• TABLE OF CONTENTS
HIDE
 Front Cover
 Half Title
 Frontispiece
 Title Page
 Acknowledgement
 Table of Contents
 Policy and research advisory committee...
 Letter from Jose A. Mora, Secretary...
 Authors' note
 Preamble to the United Fruit Company...
 Brief history: Evolution of the...
 The world banana market
 The consumer's banana dollar in...
 Banana production and producer's...
 The United Fruit Company as an...
 Contribution to the several local...
 The company's record in social...
 Labor relations and public...
 Summary and outlook
 Appendix note
 Appendix table
 The policy committee's stateme...
 NPA board of trustees
 NPA's publications policy














Title: United Fruit Company in Latin America,
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STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00089511/00001
 Material Information
Title: United Fruit Company in Latin America,
Physical Description: Book
Creator: May, Stacy.
Publisher: National Planning Association,
Copyright Date: 1958
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Bibliographic ID: UF00089511
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: 00248408 - OCLC

Table of Contents
    Front Cover
        Front cover 1
        Front cover 2
    Half Title
        Page i
    Frontispiece
        Page ii
    Title Page
        Page iii
        Page iv
    Acknowledgement
        Page v
    Table of Contents
        Page vi
        Page vii
        Page viii
        Page ix
    Policy and research advisory committee members
        Page x
    Letter from Jose A. Mora, Secretary General, Organization of American States
        Page xi
    Authors' note
        Page xii
        Page xiii
    Preamble to the United Fruit Company in Latin America
        Page xiv
        Page xv
        Page xvi
    Brief history: Evolution of the business
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
    The world banana market
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
        Page 41
    The consumer's banana dollar in the United States and Canada
        Page 42
        Page 43
        Page 44
        Page 45
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
        Page 52
        Page 53
        Page 54
        Page 55
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        Page 65
        Page 66
        Page 67
        Page 68
        Page 69
        Page 70
        Page 71
        Page 72
    Banana production and producer's revenue
        Page 73
        Page 74
        Page 75
        Page 76
        Page 77
        Page 78
        Page 79
        Page 80
        Page 81a
        Page 81b
        Page 81c
        Page 81d
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        Page 81j
        Page 81k
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        Page 91
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        Page 93
        Page 94
        Page 95
        Page 96
        Page 97
        Page 98
        Page 99
        Page 100
        Page 101
        Page 102
    The United Fruit Company as an integrated operation
        Page 103
        Page 104
        Page 105
        Page 106
        Page 107
        Page 108
        Page 109
        Page 110
        Page 111
        Page 112
        Page 113
        Page 114
        Page 115
        Page 116
        Page 117
        Page 118
        Page 119
        Page 120
        Page 121
        Page 122
        Page 123
        Page 124
        Page 125
        Page 126
        Page 127
        Page 128
        Page 129
        Page 130
        Page 131
        Page 132
        Page 133
        Page 134
        Page 135
        Page 136
        Page 137
        Page 138
        Page 139
    Contribution to the several local economics
        Page 140
        Page 141
        Page 142
        Page 143
        Page 144
        Page 144a
        Page 144b
        Page 144c
        Page 144d
        Page 144e
        Page 144f
        Page 144g
        Page 144h
        Page 144i
        Page 144j
        Page 145
        Page 146
        Page 147
        Page 148
        Page 149
        Page 150
        Page 151
        Page 152
        Page 153
        Page 154
        Page 155
        Page 156
        Page 157
        Page 158
        Page 159
        Page 160
        Page 161
        Page 162
        Page 163
        Page 164
        Page 165
        Page 166
        Page 167
        Page 168
        Page 169
        Page 170
        Page 171
        Page 172
        Page 173
        Page 174
        Page 175
        Page 176
        Page 177
        Page 178
        Page 179
        Page 180
        Page 181
        Page 182
    The company's record in social welfare
        Page 183
        Page 184
        Page 185
        Page 186
        Page 187
        Page 188
        Page 189
        Page 190
        Page 191
        Page 192
        Page 193
        Page 194
        Page 195
        Page 196
        Page 197
        Page 198
        Page 199
    Labor relations and public relations
        Page 200
        Page 201
        Page 202
        Page 203
        Page 204
        Page 205
        Page 206
        Page 207
        Page 208
        Page 208a
        Page 208b
        Page 208c
        Page 208d
        Page 208e
        Page 208f
        Page 208g
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        Page 211
        Page 212
        Page 213
        Page 214
        Page 215
        Page 216
        Page 217
        Page 218
    Summary and outlook
        Page 219
        Page 220
        Page 221
        Page 222
        Page 223
        Page 224
        Page 225
        Page 226
        Page 227
        Page 228
        Page 229
        Page 230
        Page 231
        Page 232
        Page 233
        Page 234
        Page 235
        Page 236
        Page 237
        Page 238
        Page 239
        Page 240
        Page 241
        Page 242
        Page 243
        Page 244
        Page 245
        Page 246
        Page 247
        Page 248
        Page 249
        Page 250
    Appendix note
        Page 251
        Page 252
        Page 253
        Page 254
    Appendix table
        Page 255
        Page 256
    The policy committee's statement
        Page 257
        Page 258
        Page 259
        Page 260
        Page 261
        Page 262
    NPA board of trustees
        Page 263
    NPA's publications policy
        Page 264
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THE
UNITED FRUIT COMPANY
IN LATIN AMERICA





