Guatemala and United Fruit: US Policy Blunder

Economist Americas editor Michael Reid‘s Forgotten Continent on democracy and capitalism in Latin America is required reading for gringos living in Latin America. Below is his overview on a US foreign policy blunder in Guatemala.

Guatemala is the saddest country in Latin America. The beauty of its verdant highlands dotted with whitewashed colonial towns, its shimmering lakes overlooked by soaring volcanoes and its Mayan ruins half buried in rainforest cannot conceal the ancestral oppression of its indigenous majority. It has had an elected civilian government since 1986. But a guerrilla war lasting almost three decades was settled only in 1996. It cost some 200,000 lives; most of the victims were Mayan Indians killed by the army. The war continues to cast a dark shadow. Guatemala’s democrats must struggle against what some have called poderes fácticos – shadowy networks linking corrupt former army officers and organized criminal gangs of drug traffickers and money launderers. In many ways, these networks are the real power in the country. They appeared to flourish under Alfonso Portillo, the country’s president from 2000 to 2005, who fled to Mexico on leaving office and faced charges of stealing $16 million of public money. Under Oscar Berger, a reforming liberal elected in 2004, a new effort began to cut Guatemala’s army down to size and to liberate democracy from military tutelage.

The CIA snuffs out the Guatemalan spring

And yet Guatemala might have developed into a far more robust democracy much earlier. That it did not do so is in large part the fault of the United States: more than anywhere else in Latin America, Guatemala is a victim of American intervention. In 1954, the Eisenhower administration organized a coup to topple the democratic, reformist government of Jacobo Arbenz, which the American president alleged to be a possible ‘communist outpost on this continent’. Though the enterprise was initially hailed as a success by its authors, in the words of one historian sympathetic to them, ‘in light of subsequent events it might reasonably be considered little short of a disaster’. Not only did Guatemala itself pay a high price for the American intervention: the lessons drawn by the United States and by Latin Americans of both left and right had tragic consequences in other countries, handicapping democracy in the region for a generation or more. How was it that Guatemala came to be the first battle in the Cold War in Latin America?

Central America was an underdeveloped backwater throughout the nineteenth century. After independence in 1824, the United Provinces of Central America soon fragmented into five separate countries of which Guatemala, the seat of the colonial captain-generalcy, was the largest. Except in Costa Rica, an unenlightened despotism was the norm in the isthmus. In Guatemala, a long line of brutal dictators went through the motions of legitimating their rule through elections, but these were farcical affairs in which opposition was rarely registered. An oligarchy of coffee planters dominated the republic; they assured themselves of a seasonal Indian workforce through debt peonage.

When the Second World War drew to a close, democratic eddies washed across Latin America. Several dictatorships in the region fell, to be replaced by governments elected on a reasonably broad franchise. Labour unions expanded, and flexed their muscles in a strike wave. Communist parties grew rapidly, from a total membership of less than 100,000 in 1939 to 500,000 by 1947. In Latin America, as elsewhere in the world, there were expectations that a new era of democracy was beginning. According to one account, this opened up an opportunity for Latin American countries to move towards social democracy – as much of Western Europe would do in the aftermath of war – through an alliance between industrialists and the emerging middle and organised working classes. But the opportunity proved tantalisingly brief. In Latin America, the rural landlords had not been hurt by war, and they still exercised a powerful political grip, while the trade unions were still weak. By 1948, in most countries, the progress towards democracy had been rolled back, and Communist parties had been banned. By then, the Cold War had begun. It did not create anti-communism in Latin America. This had been espoused by conservatives and the Catholic Church since the formation by Lenin in 1919 of the Third Communist International (Comintern) with its brief of world revolution. So most Latin American governments were happy to line up with the United States in the Cold War. For Washington, it began to matter more that those governments should be reliably anti-communist rather than democratic.

In Guatemala the post-war democratic spring lasted longer. In 1944, protests by students, teachers and other members of an incipient middle class prompted Jorge Ubico, a dictator even more repressive than his predecessors, to step down. Three months later, junior army officers rebelled against his chosen successor. This ‘October revolution’ was carried out not in the name of Bolshevism but of ‘constitution and democracy’. Both were quickly achieved. Juan José Arévalo, a mild-mannered teacher of philosophy who had returned from years of exile in Argentina, was elected president in the freest vote Guatemala had seen. Arévalo claimed inspiration from Franklin Roosevelt’s New Deal and from the Four Freedoms – of speech, religion, and from want and fear – for which the president had fought the war. A new constitution extended the franchise to all except illiterate women, created elected local authorities, made racial discrimination a crime and banned military men from standing for office. Arévalo’s government gave rights to trade unions, established a social security system, central bank and statistical office, and built hundreds of new schools. It brooked no restrictions on political or press freedom, despite suffering frequent plots from conservatives.

