year
in several places and, in such cases, United Fruit has supplied buildings and
furniture. Also, the company has encouraged private efforts to undertake adult
literacy training through the provision of buildings or rooms for night classes with
the necessary furniture, blackboards, and other equipment.

COMMISSARIES

Because producing divisions are located in out-of-the-way places,
United runs commissaries in lieu of private grocery stores and other
retail outlets. The company stores regularly sell a variety of staple
items at prices below cost but, on an overall basis, United tries to
provide commissary services without either a profit or loss. Total
commissary sales have been averaging about $15.5 million a year.

AS STOREKEEPER, the company buys
large quantities of consumers' goods in
host countries — particularly textiles,
clothing, and shoes.

TO SUPPLY its stores, United also has
become a large importer of foreign-
made consumers' goods, quite apart
from its importation of materials direct-
ly concerned with its banana produc-
tion. And it not only maintains dairy
and cattle herds but also operates pas-
teurizing and bottling plants, slaughter-
ing and meat processing plants; and in
some places it bakes breads and
pastries.

MANY CUSTOMERS at the commis-
saries are more accustomed to buying in
open-air markets than in modern retail
stores, and to such activities as weaving
their own cloth and roasting coffee
beans at home.

RELIGIOUS

AND SOCIAL ACTIVITIES

The great majority of workers in
areas where United operates are
Roman Catholics. Church build-
ings for Catholic services are pro-
vided at company expense and., in
some instances, financial aid is
given to the priests. For members
of other organized sects, space for
services is given in schools or
other appropriate buildings.

AT THIS DIVISION CENTER, a Franciscan friar works with Boy Scouts.

HOUSING in practically all divisions is
built around large athletic fields, and
workers are encouraged to form sports
clubs and committees. Athletic fields
are built and playing equipment usu-
ally provided by the company.

t

WORKERS' CLUBS are built in accessible locations in all divisions. Provided by
the company, they usually have a dance floor, tables for games, a snack-and-drink
bar; and free movies are shown at least once a week in all workers' settlements.
Usually, the members choose their own officers and committees.

THIS SWIMMING POOL, at a
club maintained by the com-
pany, is convenient to em-
ployees' housing seen in the
background.

CULTURAL CONTRIBUTIONS

In return for the hospitality of
countries in which it operates,
United Fruit has made a variety
of contributions to Latin Ameri-
can culture.

I

ONE OF THESE was the restoration of
the ancient city of Zaculeu in western
Guatemala. Started in 1946, the site was
formally turned over to the Republic
of Guatemala in 1949 for the permanent
enjoyment of the public and for use by
students of Mayan civilization.

m

ANOTHER EXAMPLE is found in the
National Museum of Costa Rica in San
Jose. This 19th century institution was
refounded in 1948 when the government
provided an old fort as a site and in-
div' " -ials and groups — including United
Fruit— contributed funds, art objects,
Si and labor.

that its policy of high wages and fringe benefits through the years
had made such a setup unnecessary — its workers were already better
paid and better treated than labor of similar skill and training em-
ployed elsewhere in the countries involved.

At present, the company everywhere has a guaranteed minimum
daily wage for common, unskilled labor which in every case is sub-
stantially higher than the wages paid to other agricultural workers
in the several countries. Such workers may be paid by the hour
(spray work is usually so compensated), but more usually by the task
(tarea or destajo). The United Fruit Company laborers have been
and are better off from the materialistic point of view than other
similar workers in their respective countries. But even Spanish Ameri-
can laboring people apparently do not "live by bread alone." The
realization of the wider range of workers' wants and aspirations as
clearly expressed in the new United Fruit labor policy is an important
forward step.

Not the least of the problems of the new policy of dealing with labor
unions is the fact that there is a shortage of experience and training
among potential labor leaders of a democratic or free-enterprise orien-
tation. Some of the best informed and most practiced labor union
men are communist-oriented and have received training behind the
Iron Curtain. They know how to organize and administer a union,
how to "negotiate," and how to propagandize their followers against
the United States and the United Fruit Company as symbols of
"capitalism." Even many of the noncommunist leaders are still
dominated by the older European notions that management-labor
relations can only be characterized by constant struggle and conflict.
The newer philosophy, that collective bargaining is directed toward
finding a common ground of higher production and the sharing of its
benefits by both sides, has not been widely diffused as yet in the area.
Under Point 4, scholarships were set up for the training of selected
Latin American labor leaders in Puerto Rico. The United Fruit
Company has been cooperative in granting leaves of absence and
guarantees of re-employment to its men who have been chosen for such
scholarships.

COMMUNITY DEVELOPMENT AND MORALE

FOR MANY YEARS, the company has promoted an
active sports program for its male workers. As previously mentioned,

209

the dwelling units of practically all farms are laid out around a large
rectangular soccer football field. Under the current labor relations
policy, the sports program is being reinvigorated, with more encour-
agement given to worker initiative in forming sports clubs and
committees, arranging schedules, and so forth.

Formerly, four newspapers were published and given away free to
workers and employees; at present there are three, and it is a matter
of discussion how long they will survive. The papers are El Pacifico in
Costa Rica, with a circulation of 10,000; Nuevo Tiempo in Guatemala,
circulation, 13,000; and Chirilanco in Panama, circulation, 15,000.
The relative lack of success of the company newspapers may result
from two factors. On the one hand, many workers are unable to read
well enough to appreciate the publications. On the other, the editorial
policies tend toward printing personal items and local sports news
with little attention paid to other events of more vital interest to the
workers.

Serious consideration has been given to the possibilities of setting
up some sort of home-ownership plan for workers, as a means of
increasing their stake and sense of pride in the community. However,
so long as Panama disease forces the periodic abandonment of farms
and moving of workers to new locations, any such plan seems to be
impracticable. As more and more workers are housed in one-family
and two-family detached units, it is believed that some of the same
results will be shown that could be expected from home ownership.

The company provides the buildings for workers' clubs which are
scattered about all divisions in accessible locations. The club usually
has a dance floor, tables for card playing, and a snack-and-drink bar.
Usually the members choose their own officers and committees. Free
movies are shown at least once a week in all workers' settlements,
and they are open to women and children as well as the workers
themselves.

Church buildings for Roman Catholic services are also provided at
company expense and, in some instances, financial aid is given to the
priest. The great majority of workers in most locations are Roman
Catholic. For members of other sects space for services is given in
school houses or other appropriate buildings, provided the sect is or-
ganized and responsible.

Various other plans for increasing morale and a sense of community
solidarity among the workers are being discussed by the management.
Among the possibilities is the employment of community development
workers who would help the women to practice higher standards of

210

housekeeping and to plan better balanced menus. Diseases caused
by vitamin deficiency are among the very few health problems of
workers and their families that remain unsolved. Another possibility
is the encouragement of voluntary committees or other organizations
which would enlist the interest and personal cooperation of the workers
in community affairs, such as fiestas, beautifying and keeping the
grounds clean, the promotion of night schools and secondary schools,
the development of savings plans, and so on. Community development
and the enhancement of worker morale are among the responsibilities
of the reorganized labor relations departments.

PUBLIC RELATIONS

A PUBLIC RELATIONS MAN with long newspaper
experience in the United States and in Latin America in 1951 was
retained to make a survey of the United Fruit Company's use of the
mass media and its access to influential sectors of public opinion in
the countries where it operates. As a result of this study, a public
relations department for Latin America was established in 1952, with
headquarters in San Jose, Costa Rica. It is headed by the same expert
who made the survey in 1951. The assistant director, also an experi-
enced bilingual journalist, is located in Guatemala City. In each of
the other four countries a local journalist is attached to the head-
quarters staff as a public relations man. The public relations staff
is directly responsible to the president of the company in Boston,
rather than to the local division managers, although close liaison is
maintained with the latter.

As the director of Latin American public relations for the company
has stated, "Public relations is a preventative process, not a cure.
It must operate on a base of long-established and persistent dissemi-
nation of correct information, through every possible medium. Every
action of every employee of the company is a form of public relations,
good or bad."

Previous to 1952, press contacts and other public relations were
usually handled by the division manager or one of his deputies who
had no professional standing or experience in this field. By 1956, the
public relations department was operating through a number of media.
Close contact was maintained with reporters and editors of local and
national newspapers in order to help them get material for their own
stories about company activities. It was made clear that United Fruit
would not pay for complimentary articles appearing in the news

211

columns, but that its staff would do everything it could to assist news-
men to get the facts. The company established its own news and
picture service, which was distributed free to publications in the
countries where it operates and to a selected list throughout Latin
America. In 1955, a total of nearly 1,000 such items were printed
by the publications to which they were sent.

Formerly, paid advertising space in local media usually carried only
the company's name, together with an announcement or greetings.
The new policy involves specially written advertisements that give
information about the company's operations.

Informative pamphlets produced and distributed by the public rela-
tions department are of two kinds — annual reports of the operating
subsidiaries and educational publications. The first are distributed
to government officials and the general public and are designed mainly
to show company contributions to the national economy. The educa-
tional pamphlets are planned to promote a better knowledge of com-
pany operations among the public, but are especially aimed at school
children — the coming generation upon whose opinion the future repu-
tation of the company will depend. In 1955, some 4,000 copies of a
pamphlet about Golfito were distributed to the 1,747 public schools
in Costa Rica, as well as to public libraries and reading centers. A
contest was held for compositions by school children based upon the
pamphlet and seven winners were selected, one for each province of
the country. They were given a free trip to Golfito in March 1956.

Another successful method of promoting understanding of company
problems is arranging for study trips to the plantations. The usual
procedure is to invite a group of influential journalists, administrative
officials, legislators, and lawyers to take a two-day or three-day tour
through the company installations in the country. These are not
pleasure junkets, but carefully planned studies of problems and poli-
cies based on firsthand observation by the guests. Since the planta-
tions in all cases are located in areas remote from the capital cities,
many of the guests on these tours have never before seen them, but
have based their opinions of the company on rumors and often biased
propaganda. A special effort is made to answer all questions frankly
and to help the visitors to see anything they ask to see.

The new policy of public relations also aims at more personal con-
tact between working company officials and national citizens. Speeches
by managers and superintendents before luncheon and other clubs
have been one means to this end. In a few instances, conferences or
seminars have been arranged between company officials and local
leaders.

212

Other public relations programs include short news or sports features
on the radio under company sponsorship; display boards with photo-
graphs of company activities set up in hotel lobbies, store windows,
and other public places; cooperation with newsreel crews; and the
three company newspapers for its workers, previously mentioned.

In view of the vast amount of criticism and propaganda hostile to
the company which circulates throughout Latin America, any public
relations program has a heavy burden to carry. The present policy is
directed toward winning the confidence of the public and the molders
of public opinion and opening up channels of communication to them.
It would be desirable to check its effectiveness periodically through
polling or survey techniques or some other reliable method of public
opinion study. It might also be bolstered by some intensive field
studies of the sources of complaint and criticism and of the "image"
of the company held by its critics.

In the meantime, the public relations department continues to put
the facts as it sees them before the public and trusts that in the long
run the truth will have an impact. In earlier days, public opinion in
Latin America could perhaps be ignored, but over the years a con-
stantly increasing proportion of the public in each country has become
accessible to the mass media. It is essential that the United Fruit
Company's side of the story be heard if it is to continue to carry on
its production in a harmonious fashion in the host countries.

One aspect of public relations needs to be mentioned. This is the
isolated and not very well publicized contributions it has made to edu-
cation and culture. The Zamorano Agricultural School, for example,
has been shown to have a strong and beneficial effect upon Latin
American agricultural circles, at least. Mention should also be made
of the company-financed excavation and restoration of the ancient
Maya archaeological site of Zaculeu in Guatemala. Both of these
projects were undertaken at the instigation of Samuel Zemurray.

RELATIONS WITH GOVERNMENTS IN HOST COUNTRIES

IN THE BANANA-PRODUCING REGIONS here con-
sidered, the United Fruit Company must deal with six separate
national governments. Many other North American concerns that do
business across international frontiers in Latin America are able to
deal with their relatively minor government relationship problems in
a more or less routine manner. But the United Fruit Company has
special problems for a number of reasons.

213

In at least three of the countries — Guatemala, Honduras, and Costa
Rica — the company, in its own name and through its subsidiaries and
affiliates, is the largest single landowner, the largest single business,
and the largest corporate employer of labor. In Panama, although the
company is overshadowed by the Canal and its adjuncts, it is other-
wise the largest single business and, until the United States-Panama
treaty of 1955, its annual payments in taxes to the Panamanian gov-
ernment were nearly 10 times those made by the United States as rent
for the Canal. In Colombia and Ecuador, the United Fruit Company's
business assumes far less weight in the national economies, but it is
still large enough to be conspicuous.

