United Fruit: A Company Gone Bananas — Part I
Lorenzo Dow Baker
When Captain Lorenzo Dow Baker made his first Jersey City profit from bananas he’d stumbled across while at port in Jamaica, there’s no way he could have known that he had taken the first in a series of steps that would lead to roughly four decades of civil war in Central America. There’s no way he could have prophesied way back in 1870, while dreamily patting that fresh wad of cash in his coat pocket, “Today I’ve founded a company whose President 105 years from now will frantically dig his way through quarter inch thick glass on the 44th floor of the Pan Am building in New York, so that he can cease to exist.”
But that’s what happened. Things like that often happen when people fail to take into account what economist call externalities: costs that can’t easily be described in an expense report. Like the junkie who thoughtlessly cries “I’m not hurting anyone but me!” individuals who disregard externalities court danger. Let a few too many pile up around you and you may find yourself bankrupt if you’re lucky and splattered all over the sidewalk if you’re not.
But enough with the economics, our story begins innocently enough when Captain Lorenzo Baker of Massachusetts landed his schooner Telegraph in Jamaica and came across stalk after stalk of a strange-looking fruit. So intrigued was he by the foreign produce that on the day he returned home he piled 160 green bunches into his boat, purchased at the rate of a shilling a stalk. I can imagine the smile on his face when eleven days later he unloaded the still-smiling, but now yellow fruit on New Jersey wholesalers for $2 a stalk.
But that’s what happened. Things like that often happen when people fail to take into account what economist call externalities: costs that can’t easily be described in an expense report. Like the junkie who thoughtlessly cries “I’m not hurting anyone but me!” individuals who disregard externalities court danger. Let a few too many pile up around you and you may find yourself bankrupt if you’re lucky and splattered all over the sidewalk if you’re not.
But enough with the economics, our story begins innocently enough when Captain Lorenzo Baker of Massachusetts landed his schooner Telegraph in Jamaica and came across stalk after stalk of a strange-looking fruit. So intrigued was he by the foreign produce that on the day he returned home he piled 160 green bunches into his boat, purchased at the rate of a shilling a stalk. I can imagine the smile on his face when eleven days later he unloaded the still-smiling, but now yellow fruit on New Jersey wholesalers for $2 a stalk.
Even with the markup, the bananas sold like hotcakes. Seeing an opening to be exploited, he quickly gathered up nine other New Englanders who wanted in on the banana trade and together they pooled $15,000 and founded the Boston Fruit Company. It was a wildly successful venture, so much so that in less than 30 years time Captain Baker’s company and others like it were plucking 16,000,000 bunches of bananas every year from Caribbean trees and shipping them north to markets that were demanding not 16,000,000 but 60,000,000 bunches.
It was no exaggeration to say that Americans had developed an insatiable appetite for the yellow Caribbean fruit. But every year, for nearly 30 years the Boston Fruit Company came up short on supply, though not for lack of longshoremen, sailors, boats or farmers. For that matter, it was not for a lack of anything at any point along the supply chain except for one, foundational item: more bananas. You can imagine how frustrating it must have been to know that every single year you were turning away millions of willing customers simply because… because some farmer in the Caribbean or Central America couldn’t figure out how to grow the things faster!
So what do you do when after 30 years you still find yourself high on demand and short on supply?
You decide to grow the bananas yourself, on land you own of course! It’s a wonder it took them 30 years to figure that out. But when those gentlemen back in Boston finally solved their riddle, they made up for lost time by devouring every parcel of real estate they could get their hands on. In no time at all they owned enormous swaths of terrain throughout the Caribbean, down into Colombia and back north through Guatemala, where they hit the mother lode and bought the whole freaking country.
And once in Central America they didn’t stop with simple land acquisitions. With an eye towards hegemony they began courting the assets of Minor Keith a.k.a. “the uncrowned king of Central America.”
It was no exaggeration to say that Americans had developed an insatiable appetite for the yellow Caribbean fruit. But every year, for nearly 30 years the Boston Fruit Company came up short on supply, though not for lack of longshoremen, sailors, boats or farmers. For that matter, it was not for a lack of anything at any point along the supply chain except for one, foundational item: more bananas. You can imagine how frustrating it must have been to know that every single year you were turning away millions of willing customers simply because… because some farmer in the Caribbean or Central America couldn’t figure out how to grow the things faster!
So what do you do when after 30 years you still find yourself high on demand and short on supply?
You decide to grow the bananas yourself, on land you own of course! It’s a wonder it took them 30 years to figure that out. But when those gentlemen back in Boston finally solved their riddle, they made up for lost time by devouring every parcel of real estate they could get their hands on. In no time at all they owned enormous swaths of terrain throughout the Caribbean, down into Colombia and back north through Guatemala, where they hit the mother lode and bought the whole freaking country.
And once in Central America they didn’t stop with simple land acquisitions. With an eye towards hegemony they began courting the assets of Minor Keith a.k.a. “the uncrowned king of Central America.”
Minor Keith
Mr. Keith was a heavily indebted American entrepreneur who owned almost every square inch of railroad line in the region, but who for years had been forced to dabble in the banana trade to help offset his railroad losses. Along the way, he had married the daughter of the President of Costa Rica and similarly wedded himself to any government official who would levy the fewest taxes on his enterprises. Given Mr. Keith’s inside track with the locals, the benefits of a marriage between the ex-pat’s ventures and the Boston Fruit Company were so obvious that on March 30, 1899, they got married — and formed the United Fruit Company.