In 1950, Jacobo Arbenz, a leader of the ‘October revolution’, was elected to succeed Arévalo, with 65 per cent of the vote. While Arévalo had established democratic freedoms, Arbenz promised ‘to convert Guatemala from a backward country with a predominantly feudal economy into a modern capitalist state’. His plans to do this centred on agrarian reform and public infrastructure projects, several of which had been proposed by the president of the World Bank. On both counts, that meant a confrontation with the United Fruit Company, an American firm based in Boston. Known to Central Americans as el pulpo (‘the octopus’) because of its all-encompassing tentacles, in 1899 United Fruit had obtained a 99-year concession over a vast tract of jungle from Guatemala’s then dictator and with it, the right to finish and operate a railway to the Caribbean coast. The company thus obtained a monopoly over much of Guatemala’s trade: its port at Puerto Barrios was the country’s only Atlantic port, and its railway the only means of transport to and from the port. In return it paid only a small tax on banana exports. Arbenz proposed to build a public port next to Puerto Barrios and a highway to it; United Fruit, which had already seen a rise in trade union organizing, became the main target of this land reform.

Even by Latin American standards, land distribution in Guatemala was highly unequal: 2 per cent of landowners held three-quarters of all cultivatable land, while more than half of all farmland was made up of large plantations (above 1,100 acres). Much of this land was left fallow. Arbenz’s reform affected farms larger than 670 acres whose land was not fully worked, or those above 223 acres where a third of the land was uncultivated. Compensation was paid in interest-bearing bonds according to the land’s declared taxable value. In two years a million acres – a third of this from German-owned farms nationalised at American insistence during the war – were distributed to 100,000 families. Arbenz ordered the expropriation of 380,000 acres of United Fruit land – a substantial chunk of its holdings, of which 85 per cent were left fallow, supposedly in case of banana diseases. The government offered compensation of $1.1 million; the company claimed the land was worth $16 million, thus revealing the scale of its tax evasion. Its claim was backed by the US Department of State.

By then, the Eisenhower administration was bent on overthrowing Arbenz, whom it accused of presiding over a communist takeover. With support from Nicaragua’s notorious dictator, Anastasio Somoza, and his counterpart in Honduras, the CIA trained and armed a force of 170 men, and assembled a dozen planes. Their ‘invasion’ was a halting affair. By bombing and strafing from the air, combined with disinformation broadcasts suggesting a force of thousands, caused the army high command to oblige Arbenz to resign. Through a mixture of threats and manipulation, the Americans quickly secured the appointment as president of Carlos Castillo Armas, the undistinguished retired colonel they had chosen to lead the ‘invasion’. Guatemala’s ten-year democratic spring was over.

Ever since, controversy has raged over the American action. Was the coup an enterprise of crude economic imperialism, in which the Eisenhower administration was acting as enforcer for United Fruit? Since the days of Arévalo, the company had conducted an effective propaganda campaign in the United States, painting Guatemala as being in the grip of communists. The family of John Foster Dulles, the secretary of state, and his brother Allen, the CIA director, were shareholders in the banana company; both brothers had worked for Sullivan & Cromwell, a New York law firm which had represented United Fruit’s rail subsidiary. Several of the company’s officials had close contacts with the administration. But J F Dulles insisted: ‘If the United Fruit matter were settled, if they gave a gold piece for every banana, the problem would remain as it is today as far as the presence of communist infiltration in Guatemala is concerned.’ Just five days after Arbenz was toppled, the US Justice Department began an anti-monopoly action against United Fruit; as a result, the company eventually agreed to hand over some of its land in Guatemala to local firms and sold the railway. In 1972, it sold its remaining interests in Guatemala to Del Monte. (United Fruit changed its name to Chiquita in 1989; the company filed for bankruptcy protection in 2001).