Another problem arises from the fact that everywhere except at
Sevilla, Colombia, the ravages of Panama disease require the company
to control large areas of reserve land, some of which may not be in
cultivation at any given time. This requirement runs counter to vari-
ous laws and regulations intended to prevent the monopolization of
land and its withdrawal from cultivation. Therefore, special arrange-
ments have to be worked out between the governments and the
company.

Furthermore, in the past, the company has obtained concessions
very favorable to itself from governments. At various times and
places these have involved land at very low prices, exemption from
certain taxes and duties, relaxation of some regulations, and so on.
In some cases, these concessions have been severely criticized and
have become political issues within the countries. Government officials
negotiating with the company are subject to attack on the grounds
that they are "allowing a state within a state/7 or "ceding the
national territory to a private enterprise." There is little general
recognition of the fact that the extraordinary obligations assumed
by the company — in its higher than ordinary tax payments, its
provision of basic utilities and services, its not infrequent loans or
advance tax payments to governments and the like — generally out-
weigh by a wide margin the value of any so-called concessions written
into its agreements.

As the various countries develop economically and socially, new
political pressures appear. The rise of the labor movement has already
been mentioned. National businessmen, chambers of commerce, and
distributors want to know why they should not have the business that
is handled through the company commissaries. Local travelers and
shippers want the company railroads to be operated as a public utility
for their convenience. The list could be multiplied.

214

As a result of all these and other problems, United Fruit representa-
tives in the field occasionally fall into a self-pitying mood in which
they feel that the company serves merely as a large and conspicuous
punching bag for any local elements in need of venting a bit of spleen.
However, the United Fruit Company has so far shown itself generally
able to take care of itself — with the occasional moral support of the
U.S. State Department.

The most serious recent difficulties with a Latin American govern-
ment occurred in Guatemala during the communist-influenced regime
of President Jacobo Arbenz Guzman (1951-54). The crisis came as a
culmination of a series of disagreements dating back almost a decade.
In 1954, the Arbenz government, acting on the legislative authority
of its Agrarian Reform Law expropriated some 178,000 acres of United
Fruit Company lands and, following the letter of the same law, offered
to pay for them with 25-year bonds, to the amount at which said
lands were entered on the tax books, about $525,000. The company
promptly presented a claim for $15 million which, it said, was the true
value of the lands, and was supported by the State Department. Why,
then, replied the Guatemalan government with a logic that studiously
ignored any reference to the prevailing pattern of property tax valua-
tion appraisals, was not the company paying taxes on this valuation?

The whole issue of expropriation was dropped after the success of
the Liberacion, led from Honduras by Colonel (later President) Carlos
Castillo Armas — who was assassinated in August of 1957. It has been
widely rumored, throughout Latin America, that the United Fruit
Company played an important part in organizing and financing
Castillo's overthrow of the Arbenz regime. The available evidence
indicates that it had no part in it. The company had its hands full
in other affairs, and the attribution to it of the conception, financing,
and management of such a plot is perhaps paying the United Fruit
Company too high a compliment. However, the chain of events in
Guatemala illustrates the sort of political problems United Fruit must
be prepared to handle.

Following 1954, the company has developed a new approach with
respect to its relations to Latin American national governments. In
general this might be described as a "partnership" relationship, as
reflected by the statement of one of the national presidents who said:
"We feel that we are now in partnership with the United Fruit Com-
pany." Ecuador is the one country in which the United Fruit Company
is operating without a general contract agreement with the central
government. This not only reflects United Fruit's confidence in the

215

political stability and good faith of Ecuador in dealing with foreign
capital but demonstrates that it is possible to build up such confidence
on both sides through a record of mutually beneficial relationships
maintained over a period of years.

It is possible that the future will see a general evolution toward
the abolition of special contracts between foreign-owned corporations
and sovereign governments, except where specific permits are required
by law for a public-utility type of operation. However, because of
the record of political instability in some of the countries, the com-
pany feels that the added protection of a written document is essential.
One of the features of its newer contracts is the provision that the
company pay a 30 percent income tax to the local government. Cor-
porate income taxes are a relatively new institution in most of the six
countries. The fact that they now derive such considerable revenues
from a tax on the profits of United Fruit subsidiaries operating within
their borders gives them a new awareness of enlightened self-interest
in having these subsidiaries operate profitably. From the company
point of view, of course, there is genuine advantage in paying locally
all income tax assessments that are levied upon a nondiscriminatory
basis. Not only are such payments deductible from what would other-
wise be collectible in the United States, but also the good will derived
from a local stake in company operations is evident.

IN SUMMARY

THE HISTORY OF UNITED FRUIT, as we have
stated, is not a straight success story. Its signal contribution toward
converting the perishable banana into an important item of world
trade was a difficult and complicated endeavor. Many mistakes were
made before experience helped find the road to success, and the com-
pany— although at times one step behind instead of a step ahead —
has always shown great sensitivity to the need for keeping abreast
with the times.

The 1954 strike in Honduras intensified the company's awareness of
great social changes that were in process throughout Central America,
one of which was the rise of the organized labor movement. A need was
felt to re-examine the company's labor relations policy. After a survey
by experts, a modernized labor relations program was put into effect
and a system of labor relations offices took over a task formerly
administered as a part-time responsibility of company lawyers, super-
intendents of agriculture, or managers. It would be less than fair to

216

regard the change as a reform measure representing a complete
reversal of a formerly benighted company attitude towards labor.
Primarily, the new procedures provided a professional approach
through which the company now deals with its workers in modern
terms. It replaced a generally paternalistic and benevolent policy
under which the workers for years had received high wages and fringe
benefits.

One of the drawbacks in the new labor relations policy is the short-
age of field personnel with sufficient experience and training to digest,
and interpret in terms of local values, the excellent directives sent out
from expert sources in the United States. The remarkable progress
that has already been made in spite of this fact is a credit to the
sensitivity and understanding of men of good will turned labor rela-
tions experts with little or no previous experience.

One of the weakest points of the whole company setup still is the
inadequacy of communication between the company and the indi-
vidual worker. The fragilely elusive factor that, for want of a better
name, may be termed the human touch is not something that can be
established by pronouncements from headquarters. It depends im-
portantly upon the personality of the company's management repre-
sentatives in a given area as well as upon the temper of local labor
leadership. In some divisions, the directing management has been
able to instill a general feeling of mutual confidence into the day-
to-day relationships between workers and supervisory staff. In others,
although the same general policy codes and practices apply, there is
an atmosphere of arms-length aloofness that often magnifies rather
than dispels the issues inevitably arising in worker-management
relationships.

It is an excellent idea to publish company papers for free distribu-
tion among all workers. Unfortunately, those that are being published
are less than effective because they are so generally limited to pub-
lishing social news and other superficial items conveying the false
impression that life on a banana plantation is one continuous happy
holiday. There is some lack of psychological insight into the worker's
minds; seldom is an attempt made to discuss seriously the problems
and issues that are of basic importance to both worker and company
and to the climate of their relationship. It almost appears that
there is a conscious effort to avoid such discussion.

Neither has the company yet been successful in adequately telling
its story to the communities in which it operates or to the world at
large. The many positive aspects and valuable contributions to the

217

economies of the host countries are seldom heard over the loud clatter
of charges, most of them false or exaggerated, from the very vocal
opposition. Some publications have been issued in the past, in most
cases written without sufficient imagination and in too dry a style to
win general attention to the genuinely amazing story that the com-
pany has to tell. But in this field, also, there are signs of improvement.
In sum, the United Fruit Company is faced with the formidably
difficult task of finding a way to make the image of United Fruit
that exists in men's minds conform, in at least reasonable measure, to
its genuinely impressive performance record. It has made progress in
this direction in recent years, but there is still a long route to be
travelled. There is no magic formula beyond unremitting effort
applied with patience, sensitivity, and imagination.

218

IX.

Summary and Outlook

E HAVE ARRIVED at the scholar's lonely point of no return-
where we no longer can take refuge in the hypnotically comforting
process of assembling additional data but must discharge the harsh
responsibility of saying what the record means.

Our assignment was to appraise the operations of the United Fruit
Company as a case study of an important direct private investment
abroad by a U.S. business interest. We accepted it with full aware-
ness of the degree to which this company's name has become an
emotion-charged symbol in an old and continuing controversy over
the virtues and deficiencies of this form of investment as an instru-
ment for forwarding the development process in economic frontier
areas. Accordingly, we have tried to provide objective measurement
data as a substitute for subjective judgments wherever it was possible
to do so.

A fairly extensive literature exists dealing with banana production
and distribution in general and with United Fruit operations in par-
ticular. Yet there seems never to have been a serious attempt to
measure the overall value of this crop in world trade, let alone to
determine what portion of this value was left in the countries of pro-
duction and what portion was claimed by foreign investment interests
committed to production and/or engaged in distribution. Accordingly,
there has been, up to now, no valid basis for making an informed
judgment as to what banana growing has contributed to the producing
economies. Lacking this, there was no way to compare the profitability
of banana growing to producing countries with that of other economic
activities in which they engage, either with or without the participa-
tion of foreign capital. But, as set forth in Chapter II, we believe
that only if it can be clearly demonstrated that activities set up
largely by foreign interests can be shown to yield greater returns to
host countries than could be realized in their absence will a solid
case for extending hospitality to such foreign investment be estab-
lished.

The work that we have done furnished a basis for evaluating at
least the general dimension of the world banana trade and for appor-

219

tioning the incidence of costs and mark-ups for the successive steps
in production and distribution. With respect to the considerable but
shrinking proportion of world banana exports handled by the United
Fruit Company, we have been able to provide a very precise break-
down from the full access to its accounts that was provided by the
company.

There can be no reasonable doubt that the United Fruit Company
should be given major credit for developing to its present dimension
the international trade in bananas. Despite characteristics that would
place the banana among the least likely candidates for high ranking
as a world trade item — its exceptional susceptibility to disease and
disaster in growing, to deterioration or complete loss under anything
less than meticulously tender handling upon the most demanding
schedules of distribution logistics, and to the fact that no processing
methods have been devised to permit any considerable portion of the
world crop to be marketed in a form other than as a fresh fruit — the
volume of bananas shipped in international trade exceeds that of any
other fruit and decisively dwarfs that of all other fruits of exclusively
tropical habitat. In the United States, the largest import market,
bananas now represent about 1 percent of the total national diet
measured on a weight basis. The United Fruit Company, since its
incorporation in 1899, has played the leading role of pioneer in almost
every stage of development that has made this trade feasible — from
large-scale plantation production, through disease control techniques,
land and ocean transport, and sales promotion. Without the United
Fruit Company's initiative, it is highly unlikely that the world trade
in bananas would have developed to anything approaching its present
dimension.

MAJOR FINDINGS OF THE STUDY

THE MOST IMPORTANT MEASUREMENTS and valua-
tions supported by this study may be summarized as follows:

World Banana Trade in 1955: Measurement of Overall
Dimension and its Worth to Producing Areas

1. The value of the 1955 commercial banana crop of the world
at retail level was between $1.3 and $1.5 billion.

2. Only about 25 percent of the stem total was shipped across na-
tional boundaries and thus entered into international trade. But con-

220

sumers in importing countries paid almost $1 billion ($976 million
according to our estimate) of the total retail bill. Thus, the creation
of temperate zone markets for this tropically grown fruit has increased
the retail value of the entire commercial crop by from two to three
times, since a banana to consumers in the United States, England, or
Germany is worth about six times what it brings when sold to con-
sumers in Guatemala, Panama, or Ecuador.

3. North America and Europe combined provided all but a small
fraction of the world market for export bananas. The United States-
Canadian market was the outlet for 54 percent of all banana ship-
ments and Europe for about 37 percent. Together they absorbed
some 91 percent of world banana exports.

4. We estimate that the overall capital investment (upon a de-
preciated book value basis) committed to all phases of production,
transport, and distribution of bananas moved in world trade for 1955
was of the order of $1.5 billion, of which not more than 6 percent, or
$90 million, was supplied by investors native to the countries of
banana origin. (See Chapters III and IV for derivation of this esti-
mate.)

5. Despite this very low capital commitment of interests in produc-
ing areas, the return from banana exports realized by the economies
of producing countries amounted to approximately $263 million in
1955, or 27 percent of the retail value and over 72 percent of im-
porters' landed cost in the area of distribution. (See Chapters III
and IV.)

6. Of each dollar spent by North American consumers for bananas,
25^ represented the expenses and mark-ups of retailers; 24^ covered
jobbers' costs (including inland transport) and margins; 24^ the ocean
transport, unloading, wholesale selling costs and the profit return of
"importers" on all of their integrated operations, including their grow-
ing and purchasing activities in countries of origin, and 27^ the net
accrual to the economies of the producing countries. The 27 percent
return of retail selling price to producing economies is about in line
with the 37 percent of retail price that is realized by farmers in the
United States on their produce, when allowance is made for the 10^
out of the consumer's banana dollar that goes to ocean transport.

