Guayaquil’s vocation for commerce has worked to the advantage of the surrounding region, the country as a whole, and even foreign customers of Ecuadorian products. Perhaps limited economic development during the centuries when the costa was remote and insalubrious was the price to be paid for the acquisition in the city of the habits of productive entrepreneurship. If so, sacrifices in the past have resulted in sizable dividends. Represented by individuals such as Noboa, Ecuador has been the world’s leading exporter of tropical fruit since the 1950s, without ever being a corporate dependency.
CHAPTER 3
Never a Banana Republic
As large and as diverse as Colombia is, its candidacy for the ranks of banana republics was never promising. United Fruit might have been unrivaled in the northeastern part of the country during the first four decades of the twentieth century. However, the company exercised much less influence hundreds of kilometers away in Bogotá, especially compared to what it wielded in various Central American capitals. South of Colombia, Ecuador is smaller and less developed, a place where a foreign firm might seize and hold the commanding heights of the national economy and from time to time act as a political kingmaker. Yet the country never has experienced this kind of subservience, which has been examined from various scholarly perspectives.
Although he offers no specific observations about banana republics, economist Andrés Rodríguez-Clare has analyzed the multiple outcomes that can happen if an impoverished nation hosts a company from an affluent part of the world. Investment occurs and technology is introduced, to be sure. However, sizable gains for the host country are not guaranteed. It is possible, for instance, for the multinational to decide that its interests are best served by employing unskilled labor and little else from the local economy to produce “simple final goods,” such as a number of farm products. Even if more complex ventures are undertaken, inexpensive communications with headquarters far away might deter the firm from building up factors of production that are locally scarce, including the human capital needed for management and marketing. If so, overall economic progress in the host country may well disappoint.1
Observations along these lines do not necessarily apply to the tropical fruit business. The operations Chiquita, Dole, and Del Monte have in Central America are intensively administered and most managerial jobs are held by local people. These people are as capable as their counterparts in places like the United States. Moreover, their familiarity with on-the-ground realities, commercial and otherwise, is often of great value and can be hard for foreigners to acquire. Transnational companies know that bringing in an expatriate usually makes less sense than recruiting a talented individual from the host country and training him or her as needed, which is why the local workforces of those companies do not consist only of unskilled laborers. Of course, local hiring is the norm for Latin American firms doing business in their respective nations.
Rodríguez-Clare’s analysis, which does not address foreigners’ possession of land, stands apart from the arguments of many authors who focus on the prolonged control of vital natural resources by multinationals in places like Central America. Writing about Honduras, for example, John Soluri contends that this control has had lasting and adverse effects.2 Similar effects are possible today in Sub-Saharan Africa, where an indeterminate number of large rural holdings now belong to Middle Easterners and other outsiders.3
In the tropical fruit sector, resource ownership has been consequential not only for exporting nations such as Honduras. For decades, United Fruit safeguarded its control of the banana industry as a whole by locking up much of the best agricultural land in the Caribbean Basin. This dominant position traced back to Minor Keith’s acquisitions of Central American real estate during the 1800s and lasted through the 1960s, when United Fruit still exported a large share of the region’s bananas and grew much of the fruit it shipped overseas on its own plantations.4 In northeastern Colombia, corporate control of farmland and its produce took a form other than outright ownership. As explained in this chapter, United Fruit monopolized exports from the region by the way it structured production contracts with local growers.
This monopoly broke down during World War II, when North America and Europe halted imports of tropical fruit, and could not be reestablished after hostilities ended and normal commerce resumed. In western Ecuador, no foreign company ever replicated either the huge plantations and land reserves of Central America or production contracts of the sort used to suppress competition in northeastern Colombia. Additionally, Ecuadorian entrepreneurs have engaged in international marketing since the early days of their country’s banana boom, thereby preventing foreign monopolization of exports.
Making sure that their country would never become a banana republic, the authorities in Quito imposed restrictions on United Fruit in the late 1930s. However, it would be a mistake to infer from these restrictions that Ecuadorian opposition to foreign investment in the tropical fruit sector was ever categorical or unanimous. To the contrary, many national leaders pursued that investment assiduously, no less than foreign companies once tried hard for grants of land throughout the Caribbean Basin.
Ecuador Woos El Pulpo
The campaign to interest transnational fruit companies in Ecuador began in the early 1920s, when the cacao business was suffering a sharp decline. Output contracted because of a pair of fungal diseases: Witches’ Broom, caused by Crinipellis perniciosa, and Frosty (or Monilia) Pod Rot, caused by Moniliophthora roreri.5 Simultaneously, the prices Ecuadorian growers received for their diminished harvests fell because of increased cacao production elsewhere in the Western Hemisphere as well as in Africa.6
United Fruit would not have been able to establish new operations in Ecuador or anywhere else a few years earlier because a large segment of the company’s maritime fleet (the most sizable collection of vessels at the time in the United States aside from the U.S. Navy) had been requisitioned during World War I to carry troops and supplies to Europe. But with its ships returned after the Armistice of November 1918, United Fruit could consider an expansion of its business—including south of the Panama Canal, which had been completed in 1914.
The company had ample motivation for such an expansion. Panama Disease, which was a constant menace in the Caribbean Basin, had yet to make an appearance in Ecuador during the 1920s and would not do so for several more years.7 Also, the rarity of tropical storms in the costa was an important consideration because Gros Michel plants, which would not be replaced for another four decades, were tall with shallow roots and therefore were easily blown over—particularly right before stems of fruit weighing forty kilograms or more had been cut. Before the switch to the Cavendish variety in the Caribbean Basin, up to one-third of the banana harvest was destroyed every year because of hurricanes.8 Yet another attraction of western Ecuador was that prevailing wages were low, no higher than compensation levels in other banana-growing regions.
One person who understood that United Fruit might be attracted to Ecuador and that this would be beneficial for the country was José Luís Tamayo, an attorney and self-made businessmen from Guayaquil whose most significant achievement in the private sector was to serve as legal counsel and a member of the board of directors for the Banco Comercial y Agrícola (BCA). Created to serve the cacao sector, the BCA played a pivotal role in the national economy—not least because it had been given the authority in 1915 to print the currency it lent to the national government, which lacked a monetary authority of its own and which became more indebted to the bank as the years passed.
Elected to a four-year presidential term in 1920, Tamayo assigned J. Cicerón Castillo, who at the time was managing an oil field west of Guayaquil, the task of convincing United Fruit to buy land in the costa, provide shipping, and introduce better technology for banana production. In February 1922, a letter written by Castillo reached Victor M. Cutter, the acting vice president of the multinational. In response to this letter, which stressed the advantages for United Fruit of growing bananas in Ecuador for shipment to California, Cutter provided a list of fifty-one questions for Castillo to answer so that the company could decide about sending down