-Presented by Group 2

History in brief

• The banana trade began in 1870.

• Boston Fruit Company was formed.

• Minor Keith was building railroads through Latin America, and grew bananas alongside.

• The two joined forces in 1899 to form United Fruit Company.

• In 1915, UFCo bought out its biggest rival, Cuyamel Fruit.

• In the mid-1950s UFCo represented the merging of approximately 21 once-independent banana companies.

• Power in the hands of UFCo.

UFCo. Vs. Govt.

• The United Fruit was the single largest landowner in the country.

• It had close ties with dictators such as Jorge Ubico, the company was promised low taxes, duty-free imports, and low wages for workers.

• In 1951, President Jacobo Arbenz got elected. He passed the agrarian reform law Decree 900.

• This angered UFCo because they no longer were granted their one-sided concessions

“Operation Success”• UFCo. hired Edward Bernays.• The US Government agencies began a covert operation to

support a military coup and install a new Government .• They overthrew the democratically elected government.• UFCo got their land back and banana trade unions were

banned.

(A) Was UFCo justified in its actions? Give valid reasons and

principles to support your answers.

Not justified. “Entrepreneurs give

security to other people; they are generators of social welfare”

-Carl J. Schramm

•Entrepreneurs create new businesses, generating jobs for themselves and those they employ.

•Large companies have the tendency to dictate the terms of government economic policies. Here UFCo not only dictated the terms but used that for creating a monopoly in that business.

•Once a company’s existence becomes an important criteria for the economy of the country, their responsibility automatically gets enhanced.

• Criticism of the United Fruit Company became a staple of the discourse of the communist parties in several Latin American countries.

• Major left-wing writers in Latin America denounced the company in their literature.

• Such criticisms were the result of corruption and wrong policies which are followed by UFCo.

(B)(a) What could the Guatemalan authorities have done to prevent the takeover of the economic interests by monopolistic forces?

(b) How could have Guatemalan authorities protected their jurisdiction on business matters?

Ways to prevent monopolistic forces from taking over the economic interest.

• Increased Competition

• Anti-trust Laws

Increased Competition

Entry of new firms into the Banana Industry

Anti-trust Laws

• The Federal Trade Commission Act• Shermann Antitrust Act 1890

•

In order to prevent the takeover by monopolistic forces government should have taken initiatives at an early stage.

When UFCo. was emerging as the largest landowner, government should have taken steps to curtail it and to prevent it from interfering into their economic and political policies.

The government should have taken meticulous measures such as imposing high export duty, facilitating new entrants into the industry by providing them subsidies or tax benefits etc.

(C) Were these developments good for the economy of Guatemala?

Track the path of the Guatemalan economy and development from various public sources and discuss the impact of the failure to protect the economy from predatory players.

Developments in Guatemalan Economy

• UFCo had a significant amount of economic influence in the Guatemalan Economy.

• President Jacobo Arbenz got elected.

• Passed the Decree 900 & seized the unused land held by UFCo.

• UFCo, along with US government staged a coup & overthrew the government formed by President Arbenz.

• Castillo Aramas made the new President who repealed the Decree 900 and made other policies in favor of UFCo.

SUBSEQUENT CHANGES • Castillo Aramas regime resulted in a civil war in

Guatemala which continued from 1960-96 in which more than 2,00,000 people were dead.

• The economy of Guatemala was shattered.• The regime of Castillo Aramas – most repressive

& corrupt- highly inappropriate for Guantemala.

CONCLUSION

The changes in the country on account of uncontrolled growth of large companies like UFCo had a very serious impact on the country and it’s people and left it shattered.

(D)Were US Foreign policy interests served in the short term and the long term?

How does foreign policy support impact business interests of entrepreneurs?

How far should a Government go to support its entrepreneurs?

Short term and long term interest-

• May have been served in short term but not in long term.

Impact of Foreign Policy-

• Should not harm the company and beneficial for the domestic worker.

Government’s support for the Entrepreneurs-

• Generally not bothered about the welfare of the company but in case of unfair treatment government can intervene.

(E) What are your groups recommendations for any country to protect itself against such an approach by a dominant foreign monopolistic business group?

Recommendations:

• Prevention is better than cure • Media • Economic Policies (Initial Stage) • Political instability

• Muscle power overrules all above mentioned recommendations.Irrespective of the quality of a country’s economic policies, muscle power overrules everything. US being the big fish, is fond of eating small fishes in the name of terrorism, chemical weapons, communalism, restoring democracy etc.

The 7 Governments the U.S. has Overthrown

• Iran, 195 3• Guatemala, 1954• Congo, 1960• Dominican Republic, 1961• South Vietnam, 1963• Brazil, 1964• Chile, 1973

What is the possible solution then?Entrepreneurship:

“If you want to build a ship, don’t drum up the men to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea.” -Antoine de Saint-Exupéry

• Conclusion:

Entrepreneurship is the most important key to economic and national development and thus there is a need to realize its importance and work accordingly so that MNCs and big nations don’t swallow up these small resource rich nations in absence of proper entrepreneurship skills to generate employment within and not to be dependent on outsiders.

It can be achieved by:-• Institutions Infrastructure • Economic Stability • Health & Primary Education• Higher Education & Training • Goods & Labor Market Efficiency• Financial Market• Entrepreneurial Finance • Entrepreneurship Education • R&D Transfer etc.

(F) What are the basic limits that entrepreneurs, businesses and governments need to observe so that a level playing field can be created for competition, labor

rights, taxation of profits, national and local developmental needs?

 

Situation in Guantamala: (1) UFCo. monopolized transportation and trade

of bananas.

(2) UFCo. viewed this political opening as their chance to improve their working conditions.

(3) They focused on measures to correct the current account deficit; the slowdown of industrial growth.

(4)UFCo and its supporters combined to diminish the workers' and government's leveraging positions

Problem solving:• Large volumes of information - financial

records, interactions with customers.• Responsibilities and tasks can be

delegated as your business grows.• Every entrepreneur should not only

concentrate on gaining profits .

Government:- • Tax Policy: Governments

use taxes to raise money. policymakers need to balance the goals of raising revenue and promoting entrepreneurship.

• One of the reasons that US invaded the country was because there was rampant corruption.

• Power to obtain very favorable policies from foreign governments. Only few of them get the benefits.

Problem solving:• They should have not simply passed law

decree 900

• They should have either restricted the excessive growth of bananas or promote the growth of other agricultural products.

• They should have stopped the press campaign at the very first stage by making a statement against it.