7. On a stem basis, United Fruit handled 59 percent of North Ameri-
can imports in 1955, and 10 percent of Europe's imports, or 28 percent
of the world total. From 1900 to 1909, the company had handled
from 72 to 85 percent of shipments to the two major importing areas,

221

and it never handled less than 50 percent until the outbreak of World
War II. Since 1939, its relative competitive position has consistently
declined, principally because of failure to hold its previous position
in the European market. The company's relative share of the North
American market, while holding comparatively steady since 1910, has
fallen markedly below the 77 percent average that it held for the
first 10 years after its initial incorporation (Chapter III) .

8. Six Latin American republics (ranked in order of the value of
their 1955 banana exports), Ecuador, Costa Rica, Panama, Honduras,
Colombia, and Guatemala, accounted collectively for 60 percent of
world banana exports in 1955, and were the source of 92 percent of
North American imports of this commodity (Chapter IV).

9. It is in these six countries that the United Fruit Company's
banana procurement operations are centralized. They were the source
of 95 percent of all of the bananas that United Fruit grew or pur-
chased for shipment in 1955, and 60 percent of all of their total ship-
ments for the year were handled by United Fruit.

10. From our study of banana prices and the combined effect of
price-times-volumes imported by the major North American market
since 1940 (see Chapter V), it is evident that this trade has been
markedly free of the violent fluctuations in returns realized by pro-
ducing countries that have been widely attributed to export businesses
based on primary commodity shipments.

lOa) Average annual prices for banana imports over the entire
period have shown a remarkably consistent upward trend, generally
in line with but somewhat more regular than prices of domestically
produced fresh fruits in the North American market. In the few
years that show a lower price for banana imports than in the im-
mediately preceding year, the decrease has been too small to have
a significant effect on the fortunes of the supplying countries.

lOb) When the total impact upon the exchange earnings of the pro-
ducing countries is measured by multiplying sales prices by volumes
shipped, it will be seen that in only two years of the measurement
period was there sufficient falloff in revenues to impose any consider-
able strain upon balance-of-payments yields to banana-producing
countries. In these two years, 1942 and 1943, the cause was clearly
the withdrawal of shipping facilities incident to the submarine block-
ade of World War II rather than any influence attributable to the
supply-demand situation in the banana market as such. North Ameri-
can banana sales in 1955 amounted to three times the value of such

222

sales in 1940, and the rise in banana prices over this period was
sufficient to allow selling countries to buy 45 percent more of United
States exports of manufactured goods in 1955 than they obtained in
1940 for a given volume of banana exports.

lOc) Although European banana prices have been more volatile
than the North American, the greater postwar volume increase in
European imports has been more than sufficient to compensate for
the decline in prices per pound that recently has taken place in this
market from the highs registered there from 1946 through 1952. In
no year from the end of the war through 1956 has the total value of
Europe's banana imports been appreciably lower than in the im-
mediately preceding year, and in all but two of these years substantial
gains have been registered. When European sales are combined with
North American sales, it is evident that the postwar trend of produc-
ing countries' return from banana shipments has been one of dramatic
increase unmarred by any years of substantial setbacks.

lOd) This remarkably steady growth trend in producers' realization
from banana exports as a whole has not been comparably consistent
for all banana-exporting countries considered individually. As our
study has shown, the incidence of such disasters as floods and blow-
downs has seriously cut into the export volume of particular countries
from time to time. Even when this has occurred, the impact upon
the economy of the country affected has been far less than might
logically be inferred. As has been illustrated in the accounting pre-
sented in Chapter VI of the impact of the 1955 flood in Honduras,
the brunt of the losses from such interrupted shipments tends to fall
most heavily upon the foreign-investment interests that are so heavily
involved in this trade. In this case, it was estimated that only one-
fourth of the total loss from a halving of United Fruit's normal
shipments actually represented decreased payments within the Hon-
duran economy.

While we have not pushed our investigation far enough to state
with assurance that these allocations are typical, there is at least a
strong inference that among the advantages accruing to host countries
from hospitality afforded to foreign investments is the fact that such
investments shoulder a share of loss-risk proportionately much larger
than the share in profits that they claim. This factor would appear
to be one of the more glaring omissions in a literature dealing with
foreign private investment that generally has been characterized by
the absence of any measurement discipline.

lOe) On the negative side of the stability picture, it must be

223

recorded that banana production for export has not proved to be a
uniformly enduring revenue earner for all nations which have engaged
in it. Among Western Hemisphere countries, Cuba, Jamaica, Mexico,
British Honduras, Nicaragua, Dutch Guiana, and the Windward
Islands bear witness to the fact that it is possible for such a trade
to be developed upon a significant scale and then to shrink to a small
fraction of its previous dimension or disappear entirely. Within certain
other countries, its locale has moved from one area within national
boundaries to another. The incidence of decimating banana diseases
has been the dominant factor influencing such disruptively costly
shifts.

There are, however, certain hopeful signs to indicate that banana
culture for export is outgrowing its itinerant stage. Effective methods
for keeping sigatoka under control are now in general use, and even
the hitherto inexorably lethal march of Panama disease may be
thwarted through flood fallowing or, at worst, through the planting
of resistant variety strains. The scientific methods for combating
these and other banana diseases and blights have been introduced
through the initiative of the United Fruit Company and other large
producers. Much still remains to be done to check these methods;
and if they prove to be less than fully effective, to mitigate the waste-
fulness of chronic abandonments of banana acreage, a problem to
which we shall revert later in this chapter.

We are confident that the above listed findings are substantially
proximate for the world banana trade as a whole, although the totals
have been derived from intensive studies only of the North American
distribution system (a 54 percent sample of the world trade in ba-
nanas) of the listed six-country producing area (a 60 percent sample
of the export market) and of the United Fruit Company (a 59 per-
cent sample of North American importers' operations and a 28 percent
sample of world importers' operations in 1955) checked against such
overall data on world banana production and trade as exist. The in-
escapable conclusions are:

• That the world banana trade is overwhelmingly the creation of
foreign private capital investment from the major importing
centers.

• That these same private investment interests have supplied the
initiative and the technology upon which the present dimension of
the world trade in this commodity has been built.

• That the benefits accruing to the local economies in the produc-

224

Chart XXII

Foreign and Domestic Shares

in the Banana Business

of the Six Countries in 1955*

Investment in
export bananas
totaled

$253 mill.

Total banana
exports were

$192 mill.

profits of
foreign investors

$26 mill

revenues
remaining in
producing countries

$166 mill

foreign investment
in producing
countries
$188 mill.

local investment
$65 mill.

*Dato token from chapter IV.

225

ing areas are about four and one-half times larger than their
proportionate contributions to the total capital investment upon
which the establishment and maintenance of this significantly
important segment of the world food trade depends. Upon almost
any criterion of reckoning, this constitutes a remarkably good
bargain for capital-poor countries faced with the problem of
financing an expanding economic development. Most scholars
who have worked in the development field calculate that any-
where from $2.00 to $4.00 of capital funds normally are required
to increase the annual production of an area by $1.00. Because
the major burden in furnishing the capital needed for the produc-
tion of bananas for export has been borne by outside investors, the
producing countries have been realizing $1.00 of return for a com-
mitment of their own scarce capital amounting to only about 34^.

• On every measurement basis that we have been able to devise,
the return realized by producing countries from banana exports
is extraordinarily high compared with any other agricultural
endeavor in which they engage. Acre for acre employed, banana
exports yielded to the local economies at least three times the
average return from croplands as a whole, and about five times
as much per agricultural worker employed. Banana exports earned
them from two and one-half to three times the foreign exchange
realized per acre upon coffee shipments, the largest gross export
for the area as a whole. When account is taken of the fact that
comparatively little local capital had to be employed to realize
the far higher and much more stable per acre returns from ba-
nanas, the preponderant advantages of offering hospitality to
foreign private investment in this field are irrefutably evident.

United Fruit Company Contributions to
Countries of Production

With respect to the United Fruit Company as a business entity,
we are able to measure with precision and in considerable detail its
economic impact upon the six countries in which all but a small
fraction of the bananas it handles are produced. Since (as set forth in
Chapters V and VI) the company produces a variety of other crops
in the six republics and none yields a profit to the company that is
comparable to that realized from its banana operations, the net return
to the local economies from its combined activities is higher when
related to its total business than for banana operations alone.

226

Our accounting of the total impact of all business that United Fruit
conducts in the six countries may be summarized as follows:1

1. The total invested capital of the United Fruit Company in its
subsidiaries operating in the six countries amounted to about $159
million.

2. The current account receipts of these subsidiaries were slightly
over $150 million ($122 million from exports and $28 million from
local sales). Current account expenditures totaled $122 million. The
profit of the subsidiaries upon current account operations was thus
about $28 million. Of this, something under $18 million was trans-
ferred in the form of dividends to the parent company.

3. Upon capital account, the subsidiaries had expenditures of about
$17 million. These were paid for by the $10 million of current account
earnings retained by the subsidiaries, and by new company investment
commitments to the area of almost $7 million.

4. The six local economies received the direct benefit of the com-
bined current and capital account expenditures totaling $139 million —
about $103 million in the form of direct expenditures for wages, taxes
and local purchases of goods and services, and $36 million of items
purchased abroad that were imported and put to use in the area.

5. Thus the total realized benefit accruing to the economies of the
six countries amounted to about 92 percent of the income of the
United Fruit subsidiaries operating within their borders, from exports,
local sales, fees, and miscellaneous earnings combined.

6. The dividend income drawn out by the United Fruit Company
of something under $18 million amounted to about 12 percent of the
subsidiaries' total sales and to about 11 percent on the depreciated
book value of its investment in these subsidiaries.

7. On the very important consideration of the effect on balance
of payments, the subsidiaries' foreign exchange contributions to the
local economies (that is, the total of export receipts and new capital
commitments minus foreign materials and merchandise imports added
to dividends transmitted) amounted to almost $76 million, or to about
62 percent of their total exports.

8. When the United Fruit Company's contribution to local econ-

1 For this accounting, we have used the combined average of all operations
of the subsidiaries in the six countries for 1954 and 1955. As explained in
Chapter V, advanced tax payments made by certain of the subsidiaries in 1955,
and the fact that dividends for both 1954 and 1955 were transmitted in the
latter year, would make an accounting based on the 1955 operations alone some-
thing less than fairly representative.

227

Chart XXIII

United Fruit in the Six Countries*

1954-55

Current Operations

TOTAL SOURCES
of funds
amounted to

156.8 139 was

new invest. |eff jn the

6 countries

27,1

122.5

iiiili

domestic
sales

fees

banana
exports

35.6

27.6
18.0

56.0

CAPITAL

COMMITMENT

TO AREA

159

inventories and misc.

imported goods
and equipment

local purchases

miscellaneous
taxes

wages and 17.8wOS

salaries remitted
abroad

dividends
withdrawn

'Figures in MILLIONS OF DOLLARS

228

omies is compared to the overall record of U.S. direct private invest-
ments in Latin America as a whole, as developed in studies made by
the U.S. Department' of Commerce, its comparative showing is defi-
nitely above average. This is particularly true with respect to its
foreign exchange contributions, as cited immediately above. When
compared with other U.S. direct private investments in agricultural
enterprises, the United Fruit record is outstanding upon every com-
parative count.

9. When the realization of the combined six-country economies
from United Fruit operations is compared with the return from their
domestically financed and operated enterprises, the contrast is even
more striking.

9a) On the measurement of yield per acre of land put to agricul-
tural use, the return from land owned or contracted to the United
Fruit Company was more than 20 times the average for all other im-
proved agricultural land in the area as a whole, and from United
Fruit cropland it was three times the average from all other cropland.

9b) On the measurement of yield per worker employed in agri-
culture, the returns from United Fruit operations were about five
times the average for the six countries. In all cases, the wages paid
by the United Fruit Company were substantially higher than the
average for agricultural employees.

9c) From its employment of one-fourth of 1 percent of all improved
agricultural land in the six countries, and from 2 percent of their com-
bined croplands, United Fruit operations have accounted for about
12 percent of total foreign exchange earnings, agricultural and non-
agricultural combined, for the area as a whole.

9d) For the five republics other than Colombia (where the United
Fruit operations are of insignificant weight in the economy as a
whole) , the taxes paid by United Fruit amount to more than 6 percent
of total central government revenues. The company's total tax pay-
ments in the six countries (to central and local governments combined)
have been running in recent years to a sum that about equals its
dividend withdrawals from profits earned in the area.

