The United Fruit Company in Latin America (American business abroad) [Hardcover]

Stacy May (Author), Galo Plaza (Author)

Book Description

Publication Date: November 1976 | ISBN-10: 0405092903 | ISBN-13: 978-0405092909

Publisher: [Washington, National Planning Association Publication date: 1958 Subjects: United Fruit Company Bananas Notes: This is an OCR reprint. There may be numerous typos or missing text. There are no illustrations or indexes. When you buy the General Books edition of this book you get free trial access to Million-Books.com where you can select from more than a million books for free. You can also preview the book there.

--This text refers to the Paperback edition.

Product Details

• Hardcover: 262 pages
• Publisher: Ayer Co Pub (November 1976)
• Language: English
• ISBN-10: 0405092903
• ISBN-13: 978-0405092909
• Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #6,851,097 in Books (See Top 100 in Books)

Customer Reviews

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2 of 2 people found the following review helpful:

5.0 out of 5 stars Definitive background on United Fruit Co, June 23, 2009

By 

david brown (Montreal Canada) - See all my reviews
(REAL NAME)   

This review is from: United Fruit Company in Latin America (Hardcover)

In the 1950s and 1960s the National Planning Association sponsored a series of studies about American business abroad. The intention was to identify lessons applicable to other businesses as they developed internationally. Consequently the books largely ignored individual management personalities in order to focus on general themes.

This volume by Stacy May and Galo Plaza, published in 1958, covers the United Fruit Company's banana operations in Guatemala, Honduras, Costa Rica,Panama, Ecuador and Columbia. These operations date from Company's founding in 1899 but most specific plantations date from the 1920's and 1930's. They still operate today.

The United Fruit Company has been controversial throughout its existence and been subject to a vast number of books. Most allegations concern corruption of host governments and officials, hoarding land, exploiting the host countries and their citizens, abuse of employees and monopoly of the banana market etc. Consequently it has long been the bete noire of leftists in Latin America and. since the 1960's, in North America as well.

In keeping with the NPA mandate this book does not delve deeply into any specific controversies. The strength of the book is that Stacy May, a statistician who ran the Statistics Division of America's War Production Board in World War Two, and Galo Plaza, a former President of Ecuador, had access to United Fruit's records and largely present facts rather than opinions.

The book begins with an overview of the growing of bananas which demonstrates how improbable a worldwide market in this product really is. The fruit is highly perishable, highly vulnerable to weather conditions and subject to diseases that literally wiped out plantations. This required a strategy of plantations in multiple countries, to reduce risk, heavy investment in irrigation and disease control (capital cost 5X to 10X cost per acre compared to coffee) and need to surplus land (to control irrigation watersheds and provide for relocation of planations after disease outbreaks).

The next section of the book follows the physical transportation of bananas to market. Since they are easily damaged they must be handled with extreme care, need exact logistics to get to market before they spoil (life of less than a month), require refrigerated transport etc. All of these require significant capital investment in specialized equipment and facilities, while incurring substantial transportation and spoilage costs. I found it extremely interesting that the difference between what Latin America received for bananas (approximately 28% of retail), compared to what North American farmers got for their produce (approximately 38% of retail) was accounted for by the extra costs (10% of retail) of the specialized ocean transport.

May and Plaza then looked at the financial returns earned by the Company. Economic theory states that capitalists adjust for higher risk, such as perishable products and unstable governments, by demanding a higher rate of return. Unfortunately, for the thirty or so years preceding their study for which comparables were available, they discovered that return on investment for the United Fruit Company (approximately 11%) was actually below that of similar sized companies operating in the low risk American market. If the Company was exploiting Central America or monopolizing the banana market it simply was not making any money from that behavior. Perceptions by Latin Americans that the Company was "rich", not implausible inasmuch as its gross profits exceeded the annual tax revenues in some Central American countries, appears to have been made without consideration of the massive capital required to distribute the bananas once they left the plantations.

The authors then go on to look at the economic benefits received by the host countries from the banana plantations. Essentially they occupied coastal swamp land that was otherwise of no economic value (although reading this I could only think that environmentalists might make a difference conclusion today), with less than 1% of cropland they generated 12% of output, that 92% of revenues stayed in the countries and that the Company paid approximately 15% of the nations' taxes.

Finally the book looks at the treatment of workers on the plantations. Again the numbers generally showed that the workers were paid more and received substantially greater benefits )i.e. housing, health care, subsidized food/clothing) relative to field hands in Latin America. However, at the time the book was written it also acknowledged greater union unrest (attributed in fine 1950's logic to communist involvement in union leadership).

Considering that Plaza was a politician the book is relatively weak in reconciling the negative public perceptions of the Company with the logical explanations of its business and structure. There is an interesting discussion of the timing of the Company relative to the Spanish American war and America's gunboat diplomacy in Central America. There was also an interesting point about the Company's image in the larger more diversified economies (i.e. Ecuador) versus its image in the smaller Central American countries.

In my title I specifically identified this book as definitive "background" rather a definitive "history". I did so because of the age of the book (1958) and the lack of coverage of many (controversial) historical incidents. The fact that the incidents aren't covered does not imply that the book is simply a management whitewash but rather that the scope of the book was never intended to cover them. However I would highly recommend the book to anyone interested in the United Fruit Company for the simple reason that that the authors had full access to the financial and market records of the Company. As such they provide unparalleled insight into the factors effecting the operations of the Company.