In the 1950’s, the United States was the most powerful country in the world and tended to believe an American investment in any country needed to be protected. This has always been a strange idea, because it does not say the investment needs to be protected because it represents the best of the country, just an investment. In the Central American country of Guatemala, United Fruit had an investment in over 500,000 acres of land to grow bananas. The story of how the rest of the story plays out is outlined in the book Bitter Fruit by Stephen Schlesinger and Stephen Kinzer published by Doubleday, NY, 1982.

The story of how the company started is interesting – In 1870 Captain Lorenzo Baker of Boston landed his schooner Telegraph in Jamaica and bought some bananas. He bought 160 bunches an sold the bunches for $ 2.00 a piece in Jersey City. He brought back more into Boston and they sold. Soon the Boston Fruit Company was formed and expanded with new ships and new markets. By 1898 the company was importing more than 16 million bunches. As the size of the markets grew, the owners had a problem – a shortage of bananas. The solution to buy land and grow themselves to control the production and scheduling issues. The company decided to merge with a railway company which had a monopoly on transportation in Guatemala. The companies merged into United Fruit.

The new company had 112 miles of railroad; owned over 200,000 acres of land of which 61,000 was producing bananas. It is noted most of the land was not used for agriculture and the local owners were “happy” to be paid anything for it. For example in Guatemala the ruler gave a 99 year lease to operate a railroad. By 1930’s United Fruit was the largest employer in Guatemala as well as the largest landowner and exporter, having control of the transportation and ports was a good thing for United Fruit. The company had become accustomed to be granting concessions: no taxes on internal operations, duty free importation of necessary goods and guarantee of low wages. In addition to the above advantages, the country’s leadership was among the weakest, most corrupt and most pliable or for a company an ideal investment climate and profits flourished for 50 years.

Linking to dividend paying stocks, for the first 50 years the company was a great investment, between 1942 and 1952 the company increased its assets by 133.8% and paid stockholders nearly 62 cents of every dollar invested. If you had examined the outlook for the company, you likely would have been favorable to an investment. In the coming years, new governments and their ideas on land reform would change the outlook on the company.

There are more questions than answers, till the next time – to raising questions.