By every economic measure that we have been able to apply, the
contribution of the United Fruit Company to the economies of the six
countries is enormously advantageous when regarded from the view-
point of their national interest. The fact that it has been leaving
within the production area more than $7.00 for every dollar in profits
withdrawn is an impressive but perhaps not the most important factor

229

in determining the degree to which these host nations have gained by
offering it their hospitality. Of even greater significance is the fact
that the enterprise which the United Fruit Company pioneered, and
for which it has played a continuing leading role in developing large
temperate zone outlets, is one that is enormously productive compared
to any 'other agricultural pursuit in which these countries engage.
Because successful banana production and distribution in international
trade requires far heavier investment commitments than most other
agricultural products, it is doubtful that the trade would have de-
veloped to anything like its present stature if even the production end
had depended upon the local financing that capital-poor countries
could provide. Since the United Fruit Company furnished the major
capital and technological requirements for the establishment of this
type of agricultural enterprise, its operations in the six countries have
yielded a return to their economies several times larger per acre of
land and for each agricultural worker employed than any agricultural
activity developed through local initiative and capital financing. And
the growth trend in national realizations from United Fruit operations
has been far more stable than those obtained from the general agri-
cultural exports of the countries from which it operates.

From the studies of capital -out put ratios that have been made in
various parts of the world, it is difficult to conceive of any activity —
agricultural, extractive, or industrial — organized upon the basis of
capital supplied from their own resources that would have yielded
these countries a comparable economic return per dollar of national
investment.

The United Fruit Company has made numerous additional contri-
butions to the progress of economic development in the six countries
that are less amenable to precise measurement. Its enterprise has
opened up vast areas of low, hot, humid, and heavily forested terrain
that otherwise might have remained closed to settlement and produc-
tive use for many decades at best. It has supplied the basic facilities
— roads, railways, port and communication facilities, electric power
establishments, hospitals, and schools that have made this possible.
It has introduced modern scientific agricultural methods and equip-
ment, and has trained hundreds of thousands of the local inhabitants
in their use over the span of its existence. It has pioneered in the
introduction of the health and sanitation measures without which
operation in the banana-producing areas is virtually untenable. It
has played a leading role in the introduction to the area of new crops
such as African oil palm, abaca, and a variety of timber species that

230

have been far more profitable to the local economies than to itself.
It has vastly improved the available planting stock and cultural pro-
cedures in planting and maintaining others, like cacao, and has con-
tributed to the improvement of tropical agricultural practices in the
area of its operations in literally hundreds of other ways.

Upon all strictly economic measurements that can be applied, the
suggested test for justifying the worth of a foreign private investment
to host countries — by clear demonstration that it brings them greater
gains than they could have hoped to achieve without it — is answered
in terms too conclusive to admit debate. The analysis and summary
tables presented in Chapter VI show that the conclusion holds not
merely for its overall operations but for every one of the six countries
on which its core activity of banana production and procurement is
based.

It is appropriate to turn next to the evidence produced by our case
study of the United Fruit Company upon the second major test
suggested for judging the worth of direct private investments abroad.
The thesis set forth was that the continuing flow of private capital
funds to investments in economic frontier areas depended upon the
realization of earnings sufficiently higher than could reasonably be
expected from investment at home to compensate for the trouble and
risks inherent to such venture capital commitments.

Appraisal of the United Fruit Company as an Investment

The evidence, as set forth in Chapter V, makes it very clear that
the United Fruit Company, far from earning sufficiently high returns
to compensate for the risks involved in committing three-fourths of its
capital to areas of low economic development and high political in-
stability, has fared less well than the average U.S. enterprise of its
general size based primarily upon operations and investment in the
home market. Our findings upon this score may be summarized as
follows :

1. At the end of 1955, the United Fruit Company — with total assets
of $390 million, a stockholders' equity of $350 million, and with gross
sales of $288 million — ranked somewhat above the average size of the
500 larger corporations in the United States. There were, however,
scores of corporations in the list of a size that, compared with United
Fruit, reduced the latter to pygmy-like proportions. At least five of
United Fruit's own chain-store customers had total sales much higher
than its own.

231

2. Since it was organized in 1899, the profits after taxes of the
United Fruit Company have averaged under 13 percent on net assets.
We do not have a comparative base extending back that far, but the
13 percent average for its entire history may be compared with the
14.9 percent average return on net assets shown for 1,843 leading U.S.
manufacturing corporations in 1955 in a tabulation made by the First
National City Bank. For that year, the comparative showing of the
United Fruit Company was 9.8 percent. From 1928 through 1955, the
average profits of United Fruit were 11.1 percent on net assets, a trifle
higher than the average showing for the National City Bank's total
list of larger manufacturing corporations and a trifle lower than that
of its list of larger trading corporations. Needless to say, the level of
United Fruit's profits has run consistently far below the rates that
are considered tenable for local business enterprises in the Latin
American communities where its procurement operations are based.

3. On the more important factor of growth in earnings and capital
appreciation, the record of the United Fruit Company is definitely
substandard. The average annual earnings for the 50 industrial cor-
porations included in the Standard and Poor's list increased three and
one-half times between 1946 and 1955, and the average prices for
their stocks by three and one-third times over the same period. By
comparison, United Fruit Company earnings declined by more than
15 percent over this period, and there was no substantial appreciation
in the price of its securities upon the New York Stock Exchange.

4. There is a fourth finding from the evidence assembled in Chap-
ter V, that is not strictly relevant to the question of comparative
profitability but that is germane to the widely held Latin American
preconception that a few North Americans are growing rich from a
trade based upon an item of their production. In comparison to its
size, the ownership of the United Fruit Company is exceptionally
widely diffused among U.S. corporations. The company has almost
as many separate stockholder accounts as it has tropical employees.
The dividend check paid to the average stockholder in 1955 amounted
to $360 upon 120 shares, compared with the average $942 wage pay-
ment to each of its 80,000 employees in the tropics. Even the 141
largest shareholders received dividends averaging just above $50,000
each, and many of these went to trust funds shared by a number of
individuals.

The conclusions from this part of our economic accounting are clear.
As a case study of U.S. direct private investment abroad, the United

232

Fruit Company record is one that does not fully measure up to the
second criterion of performance that was set. Although earnings have
been large enough to justify a continued effort to maintain and expand
the company's operations, they have not shown consistent profits at
a level that would encourage other foreign investors to emulate its
example. This may explain why U.S. investors generally have had so
limited an interest in foreign agricultural enterprises. It assuredly
accounts for the fact that virtually no Latin American investors have
availed themselves of the opportunity to purchase United Fruit Com-
pany stock that has been traded at so considerable a volume on the
New York Stock Exchange that they might easily have acquired a
controlling interest had they so elected.

It is conceivable, of course, that local investors in producing areas
would have shown more interest if an opportunity had been offered
to invest in United Fruit subsidiaries operating in their several coun-
tries rather than in the stock of the corporation as an integrated whole.
The concept of joint foreign-domestic investment in subsidiaries, with
local representation on their boards of directors commensurate with
their investment interests, is one with such evident appeal that we
have given it careful consideration. Such an arrangement would
dramatize the local stake of each producing country in the operations
conducted within its borders. It would provide the United Fruit
Company with powerful allies to dissipate the prevailing sentiment
that its activities are essentially of foreign rather than domestic con-
cern. It would conform to the growing sentiment that favors the joint
foreign-domestic investment pattern.

Very reluctantly, we have concluded that despite its general merit
this procedure would be of dubious practicality for application to the
particular operations in which the United Fruit Company engages.
The historic pattern upon which continuing, as opposed to ephemeral,
operations in banana production and distribution have evolved is one
that seems to demonstrate the preponderant advantages of integrated
organization based on multiple sources of supply. The whole trend
of the United Fruit Company and of other major participants in the
trade has led in this direction and promises to continue. The high
incidence of periodic disasters from floods, blowdowns, and chilling,
not to speak of the progressive incursions of Panama disease, that cut
deeply into the annual shipment levels of a given area and drastically
alter yearly production costs, have placed a high premium upon stabil-
ity that can be achieved only through treating multiple supply sources
as a pooled operation with an averaging of costs.

233

It is difficult to see how the conflicting interests of separate stock-
holder groups for the individual subsidiaries could be satisfied under
such integrated operation. For example, the local stockholders in a
subsidiary that showed comparatively low costs and high profits for
several successive years would be hard to convince that an important
expansion of its operations was not justifiable. The parent company,
however, might be far more impressed by its long experience demon-
strating that differential costs among producing areas are habitually
inconstant. On this basis, it would be loathe to commit too many of
its investment dollar eggs to one production-area basket. Similar
conflict-of-interest issues would be generated by almost every sub-
sidiary-parent company transaction. The complications arising from
autonomous joint capital investments in the several subsidiaries as
opposed to unified investment in the integrated operation would almost
certainly outweigh the advantages achieved.

The United Fruit Company Record in Social Welfare,
Labor, and Public Relations

Obviously, the direct economic impact of a foreign investment enter-
prise upon the areas of its operation is only one of the ways in which
its influence may be appraised. A corporate entity, whether it operates
at home or abroad, is in effect an individual, created by legal fiat,
subject to obligations and afforded privileges and immunities, as pre-
scribed by the prevailing law. Its overall responsibilities include
performance as a good citizen of the areas in which it operates.

In Chapters VII and VIII, we described the general scope of the
company's activities in such fields as the provision of housing, health
and sanitation, education, club and recreational facilities, commis-
saries and food purveying, and a variety of other community services
for its workers. We have reviewed also its labor and public relations
policies and procedures. Our general findings in this field may be
summarized as follows:

1. In the six countries of our firsthand study, the United Fruit
Company in 1955 paid out approximately $53 million in direct wages
and $8 million in fringe benefit payments to 59,600 employees on its
payrolls. It spent a further $4.25 million on schools, hospitals, and
infirmaries (on a net basis) , welfare programs, and sanitation services
—all of which were of direct benefit to its work force. Thus, for the
six-country area, the labor cost per company employee averaged
almost $1,100 without any allowance for the rental value of the

234

living quarters provided for employees by United free of charge.

2. In addition, the company's books show a net cost to it of about
$1.2 million on staple commodities that it sold to its employees at
prices below cost. Since its total commissary operations in the six
countries have been run on a break-even basis with both costs and
sales revenues averaging around $15.5 million per year over a five-
year period, there is no reason for the loss-item portion of this business
to be segregated. It is apparent, however, that the commissary privi-
lege, through which the company's workers have spent about 30 per-
cent of their net pay receipts for living necessities on which they have
paid no distribution markups, has substantially stretched the value
of their take-home pay. And this take-home pay, as already noted,
is uniformly higher than the going rates in the area. There is an
added bonus through the general company practice of making avail-
able garden plots upon which its workers are encouraged to grow
foodstuffs for their own tables.

3. As our review has shown, the United Fruit Company record with
respect to its furnishings of hospital, dispensary, and sanitation serv-
ices has been generally excellent when measured by the objective
standard of the health records of its employees. In this field, the
company has pioneered in the difficult task of making traditionally
disease-ridden tropical environments safer places in which to live and
work, and complaints about its performance on this score are remark-
ably infrequent from any source.

4. With respect to the provision of educational facilities, United
Fruit usually goes well beyond what is required by law, but its per-
formance here is less outstanding than in the fields related to health.
Its schools are better equipped and manned than the average for
surrounding rural areas and, in some cases, provide a longer period of
instruction than the prescribed minimum. There is, however, a serious
problem raised by the gap of three to six years that, under prevailing
laws, exists between the normal completion of compulsory school
requirements and the minimum age for the granting of work permits.
There is also a largely unfulfilled need for vocational and domestic
science instruction that applies to the United Fruit Company schools
in common with the rural school system as a whole. The company
recently has taken some steps to provide more of this type of instruc-
tion. It also materially assists in providing opportunities for the con-
tinuing education of its employees' children in the United States and
Canada, and has invested some $6.5 million of capital in the establish-

235

ment of the Escuela Agricola Panamericana in Honduras. This excel-
lent school provides practical, hands-in-the-dirt training to about 160
pupils selected from many Latin American countries. The company
pays all of their expenses for a three-year course that covers horti-
culture, field crop production, and animal husbandry, and it strictly
adheres to the rule that none of the graduates shall enter into
United Fruit Company employment. By this provision, it gives
assurance that the School is intended to serve the general interests
of Latin American agriculture rather than forward the company's
own advantage.

5. On all of its establishments within the six republics, the company
provides for its workers places of worship, clubs, recreational facilities,
and athletic fields and equipment upon a scale and of a standard that
are matched by few, if any, locally owned agricultural enterprises.
To an important degree, its railroads, ships, radio communications,
electric light and power facilities, and commissaries serve a wider
community than its own employee group. In many cases, this is true
of its hospitals and other amenities as well. Its general record of per-
forming services of benefit to the communities that always tend to
grow up on the fringes of company divisions is excellent. On a number
of occasions, the company has even helped central governments over
difficult financial emergencies by making advance payments on pros-
pective taxes, a procedure that generally would be accepted as beyond
the call of normal duty.

