Dye on Bucheli, _Bananas and Business: The United Fruit Company in Colombia, 1899-2000_

[eh.net-review at eh.net]

Published by EH.NET (August 2008)

Marcelo Bucheli, _Bananas and Business: The United Fruit Company in 
Colombia, 1899-2000_. New York: New York University Press, 2005. xi + 
239 pp. $45 (cloth), ISBN: 0-8147-9934-5.

Reviewed for EH.NET by Alan Dye, Department of Economics, Barnard College.


Marcelo Bucheli’s study of the long-run rise and decline of the United 
Fruit Company’s banana operations in Colombia offers a persuasive view 
of the role of this important company, which challenges stereotyped 
views of the role of multinationals in Central America and the greater 
Caribbean. _Bananas and Business_ is, therefore, an important new 
contribution to the relatively neglected field of business history in 
Latin America. Methodologically, it takes issue with studies that adopt 
a dependency approach, arguing that they are too narrow in scope. 
Without denying the well-known incidents of wrongdoing of the United 
Fruit Company, Bucheli widens the scope of analysis by adopting a 
business-historical approach to consider possible benefits as well as 
costs associated with the presence of the company in Colombia.

Strictly speaking _Bananas and Business_ is a case study of a branch of 
United Fruit’s overall operations in the Central American/Caribbean 
region, of secondary importance as one of the company’s banana producing 
regions. Nonetheless, the study has considerably broader significance 
for the literature. Much of the book addresses overall company strategy. 
The remainder then uses the example of the Colombian operations to show 
how the company’s regional policies fit into the global strategy. The 
first three chapters sketch a quantitative picture of the company, 
examine the development of the demand for banana exports over the 
twentieth century, and describe the evolution of United Fruit’s global 
strategies for the production and export of bananas. The remaining 
chapters then incorporate how the company’s operations in Colombia 
contributed to the company’s global strategies, and more broadly provide 
new insights into the role of the foreign corporation and local 
entrepreneurship. The Colombian example demonstrates how the global and 
local interacted to transform a sector that was originally a 
foreign-controlled, monopsonistic enclave into a competitive industry 
with dominant local participation, with evidence of growing linkages 
into processing, local finance and other services.

The United Fruit Company is probably the most frequently studied of U.S. 
corporate ventures in Latin America, yet, despite so much attention, its 
history as a business remains obscure. Scholars have shown more interest 
in this multinational corporation as an object of muckraking. The 
criticism, as is well known, was at times well deserved; yet existing 
historical treatments often misleadingly adopt stereotyped views of 
multinational motives rather than offer a serious investigation of how 
individuals inside and outside the organization interacted to determine 
the company’s policies and behavior.

Bucheli carves a new path in this literature by seeking to offer a 
balanced assessment not only of the shady dealings of the company but 
also its legitimate activities. He does this by focusing his examination 
on the business strategies of the company. One learns how over time the 
management of the company’s Colombian banana operations responded both 
to global demand and supply factors in the banana market and to local 
factors, which interacted with changing political conditions and local 
entrepreneurial incentives. Although openly critical of observed 
exploitative practices, he finds that the company’s presence in the long 
run bestowed benefits on the development of the banana industry of the 
region. Benefits included favorable compensation packages for workers on 
the banana plantations, especially in the form of benefits such as free 
health care; the provision of credit to independent growers at low 
interest rates when no other local credit was available; and the 
transfer of knowledge and encouragement of an entrepreneurial class of 
banana planters and rival locally-owned export companies. The 
transformation was not rapid. It took the better part of three-quarters 
of a century for United Fruit to have to confront any significant local 
competition. However, Bucheli suggests that, when looking over the long 
term, the benefits of United Fruit’s presence in Colombia appear to 
outweigh the costs.

One important contribution is the story the book tells of how United 
Fruit eventually decided to abandon its initial policy of creating 
barriers to competition and accept fair dealing with rivals to its core 
business. Although its early history was one of raising barriers to 
competition and exploiting the weakness of unstable governments to 
establish its monospony position, he argues that in the long run the 
presence of this, or another multinational, was necessary for the 
development of a commercial banana industry in Colombia. United Fruit 
had pioneered techniques for how to commercialize a fragile and highly 
perishable product. Regardless of unethical practices when dealing with 
locals in the producing countries, the importation of the marketing 
techniques that such pioneers in the industry developed were of 
substantial value to local industry.

As with many technologies, tacit knowledge was best transferred by 
individuals who had experience and organizational capabilities. But 
foreign first-comer advantages were not permanent. Local employees and 
managers learned the tacit knowledge by observing and doing, and 
eventually they formed organizations to compete with _El Pulpo_ [the 
octopus]. Over time, the strengthening of nationalist government 
policies caused the industry to pass to local independent banana growers 
and local entrepreneurial banana export ventures. Bucheli’s analysis, 
therefore, raises the question of whether the company’s early 
exploitation through the creation of a banana enclave was not critical, 
perhaps even necessary, for the development of a banana industry that 
later became a nationally-owned industry and an important sector for 
entrepreneurial opportunity in Colombia.

