The Banana: Empires, Trade Wars, and Globalization

2. The Empire Challenged, 1930-74

By the essential ingredients of the Banana Empire were in place and the United Fruit Company operated with relative impunity throughout the so-called banana republics of Latin America. The Great Depression of the s, however, was a major disruption to the banana trade and to national economies globally. It is often credited with inducing a new stage in the overall development of Latin America—the stage of economic nationalism—as national governments began to take a more active role in directing their economies. Ultimately, these changes would affect the nature of the Banana Empire. This chapter covers the second stage of the banana industry’s development. The origins of the second stage lie in the dire economic conditions of the Great Depression, but many of the effects of the Depression would not really be felt until the s. Similarly, the roots of the third stage can be found in the growth of Latin American state sectors that began after World War II, a process initially manifested in the larger, stronger states of the region. For the ( J^[
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'/)&·-* | Bananas in Latin America smaller Central American states, Ecuador, and Colombia, the process began later and the strength needed to confront the Banana Empire was not mustered until the s. As the second stage of the banana industry’s evolution began in the Western Hemisphere, the Banana Empire was at its virtual peak. The had created an unparalleled infrastructure in the countries in which it operated. The industry was modern and technologically advanced. Bananas were the leading export of Costa Rica, Honduras, and Panama and ranked highly among the exports of Guatemala, Nicaragua, and Colombia. Thousands of people had jobs directly related to banana production and trade. But what was the state of the industry in from the perspective of the host countries? The facilities developed within the Empire were not intended to serve the societies at large. The Empire’s infrastructure was focused on isolated banana zones and had weak, if any, connections to the heartlands of the countries involved. In Honduras the railroad system did not even reach Tegucigalpa. The industry was a classic enclave under foreign domination, with few links to the rest of the national economy in each producing country. Corruption of government officials ensured that states did not intervene in ways that would steer the industry’s real benefits toward the host countries. Labor unrest was frequent but was commonly suppressed. The industry also generated a relatively low volume of tax revenues for the host countries. Unlike developed countries, where personal income and property taxes generate a significant percentage of public-sector revenues, less-developed countries ( s) historically have a small middle class and thus are forced to rely on export and import taxes as a major source of funds. In Central America and Colombia, coffee and bananas were the two primary exports, but they did not share equally in providing funds for the national treasury . Coffee production occurred on modest-sized farms that were usually owned by nationals. Coffee exports were more effectively taxed than were bananas produced by large foreign corporations The Empire Challenged | that negotiated favorable contracts with the government. According to Kepner and Soothill ( , ), export taxes paid to Honduras, Costa Rica, Panama, Guatemala, and Colombia on a nine-hand bunch of bananas having a wholesale value of two dollars or more ranged from zero to just one and one-half cents.1 They estimated that, in Costa Rica, export taxes on coffee represented . percent of the export value while those on bananas were just . percent of the export value. Their analysis concluded that the governments of those countries “relinquished their sovereign right of taxing one of their two leading industries for many years” (Kepner and Soothill , ). During this second stage, the Banana Empire encountered several challenges to its hegemony. The first challenge—Panama Disease— resulted in the company’s developing the kind of geographic flexibility that has come to symbolize the footloose nature of modern s. Panama Disease, a fungus, was so-named because it first struck the ’s plantations in Panama’s Bocas del Toro province during the mid- s. The disease spread rapidly to the Caribbean zones in other Central American countries during the s, wiping out the output of entire plantations—indeed, of entire production zones. Losses were serious and required creative solutions, leading to the first major geographic shift...