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Banana Production Areas "
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SYellow shadings indicate areas of .. '* .
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Area
GUATEMALA
HONDURAS
PANAMA


7























BY STACY MAY AND GALO PLAZA


SEVENTH CASE STUDY IN AN NPA SERIES ON

United States Business Performance A broad
1/7.8









United States Business Performance Abroad


First Case Study
SEARS, ROEBUCK DE MEXICO, S.A. May 1953. 88pp. $1.00

Second Case Study
CASA GRACE IN PERU. November 1954. 112pp. $1.00

Third Case Study
THE PHILIPPINE AMERICAN LIFE INSURANCE COM-
PANY. March 1955. 94pp. $1.00

Fourth Case Study
THE CREOLE PETROLEUM CORPORATION IN VENE-
ZUELA. December 1955. 116pp. $1.00

Fifth Case Study
THE FIRESTONE OPERATIONS IN LIBERIA. December
1956. 140pp. $1.00

Sixth Case Study
STANVAC IN INDONESIA. June 1957. 144pp. $1.00

Seventh Case Study
THE UNITED FRUIT COMPANY IN LATIN AMERICA.
June 1958. 316pp. Cloth bound $4.50; paper bound $2.00



Library of Congress
Catalog Card Number
58-12402

1958, National Planning Association














ACKNOWLEDGMENT

This Case Study was made possible in part by funds
granted by the Carnegie Corporation of New York and
by the John Hay Whitney Foundation. These founda-
tions are not, however, authors, owners, publishers, or
proprietors of this publication, and are not to be under-
stood as approving by virtue of their grants any of the
statements made or views expressed therein.


*
























POLICY AND RESEARCH ADVISORY COMMITTEE MEMBERS ......... X
LETTER FROM Jos6 A. Mora, Secretary General, Organization of
Am erican States ....................................... xi
AUTHORS' NOTE ............................................ xii
PREAMBLE TO THE UNITED FRUIT COMPANY IN LATIN
AMERICA, by Eugene W. Burgess ...................... xiv
THE UNITED FRUIT COMPANY IN LATIN AMERICA,
by Stacy May and Galo Plaza ........................ 1

I. Brief History: Evolution of the Business........... 1
History of the Banana .......................... 2
The Banana Trade ............................ 4
Formation of the United Fruit Company .......... 5
Railroads and the Banana Industry ................ 8
United Fruit's Competition ...................... 12
Samuel Zemurray and Cuyamel ................... 15
Shipping, Communications, and Marketing ......... 18
The Company in Perspective ................... 19

II. The World Banana Market ..................... 24
World Banana Production and Consumption ........ 25
International Trade in Bananas .................. 30
The Valuation of the World Banana Market ........ 37

III. The Consumer's Banana Dollar in the United States
and Canada .................................. 42


CONTENTS


7k








Ocean Transportation .......................... 44
Importers' Handling and Margin .................. 49
The Jobbers .............................. .... 53
Inland Transportation; Jobbers' Facilities,
Procedures, and Markups; The Jobber's
Plant; The Accountancy of Banana Jobbing
Operation of the Retailer ......................... 62
Summary of the Consumer's Banana Dollar ....... 67

IV. Banana Production and Producers' Revenue ........ 73
The Producing Countries ........................ 73
Banana Lands ................................. 79
The Relative Size of United's Holdings;
Company-Owned Acreage not in Cropland;
The Extent of United Fruit Control of
Banana Land
Banana Production .............................. 90
Clearing and Planting; Disease and Pest
Controls; Harvesting
Inland Transportation and Loading Aboard Ship .... 96
The Banana Dollar in the Producing Countries ..... 97