As a second important contribution, Bucheli demonstrates how the later 
changes in United Fruit’s business strategy in Colombia led to the 
development of an entrepreneurial middle class associated with the 
banana sector. This occurred in two ways. First, the multinational 
company transferred technology, including refined methods for 
commercializing a fragile and highly perishable fruit to be sold in a 
global market. The United Fruit Company, of course, did not introduce 
the cultivation of bananas into Colombia; but it did introduce Colombia 
into the global market for bananas, and it introduced Colombians to the 
commercial and organizational techniques of the global market.

Second, a larger class of entrepreneurs emerged as independent growers 
who subcontracted with United Fruit. By 1960 the company decided to 
abandon vertically integrated banana production. Although formerly it 
could produce its own bananas more cheaply, labor demands and the threat 
of strikes, by the 1960s, had pressed the company to give free health 
care, free milk, subsidized food, and free housing, until eventually 
cost-benefit analysis favored subcontracting. In shifting to exclusive 
subcontracting of bananas, the company moved from its original seat in 
Magdalena to a new area, Urabá, where it made key investments that 
assisted in the development of the local market for bananas for export. 
The policies encouraged middle-class investors from Medellin to set up 
entrepreneurial banana-growing ventures and contract to sell bananas to 
United Fruit. By Bucheli’s assessment, this class of entrepreneurs would 
probably not have emerged without the presence of United Fruit, or some 
other multinational company. The story is reminiscent of another 
legendary migration of _antioqueño_ entrepreneurs, who established one 
of the most prosperous and relatively egalitarian coffee growing regions 
of Colombia. One key difference is noteworthy, however. The migration to 
Urabá to grow bananas was supported, apparently in a mutually beneficial 
fashion, by a notorious multinational company.

“The entrepreneur is absent” in the historiography of Latin America, 
writes Marcelo Bucheli, because of the “weak development of business 
history in Latin America as a discipline, but it is also a result of the 
dominance of dependency theory” (pp. 187-88). One suspects that there 
are many more stories of entrepreneurial significance in Latin America, 
such as the story of _antioqueño_ migration into Caldas and Bucheli’s 
story of banana entrepreneurs in Urabá. If there are, it is unfortunate 
that historians have not shown much interest in them because we know 
much too little about them. This, of course, makes the significance of 
Bucheli’s examination of the Urabá entrepreneurs that much more important.

As we observe this transition from partial vertical integration to 
exclusive subcontracting and the geographical move from Magdalena to 
Urabá, we also learn something about the institutions and contractual 
relations of banana production in Colombia. First, the contracts that 
the United Fruit Company wrote with growers have been criticized in the 
literature as onerous and exploitative. Contracts were exclusive sales 
contracts, and they also required growers to bear the costs of damaged 
fruit. Of course, the transaction costs of handling fruit that is 
fragile and perishable explain the terms of the contract. The exporter 
was subject to potential moral hazard and holdup if the terms of the 
contract had not provided for exclusive dealing and assigned the costs 
of damage to the grower. I would have liked to have seen more on this 
question, however. The reader is given a brief description of the terms 
of the typical contract, but is not given an example showing the exact 
language or other provisions that may have served to offset other 
transaction costs. Therefore, it is impossible to know whether, or how, 
damage to bananas in shipment once they were in the hands of the 
exporter was handled. Without further detail, we cannot be sure that 
some of the accusations of unfair terms were not valid. Bucheli does 
tell us, however, that, as local entrepreneurs developed competing 
exporting operations, they adopted the same contractual terms. So the 
terms were not dependent on the exporter being either a foreign 
multinational or a monopsonist.

We also learn something about the institutions of credit for banana 
growers. For most of the history of the banana industry in Magdalena, no 
formal credit is available to banana growers except for that supplied by 
United Fruit. But the company suffered considerable losses in its credit 
dealings toward the end of its operations in Magdalena. Learning by 
doing led to an alteration in the way it set up its provision of credit 
to growers in Urabá. Instead of lending directly to growers, it financed 
a locally owned corporation that provided loans to growers. The local 
corporation had better information, the advantage of a being national 
entity in claims disputes, and did not own the debt directly.

_Bananas and Business_ takes issue with the existing narrow emphasis in 
the Colombian economic and social historiography on the early United 
Fruit of 1928 and before. Much of the former attention centered on the 
tragic banana massacre of 1928, about which many have read in Gabriel 
García Márquez’s _One Hundred Years of Solitude_. Bucheli points out 
that this, in fact, was perhaps the nadir in United Fruit’s labor 
relations in Colombia, and that, in fact, this event and the ensuing 
years mark a turning point. Much was accomplished by the labor struggles 
of those years and it positively transformed the company’s relations 
with local labor and entrepreneurs. Bucheli’s penetrating business 
historical analysis brings new light and radically improves our 
understanding of the long-run consequences of the United Fruit Company 
in Colombia. It serves as an important challenge to existing stereotyped 
views, and points the way to what business history can uniquely offer to 
the study of the long-run processes of economic development.


Alan Dye is the author of _Cuban Sugar in the Age of Mass Production: 
Technology, and the Economics of the Sugar Central, 1899-1929_ (Stanford 
University Press).

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