Foreign firms, running exploitative businesses, being supported by their origin country in establishing favourable regime using all methods possible? Its bananas how close this sounds to the initial role of the East India Company in India. However, a more recent case occurred in the 1950s in Guatemala at the hands of a firm of a perennial meddler nation. Let’s have a look at that as well as what is a ‘Banana Republic’.
Crux of the Matter
Defining Banana Republics
The term was first developed in 1903 by writer O Henry. The term is usually used to refer to Central or South American countries.
Economic Features Of Banana Republics
They are economically dependent on foreign investment. Additionally, there is a large-scale export of a limited natural resource. Moreover, major infrastructure and land is under foreign control. For example, United Fruits Company’s operation in Guatemala.
Country Profile Of Banana Republics
The Government is unstable, corrupt and prone to insurgency. Furthermore, the society in such countries is characterised by widespread poverty and a lack of middle class.
United Fruits Company (UFC)
UFC was a vertically integrated tropical fruits business. Their business operations in Guatemala gave them a 99-year lease on large land holdings and exemptions on virtually all taxes.
They owned or directly controlled the country's telephone & telegraph system, a majority of railroad track and ports, and nearly 42% of Guatemala’s land. Moreover, they also operated with exploitative labour conditions.
Enter Jacobo Arbenz
He was the democratically elected Guatemalan President from March 1951 – June 1954. He introduced the Decree 900: Agrarian Reforms, under which, uncultivated land from large land-holdings was expropriated and redistributed to poor agricultural laborers. Nearly 85% of land owned by UFC fell under the domain of these reforms.
UFC V/S Arbenz
The land value was calculated based on the tax assessments filed by UFC in 1952, the year land was claimed. But, to save taxes, UFC had undervalued the land, but now it wanted a higher market price for the land. Arbenz also supported union workers’ strike against UFC.
UFC And US Ties
UFC is a registered company of the US. It was closely connected with administration of then-US President Dwight D Eisenhower. Allen Dulles, then-Director of CIA was on the Board of Trustees of UFC. Notably, the law firm of Dulles's brother John, who was then-US Secretary of State, represented UFC.
Coup D’Etat 1954
The Coup was organised by UFC, and CIA of the US. Its aim was to remove President Jacobo Arbenz from power. They achieved this by orchestrating an invasion by 150 Guatemalan exiles, and conducting psychological warfare to justify the Coup and to exaggerate the militant forces. As a result, puppet Govt of President Carlos Díaz León under UFC and US was established.
Banana Wars was a series of US interventions, police action and military occupation in Central America and the Caribbean. They took place between 1898 and 1934.