Globalized Fruit, Local Entrepreneurs. Douglas Southgate

which during the 1920s had one of the worst credit ratings in the Western Hemisphere.

      In fact, fiscal discipline was not maintained and the gold standard was honored in the breach. Reluctant to cut employment or levels of compensation in the public sector, Ecuador’s new leaders also constructed roads and other infrastructure. Just as had happened in the past, spending consistently ran ahead of tax revenues. One effort to close the fiscal gap involved the appointment of William F. Roddy, who had been a member of Kemmerer’s team, to administer the customs service. Given a mandate to reduce corruption and enhance government revenues, Roddy took his assignment seriously and was largely successful. Not coincidentally, he also became hugely unpopular, especially among importers and exporters, so his tenure was brief.²⁵ Once the meddlesome foreigner had been shown the door, business-as-usual returned in Guayaquil and other ports and tariff collections fell back to customary levels. Old habits of monetary management made a comeback as well, with the central bank printing money not in proportion to its metallic reserves, but rather on the basis of its holdings of government bonds—exactly as the BCA had done before the July 1925 coup d’état. The impact of monetary expansion was the same: ruinous inflation.²⁶

      Macroeconomic conditions in Ecuador worsened once the United States and other leading nations tightened monetary policy and raised barriers to trade after the October 1929 crash of the U.S. stock market. The collapse of international commerce brought on by protectionism largely explains why the Great Depression was so long and severe. As happened throughout the world, Ecuadorian exports declined precipitously, from fifteen million dollars in 1928 to a little over four million dollars in 1933, which among other things resulted in a dwindling of metallic reserves in the central bank.²⁷ The country went off the gold standard officially in 1931, by which time currency was being issued with abandon because of chronic fiscal deficits. The ensuing inflation and high unemployment fueled political instability, which manifested itself frequently as angry demonstrations and military takeovers. During the 1930s, the Ecuadorian presidency changed hands fourteen times, never because of an orderly succession from one elected head-of-state to another.

      United Fruit Acquires Ecuadorian Real Estate

      Even though United Fruit proceeded slowly after Tamayo left office and especially after the 1925 coup, Ecuador’s capacity to supply the United States with bananas was not forgotten. Of particular interest to the company was an old cacao estate named El Tenguel, which took in nearly 45,000 hectares a little north of Machala. Rumors that Sinners might be negotiating on United Fruit’s behalf for the property had reached the U.S. consulate in Guayaquil in December 1924. The company, however, was not yet ready to put money down for farms in Ecuador, so El Tenguel, which had been mortgaged several years earlier, was foreclosed in 1926.²⁸

      Three years later, in 1929, a U.S. businessman, Clarence L. Chester, began pursuing an exclusive license to ship Ecuadorian bananas to the United States for the Pacific Fruit Company, which he served as vice president. Chester promised growers higher prices in order to win them away from SAFCO—the Chilean company that had been the leading exporter of bananas harvested in the costa since the early 1900s. However, a bill in the Ecuadorian Congress to grant Pacific Fruit a monopoly on exports to the United States was defeated after the revelation that a legislator who had sponsored the bill was also a member of the firm’s board of directors. Chester left Ecuador for good in 1933, when his employer went out of business.²⁹

      Just at this time, the country’s banana sector was beginning to stir, in spite of the Great Depression. The U.S. consul in Guayaquil, Harold B. Quarton, reported in April 1933 that Ecuadorian merchants intended to sell 350,000 stems overseas in 1934—a projected increase of more than 50 percent in just one year. Neither Quarton nor anyone else doubted that millions of stems could be produced annually in the costa, although he was skeptical about the projected increase in exports owing to the region’s poor infrastructure.³⁰

      Roads, bridges, and rail lines did not get much better during the next few years, although maritime linkages with North America improved markedly. Grace Steamship Lines, which began transporting Ecuadorian cacao and coffee to New York in 1879, had offered the fastest service to the eastern United States since 1893, when the company’s fleet switched to steam power. Beginning in 1934, all the company’s ships docking in Guayaquil had refrigerated compartments, suitable for carrying bananas.³¹ The response to this development was immediate. Ecuador exported 1,075,756 stems from January through September of 1934, of which nearly three-quarters (745,450 stems) went to New York. These shipments not only exceeded the aforementioned goal of 350,000 exported stems for 1934, but also the 462,054 stems actually sent overseas in 1933.³²

      With banana exports going up, United Fruit started at last to invest in western Ecuador. Samuel Zemurray had taken over the company in January 1933 and one of his first acts was to send Francis V. Coleman to the costa with instructions to acquire real estate. Coleman, who had worked in Ecuador more than a decade earlier for the West Indian Oil Company, knew the country well, including the places best suited to banana production for overseas markets. Mindful of the limitations of local infrastructure, he concentrated on properties close to existing railroads. One of the properties United Fruit purchased was El Tenguel. The company also bought the Taura-Vainillo plantation, with an area exceeding 30,000 hectares, and a dozen other holdings.³³