V. The United Fruit Company as an Integrated Operation 103
The Diversity of United Fruit Operations .......... 104
The United Fruit Company as an Investment ....... 108
United Fruit Company Earnings .................. 109
Who Owns the United Fruit Company ............. 114
United Fruit Contributions to Host Country Econo-
mies ......................................... 117
Comparisons with Other U.S. Direct Investments in
Latin Am erica ............................... 121
United Fruit Contributions Compared with Local
Agricultural Enterprise ........................ 123
The Stability of the Market ...................... 124
In Sum m ary .................................... 136

VI. Contributions to the Several Local Economics ........ 140
United Fruit's Net Contribution ................... 141
Costa Rica ..................................... 142
General Description; Land Problems at
Quepos and Lim6n; Problems of Develop-
ing Other Crops; A National Responsibility;
Sources of Funds; Uses of Funds; Other
Comparisons ..
Honduras. ....... .......................... 151








Flood Fallow; Contract Farms; Research
Center; Standard Fruit and Steamship
Company; Impact on the Local Economy;
Stable Contribution
Panama ................. ...................... 160
Contribution to the Economy; Comparisons
With Other Activities; United Fruit's Con-
tribution to Development
G uatem ala ................. .................... 162
Contract Operations; Land-Use Problems;
International Railways of Central Amer-
ica; Contribution to the Economy
Ecuador ....................... ............... 169
United Fruit Share; Problems of Ecuado-
rian Producers; Contribution to the Local
Economy
Colombia ...................................... 175
Brief History; Possible Future Pattern;
Contribution to the Local Economy
In Summary ................................... 180

VII. The Company's Record in Social Welfare .......... 183
Housing .............. ....................... 184
Health and Sanitation ......................... 187
Education .................................... 190
Agricultural Training ........................ ....... 192
Commissaries and Food Services ................. 194
Summary ....................................... 197

VIII. Labor Relations and Public Relations .............. 200
Labor Relations ...... ......................... 200
The Labor Force ............................... 205
Community Development and Morale .............. 209
Public Relations ............................ 211
Relations with Governments in Host Countries ...... 213
In Summary ................................... 216

IX. Summary and Outlook ......................... 219
Major Findings of the Study .. .................. 220
United Fruit Company Contributions to
Countries of Production; Appraisal of the








United Fruit Company as an Investment; The
United Fruit Company Record in Social
Welfare, Labor, and Public Relations;
Why the Image Is Blacker Than the Record
Indications of Future Trends .................... 243
Future of the World Banana Market; Persist-
ence of Large-scale Integrated Organization;
Future Position of the United Fruit Company
in Bananas; Future Programs for Using
Abandoned Banana Lands; Gradual Emanci-
pation from Extraneous Services; The Prob-
lem of Company-Government Contracts
The Significance of this Case Study ............... 249

ALBUM OF DOCUMENTARY PHOTOGRAPHS
The Setting ................................... between 80-81
Economic Contributions to Host Countries ...... between 144-145
Employees and their Families ................. between 208-209
APPENDIX NOTE ......................................... 251
APPENDIX TABLE .......................................... 255
THE POLICY COMMITTEE'S STATEMENT ........................ 257
NPA BOARD OF TRUSTEES .................................. 263
NPA's PUBLICATIONS POLICY ................................ 264








POLICY COMMITTEE MEMBERS
CHARLES J. SYMINGTON, Chairman:
Chairman of the Executive Committee, Symington Wayne Corporation,
N. Y. C.
WAYNE C. TAYLOR, Vice Chairman:
Heathsville, Virginia
FRANK ALTSCHUL
Chairman of the Board, General American Investors Company, N. Y. C.
HARRY A. BULLISH
Chairman of the Board, General Mills, Inc., Minneapolis, Minnesota
CLINTON S. GOLDEN
Solebury, Bucks County, Pennsylvania
LUTHER H. GULICK
President, Institute of Public Administration, N. Y. C.
MARION H. HEDGES
Washington, D. C.
DAVID L. LUKE, JR.
President, West Virginia Pulp & Paper Company, N. Y. C.
DONALD R. MURPHY
Director, Editorial Research, Wallaces' Farmer and Iowa Homestead,
Des Moines, Iowa
CLARENCE E. PICKETT
Honorary Sec., American Friends Service Committee, Philadelphia,
Pennsylvania



RESEARCH ADVISORY COMMITTEE MEMBERS
ROY BLOUGH
Graduate School of Business, Columbia University, N. Y. C.
LEONARD S. COTTRELL, JR.
Social Psychologist, Russell Sage Foundation, N. Y. C.
EDWARD S. MASON
Dean, Graduate School of Public Administration, Littauer Center, Harvard
University, Cambridge, Massachusetts



EUGENE W. BURGESS, Director of Research:
University of California, Berkeley, California
FRED SMITH, International Relations Adviser:
Business Consultant, N. Y. C.



