6. In the important field of housing, the company record again is
good to excellent if viewed in the perspective of prevailing standards.
The accommodations furnished to United Fruit workers free of charge
generally are far better than anything to be found on farms in the
surrounding areas. But this, in itself, is less than an unqualified en-
dorsement, since the housing of the great majority of agricultural
laborers in the six countries is deplorably substandard. The newer
single-family houses that the company has been building upon a
systematic replacement program would qualify as good under almost
any standard. But the pace of the replacement program is necessarily
limited by what the company can afford. The cost of the new single-
family dwellings runs from $1,500 to $2,000 per unit, so that more than
$100 million is involved in the rehousing of all of its employees in
the six countries alone. This sum is equivalent to five or six years of
the company's total dividend transmittals from the area at the rate
that has prevailed in recent years.

Meanwhile, the major part of its agricultural laborers still are

236

housed in barracks-type structures partitioned off into family-unit
divisions. At their worst, as exemplified by some of the older buildings
at Tenguel in Ecuador and Almirante in Panama, such accommoda-
tions are somewhat grim. At their best, they represent a huddled
pattern of living that is in accord neither with a rural environment
where space is not a luxury nor with the deeply rooted Latin American
sentiment for family privacy. The multiple dwelling units are being
replaced by single family units at a rate of about 5 percent each year.
It is difficult to see how a faster pace than this could be provided on
the current earnings record. There are, however, complementary
measures through which the situation might be improved at far less
cost. One of these might take the form of an intensive educational
effort to encourage workers to exert their own initiative toward better
standards of housekeeping and household improvements. A relatively
inexpensive program of recognition and rewards for the best kept and
most attractively decorated or landscaped dwelling units might serve
to awaken a competitive pride that could achieve much to relieve the
present somewhat drab standardization in workers' living quarters.

7. Relations with labor in the six countries have not been uniformly
happy despite United Fruit's consistent record of providing consider-
ably higher wages, security, welfare, and other fringe benefits than
those generally prevailing in the communities concerned. In the post-
war period, its operations in a number of countries have, on occasion,
been seriously interrupted through work stoppages incident to labor
disputes.

On balance, it is probably fair to appraise United Fruit performance
in the field of labor relationships over the years as generally in ad-
vance of current practices in areas to which the tradition of labor
unionism is new, its leadership relatively inexperienced, worker alle-
giance to union principles weak, and where political overtones tend
to overshadow bargaining considerations. In several of the six coun-
tries, the company is caught between a cross-fire of criticism on its
labor relations. On the one hand, there are those who hold that such
organizations as the Fruit Company should be taking a vigorously
active position in encouraging unionism among its workers, rather
than following the conventional employer role of recognizing and
bargaining with such unions after they are formed. In recent years,
even the U.S. government has given official support to this position
through its general endorsement of ORIT, a program for affiliating
free trade unions in Latin America with the AFL-CIO complex in the
United States and with other noncommunist labor organizations on a
world basis. On the other hand, the company often has been criticized

237

as unduly soft in its labor terms and policies by members of the local
business communities and even by government officials in several of
the six countries in which traditional attitudes are profoundly sus-
picious of labor organization and resentful of its encouragement by
foreign corporations in their midst.

Since 1954 — when the United Fruit Company adopted a positive
code of labor practices and took steps to see that it was generally
established throughout its operating divisions — the company's position
in this field clearly has moved from one of generally benevolent pater-
nalism to one of consciously forwarding modern employer-worker
relationship procedures. It freely recognizes and deals with all union
agencies through which many of its workers elect to bargain. Con-
currently, it is not unnaturally apprehensive about the potentially
damaging effect to its peculiarly vulnerable business of concerted
international labor pressure that might be exercised on purely local
disputes through an affiliated international structure of labor organi-
zations of the ORIT type. Time alone will establish whether or not
such misgivings have any substantial foundation. Meanwhile, the
honest attempt of the United Fruit Company, and other similarly
situated corporations, to support the sound principles of independent
unionism would be made easier if those responsible for shaping ORIT's
policies offered assurances that its structure of union affiliation across
national boundary lines would not result in expanding local disputes
to international dimension, or result in the arbitrary employment of
such instruments as international labor boycotts or "hot cargo"
embargos.

8. Since 1951, the United Fruit Company has been devoting an
ever-increasing effort to the task of improving its public relations in
the countries in which its foreign operations are centralized. The
professional personnel to which this task has been entrusted operate
upon the sound hypothesis that their function is to see that accurate
information about the company's affairs is made available to the
widest possible audience, rather than to attempt to manipulate public
opinion to an attitude favorable to the company's interest.

This program has included the issuing of annual reports on sub-
sidiary operations and a variety of educational pamphlets stressing
the company's contributions to local economies through its business
transactions and philanthropic activities. It has employed the publi-
cation of company newspapers to keep its workers informed, and has
purchased advertising space in the local press to keep a wider public
aware of what the company is doing. Increasingly, arrangements are

238

being made to invite local journalists, public officials, and influential
citizens to visit the company's divisions to gain firsthand knowledge
of how its affairs are conducted. To an ever-increasing degree, the
responsible local personnel of the company are being reminded of the
importance of discharging the "citizenship" obligations of a corpora-
tion engaged in foreign operations through extending services to the
surrounding communities in general and to their local competitors in
banana production in particular.

Despite the commendable vigor of these efforts, there is a long road
to be traveled before the local image of the United Fruit Company
conforms to the true picture of its performance, although there are
evident signs of genuine progress along this line. In our discussions
of the United Fruit Company's current policy and practices with
heads of state and high government officials in all six of the countries
visited, recognition of its signal contributions and certification of the
generally high standard of its behavior far outweighed the specific
criticisms that were voiced. The same result was obtained from inter-
views with local business representatives, including United Fruit com-
petitors, and with most of the company's employees, although the
praise was seldom unqualified.

Yet, objective reporting compels us to register the fact that Latin
American esteem for the United Fruit Company and its works is far
from universal. The further one moves from those who have firsthand
dealing with United Fruit, the lower is its repute. This generally
holds true within the countries where it operates, and its worst repu-
tation is in the Latin American republics with which it has no active
relationships. Scarcely a week goes by in which the United Fruit
Company is not denounced somewhere in the Latin American press
as the epitome of arrogant foreign exploitation and greed. To the
average man in the average Latin American street, the name of the
United Fruit Company conjures up an image not unlike that of the
Abominable Snow Man in the minds of the Sherpa guides and bearers
of the high Himalayan snow slopes. Few Sherpas even claim to have
seen the creature. The legend of his hostile behavior is fragmentary
and shadowy. And yet the conviction of his malevolence is almost
tangibly intense.

The striking disparity between the reputation and the performance
of the United Fruit Company deserves further exploration. Part of
the explanation lies in difficulties and complexities which are shared
by many other large foreign-investment enterprises operating in
economic frontier areas, to which are added special complications

239

inherent in the banana business. Part stems from the historic setting
of the United Fruit Company's incorporation and early development.
And part, no doubt, must be charged to the company's own short-
comings and ineptitudes.

Why the Image Is Blacker Than the Record

1. From the description given in this study of the pattern of United
Fruit's operations in the six countries, it is evident that it has been
forced to deal with a range of human problems inordinately wider than
that faced by the average corporation — whether operating at home or
abroad. To establish the production end of its business, it had no
other option other than to provide, at its own expense and initiative,
full-scale communities with all of the physical and social utilities
necessary for their support in what were essentially wilderness en-
vironments negligibly populated before it moved in.

To compound the difficulties, such operations had to be carried out
in countries of less than mature political stability, and without suffi-
cient resources to provide in such fringe areas of their terrain even a
minimum complement of the services that governments normally
supply in societies of more advanced economic development.

The average industrial firm builds its plant, and draws upon the
surrounding community for its work force and for a host of servicing
activities to support its operations. Most of its human relationship
problems center on the workers in its plants during the hours of active
employment. From the wages that it pays, its employees make their
own arrangements for housing, food, and other purchases, and for
their transport between home and job. The corporation's taxes con-
tribute to the support of schools, health facilities, roads, and all of
the public utilities that service the community life of its workers, but
it has no direct responsibility for their operation.

Although such enterprises as the United Fruit Company pay the
full complement of taxes with which other corporations are charged,
governments provide them with relatively little in the way of com-
munity facilities in return. The terrains in which United Fruit
grows its bananas fall within the do-it-yourself zones of countries in
which the fabric of conventional governmental institutions is stretched
unduly thin. Through necessity, not choice, the company has become
enmeshed in the establishment of company towns with all of their
supporting activities, and has undertaken the servicing of far broader
communities with land transport, communications, port and shipping

240

services, and a variety of other activities — from facilities primarily
designed to meet the exceptionally demanding logistics of its major
business.

Each of these extraneous activities stretches the normal range of
corporation-community relationships. Each invites its own misunder-
standings and strains. No corporation anywhere in the world has ever
assumed so broad a portfolio of responsibilities and managed to main-
tain frictionless public relations. The United Fruit Company is no
exception to this rule. When consideration is given to the fact that it
has carried the extra burden of operating as a foreign-owned and
foreign-managed enterprise in environments that are supersensitively
nationalistic, it would be a miracle if it had been able to be the
exception.

2. Even so, the public relations path of the United Fruit Company
might have been smoother if its operations had evolved in a happier
historic setting. The company was incorporated in 1899, only three
years after the Spanish-American War. The United States had just
annexed Puerto Rico and the Philippines. In 1901, Cuba's sovereignty
was gravely compromised by U.S. insistence on the terms of the Platt
Amendment as a condition of terminating general occupation. In
1903, the United States intervened to assure the success of Panama's
secession from Colombia, with the Canal Treaty as its concomitant
reward. In 1904, it took over the management of customs services in
the Dominican Republic when European intervention was threatened
because of defaulted debts.

In this period, President Theodore Roosevelt was making pro-
nouncements to the effect that "chronic wrongdoing, or an impotence
which results in a general loosening of the ties of a civilized society,
may in America . . . force the United States ... to the exercise of an
international police power." The terms "Manifest Destiny" and the
"Big Stick Policy" were coined by the proponents of U.S. expansion,
and "Dollar Diplomacy" by its adversaries. In 1909, the United States
sent troops into Nicaragua; in 1915, into Haiti; and in 1916, into the
Dominican Republic. Other interventions of several types and degrees
occurred in Cuba and Central America over this period.

In short, the founding and early development of the United Fruit
Company occurred at a time when Latin American confidence in U.S.
intentions and policy toward its weaker neighbors of the Western
Hemisphere was at lowest ebb. To them, the United Fruit Company
was a visible symbol, and one of the largest and most conspicuous,
of a potential northern dominance that they feared and resented. The

241

fact that the record is singularly free of incidents in which U.S. gov-
ernment pressure was exerted to forward the interests of this par-
ticular company made little impression. Its image in the Latin
American mind, and in many North American minds as well, was
etched by the mood of distrust, on the one hand, and of guilt, on the
other, induced by a stage in U.S. foreign policy that was happily
ephemeral and which most of its citizens now would be glad to forget.
Somewhat ironically, this guilt-by-association image that was attached
to the United Fruit Company's name has persisted long after the
growth of the Pan-American political structure and confidence in the
good-neighbor intentions of the United States had gone far to dissipate
national tensions and suspicions in the Western Hemisphere.

3. Although we believe that these historical factors are important
to an understanding of attitudes, it is far from our intention to dismiss
all criticism of United Fruit Company performance as a fortuitous
inheritance of circumstance and historic association. While we have
not attempted the forbiddingly difficult, and probably impossible, task
of appraising the rights and wrongs of the voluminous chronicle of
charges and countercharges arising out of the days of banana pioneer-
ing, we are willing to believe that the early "banana hands" did not
always fully exemplify the virtues and rectitude associated with the
ideals of chivalry. But the same could be said of the political and
commercial environments in which they had to work. On balance, it
is doubtful that they seriously depreciated the prevailing ethical
currency.

Within a more recent time span — where we feel that we have a
firmer grasp upon the facts of the record — there can be no doubt that
the company has made a very earnest effort to live up to the enlight-
ened obligations of "good citizenship" in the areas of its foreign opera-
tions. Its degree of success in registering this intention firmly upon
local consciousness has varied considerably from country to country.
Although the inherent difficulties of its public relations task are suffi-
cient to make a standard of perfection unattainable, there is ground
for believing that the company was somewhat tardy in recognizing
the full importance of cultivating this field. Its present policy of pub-
lishing annually a factual account of the impact of its operations upon
the economy of each country in which it operates is still susceptible
to improvement in form and coverage. And there is still a considerable
range in the sensitivity of the company's representatives to the feel-
ings, usages, and prejudices of the local communities. It will take
years of unremitting effort before the practice in all divisions equals

242

the very high level already achieved in some of them, or effectively
reflects the aims of the company's central policy.