In recent years, as official archives have been opened, historians have come to accept Dulles’ contention. But many question his verdict on Arbenz. Not for the last time in Latin America, the critics argue, the United States failed to distinguish between a nationalist reformer and a communist. The Guatemalan Labor Party, as the communist party was called, was tiny; it never had more than 2,000 activists. Though an enthusiastic backer of Arbenz and the land reform, it was the smallest of the four parties in the governing coalition. It won only four of the 56 seats in Congress in an election in 1953, had no Cabinet members, and fewer than ten senior government jobs. Guatemala had no diplomatic relations with the Soviet Union and the eastern bloc. Until the late 1950s, the Soviet Union had only three embassies in the whole of Latin America, a region Stalin had dismissed as ‘the obedient army of the United States’. Dulles made great play of an arms shipment from Czechoslovakia received a month before the coup. But the United States had imposed an arms embargo on Guatemala since 1948, and the Czech arms were of limited use. Arbenz’s coalition was fractious, the army restless and the middle class became disillusioned as tensions with the United States rose. The president did come to depend on the communists, who alone could mobilise popular support for the government. His wife is alleged to have been a communist sympathiser. The CIA feared that land reform would create a base for the communists in the countryside. Even so, it is hard to see the army or the civilian politicians acquiescing in a communist takeover.

In the event, the US crushed democracy not communism in Guatemala.  Castillo Armas quickly reversed the agrarian reform, reached agreement with United Fruit, and restored the old order of corrupt dictatorship. In 1960, junior army officers would rebel in the name of nationalism, angry that Guatemala was being used by the CIA to train anti-Castro Cuban exiles. The rebellion failed, but two of its founders went on to found Guatemala’s first guerrilla group. This was crushed after right-wing death squads murdered thousands of civilians, many of whom had no connection to the guerrillas. In the mid-1970s, new Marxist guerrilla groups established a presence among the Mayan Indian communities of Guatemala’s western highlands. That prompted the army to undertake a scorched-earth campaign that saw scores of Indian villages wiped out, their inhabitants butchered and the survivors forcibly relocated and conscripted into army-backed auxiliary forces called ‘civil patrols’. Of all the counter-insurgency campaigns in Latin America during the Cold War, only that in Guatemala merits the much-abused term of genocide. Repression by dictatorships in Chile and Argentina, where most of the victims were middle class, attracted far more outside attention. But in the deliberate infliction of mass terror, the massacres of the Mayan Indians in the western highlands in the late 1970s and early 1980s had no parallel in the region. Those excesses caused Jimmy Carter to cancel the United States’ previous aid to the army. Another Democratic president, Bill Clinton, made a formal apology for that aid on a visit to Guatemala in 1999. But by then the Cold War was long over.

The ease with which Arbenz was overthrown would lead policy-makers in Washington to adopt ‘regime change’ as their standard process to perceived communist threats in Latin America. A few years later, another such attempt on a much larger scale would end in disaster in the Bay of Pigs in Cuba. Thwarted, President John F Kennedy would launch the Alliance for Progress in an attempt to stall the spread of communism in Latin America by encouraging democratic reform. ‘Those who make peaceful change impossible make violent change inevitable,’ Kennedy declared. Indeed, had Arbenz’s agrarian reform taken place a decade later – or a decade earlier when FDR was preaching freedom from want – it might well have drawn applause from Washington.

The Latin American left, too, drew lessons from Guatemala. A young Argentine doctor, Ernesto Guevara, had arrived there on New Year’s Eve 1953 and witnessed the fall of Arbenz. By the time he was given safe conduct from the Argentine embassy to Mexico, he had acquired the nickname Che, bestowed by leftist exiled Cubans he met in Guatemala. According to one of his most perceptive biographers, Guatemala was Che Guevara’s ‘political rite of passage’. Guevara thought the coup showed that the United States ‘was a priori ruthlessly opposed to any attempt at social and economic reform in Latin America’. So he inferred that the left should be prepared to fight US interference rather than try to avoid or neutralise it. He also thought that Arbenz had allowed his enemies too much freedom, especially in the press, and had erred in not purging the army. This is confirmed by Hilda Gadea, Guevara’s first wife, who wrote: ‘it was Guatemala which convinced him of the necessity for armed struggle and for taking the initiative against imperialism’.

See the other sections of Reid’s book I’ve published here: Cocaine Cartels and Economics in Colombia or FARC, Guerrillas, and Paramilitaries in Colombia. Or for more on the sordid past of United Fruit Company / Chiquita, see the separate Wikipedia articles on United Fruit and Chiquita.

June 2011 UPDATE: The New York Times has an even more scathing review of the incident in Ghosts of Guatemala’s Past, asserting that US involvement here stunted the growth of democracy in the greater Central American region.

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