ORGANIZATION OF AMERICAN STATES

AIIENTIIA BOLIVIA IRAIl l C.IL 8. EUATiMALA MAIIi NONDUIAS MXICO
COLOnIIA COST A *ICA. CU Bi. AmmOnL (CA NICAAOtUA PANAMA PARAGUAT PERU
AEPUBIOC ICUAOM I EL SALVAD UNITED STATES aUIIGUAI INilItLA

GENERAL SECRETARIAT
PAN AMERICAN UNION
Washington 6, D. C.. U. S. A.
(CTOle Address PAU WASHOC1



May 23, 1958

My dear Mr. Symington:

I appreciate your sending me a copy of the text of your latest case study in the
series relating to United States business operations abroad. I also note with in-
terest, that in the preparation of this volume, "The United Fruit Company in
Latin America" you had the good fortune of securing the services of Mr. Galo
Plaza, my friend of many years standing, as co-author.

Your series of studies to date has clearly shown that United States enterprise
is being moved more and more by a growing sense of social responsibility in its
activities abroad and that it has demonstrated how profitable operation, on the
one hand, and general economic improvement and development, on the other, can
be mutually accelerative.

Economic and social development throughout the Americas is one of the funda-
mental objectives of the Organization of American States and its various organs.
Your case studies reflect the many areas in which United States business enter-
prise has contributed to these ends in particular countries in Latin America.
I call attention especially to such constructive steps as are exemplified in the
founding of the Escuela Agricola Panamericana al Zamorano, Honduras, by the
President of the United Fruit Company in 1942. This is but one of many instances
in which the foresight of enlightened business leaders has resulted in practical
measures and in the type of collaboration which is bound to strengthen the bonds
of inter-American economic, social, and cultural relations.

Sincerely yours,



e A. Mora
Secretary General
Mr. Charles J. Symington
Chairman, Policy Committee for NPA Case Studies
National Planning Association
230 Park Avenue
New York 17, New York




tihe Oranlatlon of Ameican Stlaes orgl naed in 1890 at the firs a tlernallonl Confeenc of Ame ricA n Sates. Its dernAtiv Charler was sIL .l he. Nlh
Conference A l n 948. Its purpose is 1t achieve a ordel of peace and lunce. promote A-meian s tohda ,Ed. stael Ihen callaboraboa among ie Membe SlaTes, and
defead TheIA sovereignty, Independence and lTeratlo, l IneArIly The PaT AtneIcan meUnn Is the ceolral. permanent orign and GenerT l SecretaI at lf the OrteINIaohL








AUTHORS' NOTE



T HE AUTHORS of this report share a deep conviction that there
is need for an ever-increasing degree of understanding and collabo-
ration between the citizens of the Latin American republics and of
the United States. Trade exchanges excepted, the flow of capital
from the United States to Latin America in the form of direct private
investments has been the most important factor in the economic
interrelationships of the two areas. In addition to their evident
contribution to development, there is growing recognition that direct
private investments have exerted a very large influence upon the
volume and structure of United States-Latin American trade.
When we were invited by the National Planning Association to
report upon the United Fruit Company's operations in Latin America
as a case study of this type of investment, as a condition of our
acceptance, we asked for assurance of full access to all relevant
accounts and reports of the company. This assurance was given
by the management of United Fruit, and was carried out not only
in letter and spirit by the company's representatives in Boston and
in the field, but with a generosity and freedom that has earned
our respect as well as our sincere gratitude.
We owe an equal debt to numerous government officials, including
heads of state, in the six countries in which our field studies were
centered. They gave unstintingly of their time and in many cases
provided special compilations of unpublished economic data that
were a necessary background against which United Fruit's impact on
local economies could be measured. An equal measure of generous and
gracious response and cooperation was afforded by private citizens
of the six countries-by businessmen, independent banana growers,
members of the company's work force, labor union officials, and others
too numerous to catalog. And the debt multiplies to include the help
of U.S. officials in Washington and in the embassies abroad, to
officials of the Organization of American States who made available
to us the findings of their own forthcoming study of the banana
industry, to officers of United Fruit's competitors, and to jobbers
and retailers whose establishments we visited.
All of these gave us their help in a measure that far transcended
the accepted amenities of social courtesy. We acknowledge their
assistance with gratitude and with a deepened awareness of the
meaning of inter-American cooperation.