INDICATIONS OF FUTURE TRENDS

FINDINGS WERE CATALOGED in the first section of
this report which were derived from the relatively secure base of
measured or, at least, observed phenomena. We turn now to the far
more precarious exercise of attempting to forecast trends and outlook
that seem likely to shape the development of the banana trade in gen-
eral and of the United Fruit Company's destiny in particular.

Future of the World Banana Market

As we have seen, the combined North American and European
markets that absorb over 90 percent of world banana shipments have
shown a rather rapid growth in terms of value over the postwar
period, but a relatively modest growth in terms of volume measured
by weight of stems imported. Most of the latter growth has taken
place in the European market in which per capita consumption is still
well below half that of Canada and the United States.

Population growth in these two major areas would seemingly provide
a potential increase in demand of something approaching 2 percent
per year. Practically, no such growth trend is likely to be realized,
because in the larger North American market the per capita consump-
tion of fresh fruits, as a whole, has been shrinking and the total
weight of banana imports has been virtually static since 1940. In
Europe, however, increasing per capita incomes promise to stimulate
a continuing upward trend in the banana imports of that area for a
considerable period of time; and within 10 to 20 years this outlet
may well attain a larger dimension than the North American market.
The relatively small market in other nonproducing countries may
also expand. But the most optimistic reading of present trends gives
promise of only a relatively modest growth in the overall weight of
bananas that will be exported in world trade in the predictable future.

With most of the growth originating in Europe, where the common
market-free trade area movement seems to be gaining a foothold, it
is probable that much of this expanding demand may be supplied
from producing areas of Africa or the Western Hemisphere where the
currencies are not linked to dollars.

243

There is one possible development that could radically change this
outlook. To date, all but a negligible fraction of bananas shipped
in world trade are sold to consumers as fresh fruit. But if the ex-
perience of the North American market can be taken as representative
of world trends, all of the recent growth in per capita consumption
of fruits has been accounted for by the dramatic increase in the sales
of processed fruits — refrigerated and frozen fruit juices and pulps,
canned, dried, or otherwise preserved fruits in various forms. There
are numerous and formidable technical problems in the processing of
bananas. If they can be solved — if an economic and palatable product
that would lend itself to wide use by confectioners and ice cream
manufacturers, or as baby foods and, particularly, as an ingredient
in the rapidly growing package market for breakfast cereals and cake,
muffin, and bread mixes of various types can be produced — the world
consumption of bananas could be enormously increased.

The United Fruit Company and others in the field have been work-
ing on this problem. Success to date has been only moderate, but the
potential stakes are sufficiently high to warrant continuing and in-
tensified effort in this direction by all who are concerned with the
future of banana production and marketing.

Persistence of Large-scale Integrated Organization

Chapters III, IV, and V set forth in considerable detail the special
characteristics of banana production and distribution that explain why
the prevailing pattern of large-scale integrated organization has be-
come predominant in this field and is unlikely to be displaced. The
exceptionally heavy capital requirements for establishing and main-
taining banana acreage, the encroachment of diseases that to date
have forced successive shifts in the locale of growing areas, the
recurrent blowdowns and floods that dictate multiple sources of supply
as safety insurance, 'and the exceptionally demanding logistics of dis-
tribution for an almost uniquely perishable major trade commodity —
all of these unite to make large-scale, vertically integrated organiza-
tion 'a condition of successful operation.

One trend (recorded in Chapter VI) promises to make continuing
headway that will modify to a limited degree the all-inclusive sweep of
integration. It seems likely that United and other large operators will
expand contract operations, under which an increasing proportion of
their bananas will be produced by local farmers with the purchasing
companies guaranteeing to take all acceptable fruit at agreed-upon

244

prices and in turn providing growers with disease control and other
services related to -growing and shipping their products.

This procedure has at least three features of obvious merit. It
preserves the degree of centralized control needed to maintain quality
standards in production and handling. It encourages local entre-
preneurs and importantly contributes to the sense of a responsible
national stake in what has too generally been regarded as essentially
a foreign enterprise. It appreciably reduces the capital investment
that the integrated operators are forced to commit to the supply side
of their business, and thus limits their margin of risk and improves
their profit potentials.

Future Position of the United Fruit Company in Bananas

Contrary to widely held preconceptions, the United Fruit Com-
pany's importance in the world banana trade has been subject to
continuous, if gradual, erosion. Its relative share of the world banana
market in 1956 was only about 40 percent of its share -at the turn of
the century. In the North American market, where it obviously has
made a major effort to maintain a foothold, its relative position has
declined by about 20 percent over the same period. In 1900, it had
about 20 importers competing for the trade of the United States and
Canada. Today, competitors number about 160.

The evident downward trend in the United Fruit Company's relative
position in the world banana market and the concomitant gain of its
competitors may be salutary rather than retrograde from the view-
point of the industry as a whole. But from the perspective of the
company's own interest, and from that of the producing areas for
which it provides the major outlet channel, there is room for a certain
amount of concern as to where a continuation of the trend will lead.
Apparently, company policy has been focused upon the major aim
of holding its relative position in the important North American
market. In this, it has been reasonably successful for a long period
even though its share of this market since 1910 has been consistently
lower than in the first 10 years of its corporate life.

With a limited supply of bananas at its disposal, this policy has
resulted in the drastic loss of its relative position in the European
market. Since the outbreak of World War II, the company's relative
position as a European supplier has deteriorated to only about 25 per-
cent of its immediate prewar position, and to only about 11 percent
of that occupied from 1913 to 1930.

245

In short, there would appear to be genuine ground for debating the
wisdom of the company's policy of focusing upon the North American
market — in which the growth prospects are meager at best, and in
which antitrust regulation assuredly will inhibit any increase in its
approximately 60 percent share of recent years, if indeed it goes no
further. This policy necessarily called for a variety of decisions
relating to the disposition of available supplies and the areas in which
programs for expanding production would be pursued. The result has
been a drastic loss of position in the European market that has far
greater growth potentials than the one that has been cultivated.
Unless the United Fruit Company reorients its policy and takes what-
ever steps are necessary to win back a larger share of Europe's trade,
or succeeds in developing a substantial outlet for processed bananas
in the United States and Canada, its prospects for a continuing ex-
pansion of business upon any impressive scale are far from bright.
More vigorous exploration of both of these matters than they have
received in the past appears to be warranted, since the clear record
of corporate history indicates that in the absence of growth, deteriora-
tion sets in.

It is conceivable, of course, that the United Fruit Company could
achieve expansion through diversification of its activities, even though
its banana operations showed little upward trend. But the record
offers little encouragement to the idea that this is a promising alterna-
tive. This study has given at least some indication of the considerable
variety and scope of the company's past efforts in diversifying. To
date, none of its diversification ventures — in sugar, cacao, palm oil,
abaca (in an agency capacity), forest, or other agricultural products —
has demonstrated that they can substitute adequately for continuing
growth in the company's core business of growing and distributing
bananas. From none of these side activities has the company been able
to match even the modest rates of profit return earned in the banana
trade. It would appear that few agricultural pursuits lend themselves
to the high capital outlay and high overhead pattern that is basic to
United Fruit Company operations.

Future Programs for Using Abandoned Banana Lands

Earlier in this chapter, and at greater length in Chapters IV and VI,
we referred to the extravagant wastefulness entailed in the abandon-
ment of land rendered unsuitable for further banana production by the
incursion of Panama disease. Neither the flood fallowing procedure

246

adopted by the United Fruit Company in recent years nor the Stand-
ard Fruit Company's policy of planting such lands to disease-resistant
varieties seems to provide the ideal solution of stabilizing banana
production upon a given acreage.

Panama infection has no effect upon the productivity of soils when
planted to other crops. Thus, the failure to make optimum use of
fertile lands that are cleared, drained, and serviced by the full range
of community and transport utilities, in areas where their lack is the
chief impediment to needed agricultural development, is an inexcus-
ably profligate waste. We have enumerated the varied measures that
the United Fruit Company has taken to avoid a repetition of the
social losses that accompanied giving up banana culture in the Limon
area of Costa Rica, but the problem is of too great a magnitude to
be handled by the action of banana-producing companies alone.

What is needed for the future is systematic planning by the govern-
ments of all banana-producing countries for the prompt resettlement
of abandoned banana lands. The technical assistance programs of the
United States and the United Nations should take an active interest
in planning and carrying out such change-overs. These can provide
an opportunity for either international or local agricultural resettle-
ment programs which could scarcely be matched on the score of econ-
omy and general ease of transition by any existent alternatives. It is
not too much to hope that the future will show far more vigorous and
enlightened efforts to wed what are likely to be continuing world needs
to the exceptional opportunities for satisfying them that are afforded
in this field.

Gradual Emancipation from Extraneous Services

We have dealt at some length with the extraordinary ramification
of services only indirectly related to the banana trade that large
companies operating in virgin areas are called upon to provide. We
have noted that many of the United Fruit Company's public relations
problems stem from the fact that in order to grow, purchase, and ex-
port bananas, it has been forced to establish and service whole com-
munities with housing, public buildings, roads, transport, power and
communication facilities, hospitals, sanitation services, schools, rec-
reation establishments, commissaries, and a variety of other social
services. In more settled areas, many of these activities are performed
by other private enterprises or by the organized political entities of
the surrounding communities. It is reasonable to expect that, as the

247

areas opened by the pioneering efforts of United Fruit Company
mature, many of the burdens that it has been forced to carry may
be turned over to others.

The period of transition inevitably will vary in length from country
to country. It would be a mistake to push it overrapidly for doc-
trinaire reasons, since the delicate balance of banana export logistics
could be disastrously upset if some of these services were not carried
out with high efficiency. Nevertheless, it would seem desirable for both
the company and the local governments to formulate definite policies
for moving in this general direction with as much dispatch as practic-
able. Any sound progress that can be achieved should serve to reduce
an almost hopelessly complex public relations problem to one of ten-
able dimension.

The Problem of Company-Government Contracts

One of the principal wellsprings of local criticism of the United
Fruit Company is its adherence to a general practice of large corpora-
tions operating in frontier economic areas. That is the practice of
entering into general contracts or agreements with the governments
of the several countries in which it maintains subsidiaries outlining
commitments and obligations on both sides over a given period of
years.

With some justice, this procedure is condemmed on the ground that
the terms of such an agreement between a private corporation and a
sovereign government attribute to the former a status to which it is
not entitled, and compromises the dignity of the latter. With much
less cogency, the specific guarantees offered on the government side —
such as abatement of import duties on capital equipment and process
materials or a margin of leeway on requirements to clear all foreign
exchange earnings through currency controls — are often denounced
as "give-aways" or concessions unfairly extorted by a foreign colossus.
The evidence presented in this study shows that the extraordinary ob-
ligations assumed by the United Fruit Company in its agreements are
considerably greater than the value of any concessions granted it.

The problem is not a simple one that can be resolved in terms of
principles that can be etched in pure blacks and whites. There is
unquestionably an element of indignity in the posture of a government
that offers a private business entity individual status, whatever its
terms, instead of treatment defined by general laws relating to its
category. On the other side, it is fair to note that a corporation such

248

as the United Fruit Company is required to risk far more than the
normal capital investment when it establishes a new, large-scale enter-
prise in a wilderness area that can furnish none of the ordinary facili-
ties of industrialized communities. Its risks are compounded when it
moves into countries in which no firm tradition of political stability
has been established, and in which the record of de facto as opposed
to de jure equality of treatment to foreign-owned corporations is far
from secure.

Under such conditions, stockholders and directors are simply unwill-
ing to commit large investments to such areas and bankers are unwill-
ing to extend loans, without such added assurance as a firm contract
with the recognized government of the area can offer. Many state and
municipal governments in the United States offer special concessions
over a term of years to new enterprises as an incentive to locate
within their borders. And such institutions as the International Bank
for Reconstruction and Development require government guarantees
as a condition of extending loans to private development projects,
often with a spelling out of terms under which the business will
operate.

As a practical matter, for the immediate future it is hard to see
how capital investments on a scale sufficient to establish new banana
divisions in many countries may be mobilized without specific agree-
ments. In the longer term, the establishment of stable policies and
the development of international treaties and machinery for adjudi-
cating disputes may make them obsolete. The fact that the United
Fruit Company now is operating in Ecuador without a general con-
tract may indicate a pattern of future trends.

THE SIGNIFICANCE OF THIS CASE STUDY

THIS WORK WAS UNDERTAKEN as a case study of
one important U.S. example of direct private investment abroad. We
stated the initial thesis that, in order to justify its claim upon the
hospitality offered by host countries, such an enterprise would have
to demonstrate that its operations left behind a contribution to local
economies greater than they could reasonably have expected to realize
from the use of their own resources. The complementary thesis was
that unless such investments in pioneer economies proved to be suffi-
ciently more profitable than the normally expectable return from
investments of less risk at home, there would be little incentive for

249

private capital from mature economies to move into these channels.

