Excused from having to undertake either the first or second business innovation identified by Schumpeter, Ecuadorian entrepreneurs have been able to concentrate on other innovations. Time and again, they have placed bananas in new markets. They also have entered a number of existing markets, thereby increasing competition. Exporters from the South American nation, which is smaller and poorer than Colombia to the north and Peru to the south, have been successful thanks largely to the business services and mutually-rewarding partnerships on offer in Guayaquil, which was a haven for international commerce generations before Noboa or any other Ecuadorian began selling bananas overseas. Since the mid-1900s, the country has maintained an edge over its competitors—including the Mesoamerican republics where United Fruit and Standard Fruit got their start.
Central Versus South America
Warm and humid, the Caribbean lowlands of Central America have always been an obvious place to grow tropical fruit for the United States, where demand was seemingly insatiable around the turn of the twentieth century and for many years afterward. Bananas from the region had been finding their way to New Orleans and other U.S. ports since the 1870s. Some of this fruit was harvested alongside the railroad Keith built in Costa Rica and more came from the Bay Islands of Honduras.5 However, Central America’s potential for banana production remained largely unexploited as the nineteenth century drew to a close, primarily because few rural laborers were willing to relocate from the temperate highland valleys where the region’s population had long been concentrated to coastal settings that swarmed with disease-bearing insects.6
Multinationals dealt with labor shortages and other barriers to large-scale production as they established their own plantations, which were the core of company-controlled enclaves that had few linkages to the Central American economy. Some of the workers in northern Honduras, which during the early 1900s lacked a rail connection to the rest of the country, were from El Salvador, which was (and remains) more densely populated than its neighbors and is the only Mesoamerican nation with no Caribbean coastline. Also, many of Central America’s bananas were harvested by West Indians who spoke English and were of African descent. Migration by this group into the highlands, which was proscribed by law in a number of countries,7 was unappealing because the wages paid by foreign fruit companies far exceeded what other rural employers offered.
Sizable expenditures on the clearing and preparation of land and on infrastructure of every description were needed before tropical fruit could be produced and exported. Prior to these expenditures, investing firms demanded long-term concessions, which included grants of real estate as well as guarantees of minimal taxation. The handful of companies that received these concessions from public officials in San José, Tegucigalpa, and other capitals ended up with nearly all the best coastal land from Guatemala to Panama, which effectively preempted competition either on Central Americans’ part or by outsiders.
Circumstances were not the same a century ago in South America. Whereas urban centers were lacking along the Caribbean coasts of Costa Rica, Nicaragua, Honduras, and Guatemala, there were cities of long standing in northern Colombia. Santa Marta, Ciénaga, and Barranquilla, within 100 kilometers of each other, were settled in the sixteenth century. Cartagena, a colonial stronghold built to prevent incursions by Spain’s European adversaries and to discourage attacks by pirates, was a little farther down the coast, in the direction of Panama. In addition, sugar and other crops had been raised in northern Colombia for generations. In no sense, then, could the region be considered a tabula rasa, as Central America’s eastern littoral was regarded in the late 1800s and early 1900s by the tropical fruit industry and even by national governments. Western Ecuador, which is bounded on the east by the Andes (the world’s tallest mountains other than the Himalayas) and opens toward the Pacific Ocean, had agriculture and an urban population as well. Parts of the costa, as the area’s inhabitants and all their countrymen call it, have been farmed continuously for millennia. Also, Guayaquil, which was founded in 1538, was a commercial center decades before Baker, Preston, and Keith joined forces in 1899 to create United Fruit.
The costa was the first part of South America to export bananas, which had been brought to the New World by Spaniards following close on the heels of the conquistadors. However, Ecuadorian fruit traveled south, to Peru and Chile, instead of to the north. This trade, which was under way by 1877, grew modestly over the years and in 1908 a Chilean firm, the South American Fruit Company (SAFCO), opened an agency in Guayaquil to handle bananas and other tropical goods. None of the vessels plying the waters between Ecuador and Chile were refrigerated, so fruit was transported in small quantities as deck cargo. Banana exports amounted to $40,000 in 1915 and had risen to $60,000 in 1933, with SAFCO consistently accounting for more of the business than any other firm.8 Tropical fruit comprised less than 1 percent of Ecuador’s total exports at the end of this period,9 when United Fruit started to invest in the country.
In Colombia, José Manuel González made an initial shipment of bananas to the United States in 1889. However, this early venture failed because, as Marcelo Bucheli notes, “the fruit rotted by the time it arrived in New York.” More rewarding was an enterprise launched shortly afterward by a pair of Englishmen, Mansel Carr and Laurence Bradbury, who partnered with a firm in New Orleans to deliver bananas regularly to the Crescent City. This enterprise took off around the time Keith began buying farmland in South America. His purchases were subsequently absorbed by United Fruit, as was the Santa Marta Railway Company (originally a British-owned business and Carr’s former employer). Like Keith’s holdings in Central America, northeastern Colombia was thus drawn into the multinational’s orbit, where it remained until World War II.10
Holland in the Tropics
With its fertile soils, abundant hydrologic resources, and direct access to European ports and the southern and eastern coasts of the United States, the Caribbean Basin has been the source of most of the bananas traded internationally since the late 1800s. But while Europe and the United States are farther from the costa, the region is well suited to fruit production, more so than many other parts of the Western Hemisphere. Northern Chile and the entire Peruvian littoral, for example, are extremely dry. Arid conditions result partly because the Andes impede the movement of moisture-laden clouds out of the Amazon Basin, east of the mountains. Also, clouds that form in and around the Humboldt Current, which has low temperatures owing to its origins in the frigid seas near Tierra del Fuego and which flows northward along the Pacific coast of South America, are thin as a rule and therefore the source of little precipitation. For hundreds of kilometers along the coast, the only green places are the narrow valleys of rivers careening down from the nearby Andes.
A little north of Peru’s boundary with Ecuador but still below the equator, the Humboldt Current turns away from the continental mainland and heads straight to the Galápagos Islands, 1,000 kilometers due west and the only setting anywhere on the equator where the seawater is cool enough to suit penguins. The ocean is like a warm bath a little farther north and the resulting cloud formation is the source of torrential precipitation and lush vegetation in the surrounding region. In stark contrast to the deserts bordering the Pacific Ocean in Peru and northern Chile, rainforests formerly extended from northwestern Ecuador through western Colombia and into Central America. Patches of this ecosystem remain intact. Where Colombia and Panama meet, for example, impenetrable jungles and broken terrain combine to this day to block construction of the final segment of the Pan-American Highway, which otherwise runs the whole distance from Alaska to Patagonia.
Neither arid nor excessively wet, western Ecuador includes locations south of Guayaquil where precipitation falls short of bananas’ water requirements, which are substantial. However, the southern