That union gave birth to a mighty enterprise, one that was not interested in limiting itself to acts of vertical integration for the sole purpose of widening the margins a smidge. No, the merger with Mr. Keith produced a truly amped-up version of the old Boston Fruit Company. This new species was a super-aggressive, agri-bulldog: a land-grabbing, market-making, banana-manufacturing agri-bulldog.
When The United Fruit Company began staking its claim to Central America, it made sure to not only purchase the railroads, but to buy the ports too. And where a needed port didn’t exist, it built one. And while it was building, it also laid down and retained ownership of all of the region’s telegraph lines, which gave it control, either explicitly or implicitly, of most of the newspapers, which gave it control, either explicitly or implicitly of most of the politicians.
That union gave birth to a mighty enterprise, one that was not interested in limiting itself to acts of vertical integration for the sole purpose of widening the margins a smidge. No, the merger with Mr. Keith produced a truly amped-up version of the old Boston Fruit Company. This new species was a super-aggressive, agri-bulldog: a land-grabbing, market-making, banana-manufacturing agri-bulldog.
When The United Fruit Company began staking its claim to Central America, it made sure to not only purchase the railroads, but to buy the ports too. And where a needed port didn’t exist, it built one. And while it was building, it also laid down and retained ownership of all of the region’s telegraph lines, which gave it control, either explicitly or implicitly, of most of the newspapers, which gave it control, either explicitly or implicitly of most of the politicians.
Although I used the word “bulldog” the locals had a different name for the company: El Pulpo or The Octopus. As the 20’s drew to a close, only one individual stood between El Pulpo and complete regional domination: Sam Zemurray, a.k.a. Sam the Banana Man, owner of the Cuyamel Company.
Sam Zemurray
Sam got into the banana trade via the port at Mobile, Alabama, where he purchased overripe bananas from importers and delivered them to local markets who could sell them the next day. But sensing there was more money to be made by putting his operation onsite somewhere, in 1910 he purchased land in Honduras. Soon after, he began courting government officials in hopes of striking the type of deal that would allow him to move capital into the country and bananas out of the country without the inconvenience of a tax or a tariff bill. You see, just like United Fruit— no — even more so than United Fruit, Sam was obsessed with gaining absolute control over the entire production cycle: from how and where the banana tree seeds were planted in the ground to how the fruit was unpacked from the hulls once they reached port (and by “obsessed” I mean whatever you mean by the term “obsessed” but multiplied by a factor of 15.) However, the first item on his To-Do List had nothing to do with prepping the soil or re-educating the longshoreman, and everything to do with getting his hands on an agreement that would allow him to grow his product in tax-free soil.
Now up to this point in the story, if you caught me on a truly off day morally, I might see the logic in Sam’s don’t-tax-me argument; because hey, the Hondureños weren’t doing much with the land anyway. Why not take a hands-off approach with a guy who was willing to lay down the type of infrastructure that would not only provide a boost to the local economy but would bring the entire country into the 20th Century? Certainly, that’s how Sam saw it, which is why he pressed so hard for the type of agreement that would leave him with a minuscule tax bill and no duties to be paid at the port. And just when he thought he had his coveted agreement…
He didn’t.
How intensely his bones and guts must have burned when he discovered that the sitting government with whom he was negotiating, was at that same time in the process of inking a contract with J.P. Morgan to restructure its debt. As part of that agreement, agents from J.P. Morgan were to assume management of the nation’s treasury department. In other words, the nation of Honduras was outsourcing its tax collection to an American bank. Which meant that now, instead of seeking concessions from a possibly pliable Hondureñan entity, Sam was going to have to explain why he shouldn’t pay any taxes to the same New York City bankers who had been sent to Honduras to make sure that everyone paid their taxes.
It drove Sam mad, so mad that… … …
Well, you’ll never guess what he did.
Now up to this point in the story, if you caught me on a truly off day morally, I might see the logic in Sam’s don’t-tax-me argument; because hey, the Hondureños weren’t doing much with the land anyway. Why not take a hands-off approach with a guy who was willing to lay down the type of infrastructure that would not only provide a boost to the local economy but would bring the entire country into the 20th Century? Certainly, that’s how Sam saw it, which is why he pressed so hard for the type of agreement that would leave him with a minuscule tax bill and no duties to be paid at the port. And just when he thought he had his coveted agreement…
He didn’t.
How intensely his bones and guts must have burned when he discovered that the sitting government with whom he was negotiating, was at that same time in the process of inking a contract with J.P. Morgan to restructure its debt. As part of that agreement, agents from J.P. Morgan were to assume management of the nation’s treasury department. In other words, the nation of Honduras was outsourcing its tax collection to an American bank. Which meant that now, instead of seeking concessions from a possibly pliable Hondureñan entity, Sam was going to have to explain why he shouldn’t pay any taxes to the same New York City bankers who had been sent to Honduras to make sure that everyone paid their taxes.
It drove Sam mad, so mad that… … …
Well, you’ll never guess what he did.