On the first score, the measurements that we have been able to
apply show that the contributions made by the United Fruit Com-
pany's foreign operations to the local economies have been outstand-
ingly to the latters' advantage.

On the second count, it is clear that while the company's returns
have been sufficient to keep it in operation and finance a considerable
expansion, they have not matched the earnings of the average com-
pany of its size engaged primarily in domestic business.

Obviously, it is not tenable to make generalizations about U.S.
foreign investment as a whole upon the basis of one case. If our study
has any merit, it lies in the attempt we have made to base our findings
upon measurement in a field in which subjective judgments have been
largely dominant. If it serves to encourage others to apply a similar
approach to other cases, we shall feel that our work has been justified.

250

APPENDIX NOTE

.FTER THIS STUDY HAD BEEN SUBMITTED to the

National Planning Association for publication, but before its process-
ing had been carried to the page-proof stage, the civil antitrust
suit filed against the United Fruit Company in 1954 by the U.S.
Department of Justice was terminated through a "consent decree"
subscribed to by both plaintiff and defendant.

Thus, a final judgment was entered by the Court of jurisdiction
setting forth a series of steps and outlining a set of performance
standards that were agreed upon mutually by the company and
by the Department of Justice as assuring that future operations
of the company in the United States market would be in conformity
with the competitive pattern that the antitrust laws seek to preserve.
It was specifically stipulated that the terms of the final judgment,
arrived at without a hearing of testimony, without trial, and without
decision upon any issue of fact or law raised in the government's
complaint, implied no admission of law violations in the company's
past practices.

The positive steps that United Fruit agreed to take, and which
were ratified by stockholder vote on April 16, 1958, may be sum-
marized as follows:

1. It agreed to divest itself, through sale not later than June 30, 1966,
of all of its stock ownership in the International Railways of
Central America, and not to reacquire any direct or indirect
interest in this Guatemalan railroad enterprise. (For background
discussion, see Chapter VI.)

2. It agreed that by midyear of 1966, it would submit for Court
approval a plan, to be carried through to fulfillment within four
years after approval was obtained (presumably by not later than
1970) , for turning over to a new company operating independently
of any United Fruit control, a sufficient part of United's producing
lands and purchasing arrangements combined and of its integrated
facilities for shipping to and distribution in the United States to
furnish that market with approximately nine million stems of
bananas generally equivalent in size, variety, and freedom from
disease to those that United is then shipping.

Three optional arrangements were specified through which this
commitment might be fulfilled:

A. United Fruit might itself organize the new company under

251

arrangements that would assure its subsequent independent
operation, and distribute its stock upon a prorata basis to
United's own shareholders.

B. It might sell to any buyer in which United Fruit has no direct
or indirect interest (other than the Standard Fruit and Steam-
ship Company) the necessary production and transportation
assets to provide the specified shipment volume. If this option
is chosen, United is relieved of obligation to transfer to the new
company managerial or other personnel or any distribution
facilities.

C. It might work out an arrangement that combines features of
the other two alternatives, by organizing the new company,
as under Alternative A, but by selling a partial interest to an
independent investor, as defined in Alternative B, who commits
not less than $1 million to the enterprise. In this case, also,
United will be relieved of the obligation to transfer managerial
or other personnel.

3. United Fruit agreed to liquidate, within nine months, its Banana
Selling Corporation, a subsidiary engaged in jobbing operations
in the area of Mobile, Alabama. This was the last remaining
subsidiary of its type that, according to company statements,
had been set up to experiment with and demonstrate improved
methods of handling, ripening, and merchandising fruit to its
regular jobber and wholesaler clients.

In addition to these three positive commitments, the consent
decree specified that United Fruit must refrain from engaging in
a long list of practices of the variety generally considered to be
inconsistent with healthy competition. They included, as is customary
in such documents, the listing of various procedures that had been
attributed to United Fruit in the complaint, although the company
had denied using them, along with others included merely to safe-
guard the maintenance of sound competition in the future. Thus,
United Fruit was enjoined from engaging in jobbing operations;
from maintaining exclusive sales contracts with jobbers, or exclusive
purchasing contracts with independent banana suppliers for longer
than five years without an escape clause ; from acquiring proprietor-
ship, ownership, or control of any of its competitors or of any
substantial part of their business assets; from entering into collusive
agreements with competitors, or using coercive tactics against them;
from attempting to control the resale price policies of jobbers or
other wholesalers; from obtaining preclusive treatment from com-

252

mon carriers; from requiring its customers to employ specified
transport media; from refusing to sell in specified markets to any
purchaser at its regular terms of sale such bananas as it might have
after supplying the needs of regular customers; or from tying up
refrigerated space on vessels, other than through bareboat, time or
voyage charters, in a manner that prevents competitors from obtain-
ing space needed for their shipments.

Finally, the judgment provided that the Department of Justice
be afforded such freedom of access to the accounts and records of
the United Fruit Company as might be necessary to assure com-
pliance with the consent decree's provisions.

The sharp rise in the price of United Fruit stock on the New
York Stock Exchange that followed the announcement of the terms
of the consent decree indicates a market judgment that the advan-
tages to the company's interest of having the suit settled far out-
weigh any adverse effect upon its future prospects of the provisions
to which it subscribed.

Of the three positive mandates, the divestment by United Fruit
of its stockholdings in the International Railways of Central America
and the liquidation of its sole remaining jobbing establishment
represent overdue actions that probably would have been taken
in any event.

The provision for the establishment of a new company through
the spinning off of a portion of United's assets accounting for
approximately nine million stem imports for the U.S. market will
eventually create another competitor of about the same size as
Standard Fruit and Steamship Company. Time alone will demon-
strate whether or not such additional competition will be of positive
benefit either to this distribution market or to the regions that
supply it.

Since, under the terms of the final judgment, the actual estab-
lishment of the new company does not become mandatory until
around 1970, many developments may take place in the interim
that can modify the impact that such a move would have if it were
made immediately. If the scope of United Fruit's banana procure-
ment operations meanwhile expands by an equivalent amount, the
surgery will not reduce its absolute size below present dimensions.
The growth potential of even the North American market could
provide this leeway, not to speak of the larger margin that the
European market holds forth. It also is possible that the future
will provide more profitable opportunities than have been seized

253

in the past for United to grow through a diversification of activities
in other lines than banana production and distribution.

If another interest can be found to purchase at a fair value the
assets that United Fruit may elect to sell, the company's stockholders
will be adequately compensated for the amount of the divestiture.
If such a purchaser is not forthcoming, the required formation of
the new company by United will merely transfer to United Fruit's
stockholders an ownership right in assets of the new company
equivalent in value to the assets transferred to it by the United
Fruit Company.

The matter of intangible values is, of course, more difficult to
weigh. Whether or not the new company will be more or less
successful than United has been can only be conjectured, and this
in important measure will determine the degree of competition
that it will offer United and United 'a other competitors. It is worthy
of note, however, that the size of the entity that is to be formed
is sufficient to allow the type of vertically integrated operation
based on at least several sources of banana supply that seem to
the authors of this report to be a major requisite for successful
operation under existing conditions.

254

Appendix Table

I

World Trade
in Bananas
1955

Area

Exports

Imports

Million
pounds

%of

world
total

Million
pounds

%<?$

world
total

North America:
Canada

—

-

311.2
3,292.5

4.6
49.2

United States

Total

—

—

3,603.7

53.8

Europe:
Austria

—

\

23.3
112.1
60.2
16.7
16.8
598.2
469.9
98.6
73.7
17.1
149.6
96.0
44.1
691.9

0.4
1.7
0.9
0.2
0.2
8.9
7.0
1.5
1.1
0.3
2.2
1.5
0.7
10.3

Belgium-Luxembourg

Denmark

Ireland

Finland

France

West German}''

Italy
Netherlands
Norway

Spain

Sweden

Switzerland .... ...

United Kingdom

Total

—

—

2,468.2

36.9

Central America:
British Honduras ... .

1.1

726.1
250.5
546.5
63.4
21.1
606.5
2.7
32.6
94.1
146.4
1.9
381.3
114.2
4.2

10.7
3.7
8.1
0.9
0.3
9.0

0.5
1.4
2.2

5.6
1.7
0.1

—

—

Costa Rica .

Guatemala
Honduras

IMexico

Nicaragua

Panama . .

Cuba

Dominica.

Dominican Republic

Guadeloupe

Haiti

Jamaica .

Martinique

Trinidaof and Tobago

Total

2,992.6

44.2

—

—

(More)

255

Appendix Table (continued)

Area

Exports

Imports

Million
pounds

%of
world
total

Million
pounds

%of
world
total

South America:
Brazil

465.2
462.1
1,344.8

6.9
6.8
19.9

350.0
38.2
40.6

5.2

0.6
0.6

Colombia

Ecuador

Argentina

Chile

Uruguay

Total

2,272.1

33.6

428.8

6.4

Asia:
Taiwan

77.0

1.2

53.7

0.8

Japan ... ...

Total

77.0

1.2

53.7

0.8

Africa:
Belgian Congo

66.4
427.2
1.6
107.5
167.9
275.6
1.4
23.6
151.2
150.1
0.6

1.0
6.3

1.6
2.5
4.1

0.4
2.2
2.2

19.7
23.4
6.4
n.a.

n.a.

0.3
0.4
0.1
n.a.
n.a.

Canary Islands

Egypt

Eritrea and Italian Somaliland
French Cameroons

French Guinea and Ivory Coast
Gold Coast

Mozambique

British Cameroons

Nigeria

Sierra Leone • •

Algeria

French Morocco

Tunisia

Union of South Africa

Southern Rhodesia

Total

1,373.1

20.3

95.0"

1.4

Oceania:
New Zealand

—

—

47.5

0.7

Total

47.5

0.7

47.5

0.7

World total

6,762.2

100.0

6,696.9

.100.0

a Estimated.

n.a. — Not available.

Source: U. S. Department of Agriculture, Foreign Agricultural Circular, FDAP

5-56, Sept. 12, 1956.

Note: Import figures for the United States and Canada were adjusted upward

slightly.

256

THE POLICY COMMITTEE'S STATEMENT

IN UNDERTAKING THIS PROJECT the National Plan-
ning Association is not attempting to assess or describe how
U.S. business enterprises generally operate abroad. Rather we
are concerned with an objective study of some selected cases in
which U.S. business management has, in pursuance of normal
and profitable operations abroad, taken positive steps toward
raising living standards and helping to integrate into countries
less developed than the United States the foundations of a more
mature economy. We are attempting only to sketch out those
aspects of typical managerial efforts that contribute to the gen-
eral economic and social progress of a host country. In confin-
ing ourselves to this facet of the problem of United States private
enterprise abroad, we are not deprecating or belittling the other
side of the coin, nor are we trying to write the "success" stories
of nonprofit operations.

Underlying this project are the following assumptions con-
cerning the relationships between U.S. private enterprise and
the interests of the countries in which this private enterprise is
operated :

First Assumption

We assume that certain, though not all, U.S. private en-
terprises operating in foreign countries have made con-
tributions to the welfare of those countries and that
these contributions have resulted from the foresight of
management. We are convinced, therefore, that well-
operated and profitable businesses abroad can establish
patterns of behavior that contribute materially to the
welfare of the countries involved without unduly dis-
turbing native cultures, living patterns, and ideologies.

Second Assumption

Properly managed private enterprise abroad contrib-
utes to its market and economic area an organizational
pattern, within which new enterprises are developed
by people native to the host country. This chain reac-
tion helps to create a manageable, more productive
economy. In other words, well-run U.S. enterprise
abroad not only can be self-sustaining, but also can
give birth to or stimulate the development of corollary
enterprises as a result of the private enterprise pattern
taking hold.

257

I

Third Assumption

A basically private enterprise economy in less devel-
oped countries, of which well-managed U.S. private
enterprises can well be a part, provides strong insula-
tion against Communism, totalitarianism, and political
instability. Therefore, it is to the national interest of the
United States to have "policies" that promote enlight-
ened and well-managed U.S. enterprises abroad. Con-
versely, it is in the best interests of all parties concerned
that the United States Government use its influence to
promote cooperation between U.S. private enterprises
abroad and democratic countries in which they operate.

Fourth Assumption

The soundest way of assuring continued access in the
less developed countries to those vital raw materials
which the United States needs is to take cooperative
measures to help those countries improve their stand-
ards of living and strengthen their economies. One of
the most practical ways of doing this is to provide en-
couragement to U.S. private enterprises to help these
countries develop their resources insofar as they want
the assistance of U.S. management organization, private
capital, knowledge, experience, and technical skill.

Fifth Assumption

In the long run, the "success" of an enterprise abroad
must be judged in the light of its relations to the host
country. The ultimate success and permanence of the
enterprise must necessarily be related to the importance
of its contributions insofar as the host country is con-
cerned, since enterprises typical of those we are study-
ing do not exploit host countries, but create wealth
which is shared by their citizens. If U.S. private enter-
prises abroad are managed in such a way that the host
countries are convinced they are also promoting their
economic and social development, then it is most likely
that they will receive the cooperation essential to long-
run survival.

Since the above assumptions are general considerations, it is
unlikely that any specific Case Study will bear directly on all
these points. All Case Studies, however, will be measured against
the fifth basic assumption. Our inquiry, therefore, is an area that
until now has been almost wholly neglected.

258

The files, information, and services of our governmental de-
partments, numerous agencies and special commissions, the
Export- Import Bank and the International Bank for Recon-
struction and Development are replete with current and historical
information helpful to the businessman contemplating opera-
tions in foreign lands. In addition there are many private agencies
— particularly commercial and investment banks maintaining
foreign departments — engaged in counseling on legal, financial,
trade, transportation, and local political conditions throughout
the world. Our Case Studies will not aid the student or business-
man seeking out specific answers to questions in the legal, finan-
cial, political, and related subjects. We are under no illusions
as to the many difficulties that beset management in initiating
and maintaining operations abroad.

We do not assume that U.S. enterprises will go abroad unless
they believe they can return a satisfactory profit on the capital
placed at risk, although collateral considerations may be in-
volved. In pursuing profits, however, the "successful" enterprise
finds it pays dividends to strive consciously to contribute to the
social and economic life of a host country. For this reason, there
should be no misunderstanding of what we are studying. We
are not delving into the business transactions of any company
under study except as they may relate to these contributions
in our area of inquiry.

We frequently hear these days of the unsettled conditions
abroad, that little or no basis exists for private investments in
foreign countries, and particularly that the world is hostile to
U.S. capital and our production methods (though not to our
achievement ! ) . This may be true among certain segments of the
world's population, but an increasing number of foreign govern-
mental and private leaders are consciously trying to create and
maintain an economic climate favorable to such ends. Most of
the world is short of capital and very short of dollars — yet at
present it is only from the United States that they may obtain
both to a degree necessary to their continued growth.

Capital that goes abroad without management — as much of it
did in the early twenties — often constitutes a poor risk. That
which goes abroad under American management — through U.S.
business firms establishing branches or subsidiaries — usually
shows better results both from a profit standpoint and in terms
of economic and social contributions to the host countries. Gov-
ernmental guarantees by this country are not nearly as effective
in safeguarding such investments as the enlightened attitudes of
the U.S. businessmen who manage the investments. This coun-

259

try has much to offer the world in business organization, technical
know-how, and creative capital. The building of economic units
in foreign countries that are not only profitably managed but
also provide a positive economic and social contribution to their
host countries are the surest guarantees that such capital will
not be subject to abnormal risks.

The rapid expansion of industrial capacity here and abroad
has enormously increased the need for raw materials throughout
the world. On this basis alone, it is in our self-interest to en-
courage private capital to seek profitable opportunities in under-
developed areas. And in so doing, we can demonstrate that
we are creating new outlets for electric power, transportation and
port facilities, increased industrialization, greater demand for
U.S. capital goods, and contributing to the increase in interna-
tional trade in general. However, unless we can come to a more
realistic "import" policy, the export of U.S. capital will shrink
and with it will go one of the principal ways to meet the present
critical "dollar gap." This dollar shortage abroad is already
seriously threatening our nondefense export trade.

Because we live in a world of state trading, exchange controls,
export subsidies, import quotas, and intensified nationalistic
aspirations there is special need for correlating private and gov-
ernmental action in the exportation of U.S. capital. Everyone,
including the taxpayer, benefits when governmental action con-
structively complements the flow of private capital abroad ; when
such action anticipates and helps create the appropriate climate,
and when it fosters the long-range development of economic and
trade relations of this and responding host countries.

The fact that we are only studying successful companies cer-
tainly implies that they have been profitable to their stock-
holders, and therefore we will not concern ourselves directly with
this facet of their success. Our concern is rather how these
selected though typical companies have earned the title "success-
ful" insofar as they have benefited the host countries. For con-
venience, we may outline these principal possible benefits in the
order of greatest ease in ascertaining their existence:

I. Contribution to the basic economy

A. Additional resources (land, minerals, etc.) brought into
use for the country.

B. Transportation, energy, communications which are built,
fostered, subsidized, or otherwise created by the com-
pany or by virtue of its operations and available to the
use of the country in whole or in part.

260

C. Products of the company consumed or used in the host
country.

D. Related industries developed with company assistance
or which are attributable to the company's operations.

E. Service industries and trades dependent on and arising
because of the operations of the company and the addi-
tional purchasing power of the labor force.

II. Contributions to living standards

A. Improvement in wages, hours of work, and employment
conditions.

B. Better housing.

C. Improved health and sanitation.

D. Greater opportunities for education and recreation.

E. Higher levels of nutrition.

III. Institutional benefits

A. Formation of and use of local capital.

B. Improvement in skills.

C. Changes in patterns of doing business.

D. Tax, social, and other legislation encouraged or fostered.

E. Changes in public administration.

F. Greater civic responsibility.

IV. Cultural

A. Are the company operations as a whole tending to in-
crease the middle class?

B. Is initiative passing to more responsible groups?

C. Are class conflicts decreasing?

D. Is there greater respect for human rights?

Unfortunately many of these broad areas of benefits cannot
be measured or even detected except over a considerable period
of time. They will be present or absent in varying degree ac-
cording to the type, size, and purpose of the capital investment
and the stage of the country's development at the time the initial
investment was made. Certainly the cultural benefits will emerge
gradually and probably only will be measurable by the influence
of the total impact of all managed capital — -foreign and local —
rather than any one part of it.

In addition to these external factual areas, we are vitally
interested in studying the relationships and attitudes that have
made these practices successful:

261

How has the company met the obstacles which it has
encountered?

To what extent has the company introduced U.S. man-
agerial skills and methods cut to fit the operating pic-
ture abroad?

How has the company sought and obtained the co-
operation of employees, government officials, and com-
munity; and have the views of these people changed
markedly since the company first started operations?

Has the company sought to identify itself with the
community as a friendly institution?

Has it sought to train native labor for the higher skills,
for supervisory and executive positions, and have such
efforts resulted in higher productivity, greater responsi-
bility, and understanding on the part of labor?

Have the company's practices in investing capital and
securing return of profits been made progressively
easier?

Has the company brought know-how, technical assist-
ance, and business management that could not have
been provided at all — or as effectively — by government
programs?

Above all, we shall be describing U.S. business management
attitudes toward its job of conducting successful operations
abroad, its flexibility and patience in meeting the great obstacles
that are presented in so many fresh and challenging ways. Let
no one be deceived by these Studies into believing that the way
of business management abroad is all romance, huge profits, and
success, purchasable in the market place. The rewards are ade-
quate, the work is hard but interesting, and, as at home, the re-
sults are created, not bought.

262

NPA OFFICERS AND BOARD OF TRUSTEES

*H. CHRISTIAN SONNE

Chairman; President, South Ridge Cor-
poration

*WAYNE CHATFIELD TAYLOR
Chairman, Executive Committee; Heaths-
ville, Virginia

*MARION H. HEDGES

Vice Chairman; Washington, D. C.

*FRANK ALTSCHUL

Vice Chairman; Chairman of the Board,
General American Investors Company

*CLINTON S. GOLDEN
Vice Chairman; Solebury, Bucks County,
Pennsylvania

*BEARDSLEY RUML
Vice Chairman; New York City

*LAUREN K. SOTH

Vice Chairman; Editor of the Editorial
Pages, The Des Moines Register and Tribune

ARNOLD S. ZANDER

Secretary; International President, American
Federation of State, County & Municipal
Employees, AFL-CIO

GILBERT W. CHAPMAN
Treasurer; President, The Yale & Towne
Manufacturing Company

MYRON M. COWEN

Counsel; Washington, D. C.
JOHN MILLER

Assistant Chairman and Executive Secretary
SOLOMON BARKIN

Director of Research, Textile Workers'

Union of America, AFL-CIO

•WILLIAM L. BATT

Philadelphia, Pennsylvania
LAIRD BELL

Bell, Boyd, Marshall & Lloyd
R. E. BROOKER

President, Whirlpool Corporation

COURTNEY C. BROWN
Dean, Graduate School of Business, Colum-
bia University

L. S. BUCKMASTER

General President, United Rubber, Cork,
Linoleum and Plastic Workers of America.
AFL-CIO

HARRY A. BULLIS
Chairman of the Board, General Mills, Inc. .

JAMES B. CAREY

President, International Union of Electrical,
Radio and Machine Workers, AFL-CIO

ROBERT W. DOWLING

President, City Investing Company

GUY EMERSON
Samuel H. Kress Foundation

JOSEPH W. FICHTER
Farm Consultant, Oxford, Ohio

WILLIAM C. FORD

Vice President, Ford Motor Company

LUTHER H. GULICK

President, Institute of Public Administration

RUFUS C. HARRIS
President, Tulane University

ALBERT J. HAYES

International President, International Asso-
ciation of Machinists, AFL-CIO

*ROBERT HELLER

President, Robert Heller & Associates
LEON HENDERSON

New York City

H. M. HORNER

Chairman of the Board, United Aircraft
Corporation

ERIC JOHNSTON

President, Motion Picture Association of
America, Inc.

MURRAY D. LINCOLN

President, Nationwide Mutual Insurance Co.
•DONALD R. MURPHY

Director, Editorial Research, Wallace's

Farmer and Iowa Homestead

CHARLTON OGBURN
New York City

WILLIAM S. PALEY

Chairman of the Board, Columbia Broad-
casting System, Inc.

JAMES G. PATTON
President, National Farmers Union

CLARENCE E. PICKETT
Honorary Secretary, American Friends Serv-
ice Committee

WALTER P. REUTHER
President, United Automobile, Aircraft &
Agricultural Implement Workers of America,
AFL-CIO

*ELMO ROPER
Elmo Roper and Associates

•THEODORE W. SCHULTZ
Chairman, Department of Economics, Uni-
versity of Chicago

HERMAN W. STEINKRAUS
President, Bridgeport Brass Company

CHARLES J. SYMINGTON

Chairman of the Executive Committee, Sy-
mington Wayne Corporation

ROBERT C. TAIT

President, Stromberg-Carlson Company, Di-
vision of General Dynamics Corporation

DAVID J. WINTON

Chairman of the Board, Winton Lumber
Company

•Executive Committee

263

MA'S PUBLICATIONS POLICY

NPA is an independent, nonpolitical, nonprofit organization estab-
lished in 1934. It is an organization where leaders of agriculture,
business, labor, and the professions join in programs to maintain and
strengthen private initiative and enterprise.

Those who participate in the activities of NPA believe that the
tendency to break up into pressure groups is one of the gravest dis-
integrating forces in our national life. America's number-one problem
is that of getting diverse groups to work together for this objective:
To combine our efforts to the end that the American people may always
have the highest possible cultural and material standards of living
without sacrificing our freedom. Only through joint democratic efforts
can programs be devised which support and sustain each other in the
national interest.

NPA's Standing Committees — the Agriculture, Business, and Labor
Committees on National Policy and the Committee on International
Policy — and its Special Committees are assisted by a permanent re-
search staff. Whatever their particular interest, members have in
common a fact-finding and socially responsible attitude.

NPA believes that through effective private planning we can avoid
a "planned economy." The results of NPA's work will not be a grand
solution to all our ills. But the findings, and the process of work
itself, will provide concrete programs for action on specific problems,
planned in the best traditions of a functioning democracy.

NPA's publications — whether signed by its Board, its Committees,
its staff, or by individuals — are issued in an effort to pool different
knowledges and skills, to narrow areas of controversy, and to broaden
areas of agreement.

All reports published by NPA have been examined and authorized
for publication under policies laid down by the Board of Trustees.
Such action does not imply agreement by NPA Board or Committee
members with all that is contained therein, unless such endorsement
is specifically stated.

NPA issues regularly the PLANNING PAMPHLETS and SPE-
OIAL REPORTS series which present the findings of NPA's Board,
Standing Committees, staff, or cooperating specialists. Information
on titles, prices and quantity discounts of these — as well as several
other special series — will be provided upon request.

NATIONAL PLANNING ASSOCIATION

A Voluntary Association Incorporated under the Laws of the District of Columbia

1606 NEW HAMPSHIRE AVE., N. W., WASHINGTON 9, D, C.

JOHN MILLER: Assistant Chairman and Executive Secretary

EUGENE H. BLAND: Editor of Publications «*Sffifa>7