We wish, also, to record our indebtedness to the following who
assisted us directly upon various phases of this study: William
Butler, who accompanied us on our field trips, contributed valuable
advice in planning the study, and wrote one chapter; John Gillin,
Miguel Albornoz, and Miss Lilo Linke who conducted field investi-
gations under Galo Plaza's direction; and Shaw Livermore, Ferdinand
Mehrlich, and Miss Erika Teutsch who carried out specific research
assignments or assisted with statistical calculations and editing with
Stacy May.
A large measure of any worth that the study may have is due to
the help we have received as recorded above, but the authors assume
full and joint responsibility for what has been presented.
In the hope that this report might contribute to the methodology
of studying an important field, in addition to throwing light upon
one company's operations abroad, we have tried to employ objective
measurement to the greatest practicable degree and to spell out sources
and procedures that might be useful to others embarking upon com-
parable undertakings. We realize that this imposes upon the reader
a greater burden than many who are interested mainly in the study's
findings may be willing to assume. Accordingly, tempering our zeal
with mercy, we recommend that those who would prefer to go directly
to conclusions without the pain of sifting evidence should turn to
Chapter IX. That chapter summarizes the major findings of this
study, with some indication of where, in earlier chapters, the reader
may find a fuller exposition of issues about which his curiosity may
have been aroused.








PREAMBLE
TO
THE UNITED FRUIT COMPANY
IN LATIN AMERICA



T HIS SEVENTH STUDY in the National Planning Association's
series on United States Business Performance Abroad turned out to
be a much more ambitious project than we intended when the
United Fruit Company first agreed to cooperate in a study of its
operations abroad. Subsequent inquiry indicated that it would not
be meaningful to restrict the study of the company's banana operations
-which are its principal operations-to a single country. However,
it seemed unreasonable from the point of view of research and cost
to include every country in which the company had banana operations.
The solution seemed to point to studying the company's banana
business in the six banana-producing countries in Central and
South America (Colombia, Costa Rica, Ecuador, Guatemala, Hon-
duras, and Panama) that produce 60 percent of the world's banana
tonnage and 90 percent of U.S. imports of this exotic fruit.
Happily, this six-nation limitation lent itself at least to partial
geographical and cultural similarity in coverage. In addition, it
facilitated concentration in this study on the company's banana
operations which account for over 60 percent of its gross sales and
85 percent of its gross profits before taxes. Without these obviously
minor limitations, the study could not have been sufficiently simplified
for presentation in this series. Neither the authors nor officials of
United Fruit, however, feel that the frank appraisal of the company's
banana activities in the six nations-as reflected in this study-
would be modified if all of its operations outside the United States
had been included for study.
The National Planning Association is grateful for the wholehearted
cooperation of the United Fruit Company in releasing for publication
much factual information supplied from its own records. Employees
throughout the company here and abroad were uniformly courteous
and helpful to the authors in their search for facts. Much credit
also should be given to the many individuals in governmental and
private posts in the six countries studied, as well as to officials of the








Organization of American States and the U.S. government, who
gave so generously of their time and knowledge to the authors.
United Fruit has been a factor of varying influence in the economic
life of several friendly, but small, republics in Central America.
At times its banana operations in some of these countries have been
brought to public attention, and not always in a laudatory way.
The National Planning Association received full encouragement from
the company in giving adequate coverage of United Fruit's principal
business-bananas-and in extending its inquiry beyond the formula
utilized in this series up to now. The authors in this study have
related much more than a story of a rough road to success-they
also provide a painstaking economic and social analysis of the banana
business in the Western Hemisphere.




Eugene W. Burgess
Director of Research
May 1958






























Brief History: Evolution of the Business


T HIS IS the story of how, over a relatively short period of time, a
highly perishable tropical fruit has become an important item in world
trade. It is the story of how an implausible product, which was being
introduced into the United States as a curiosity a little over 80 years
ago, is today carried by the millions of stems, on more than a hundred
fast refrigerated ships, from farms in the tropics to markets in the
United States, Canada, and Europe, to become a common foodstuff in
almost every household.
Our study concerns primarily the United Fruit Company as a
producer and exporter of bananas. It explores the world banana market,
the basic economics of banana growing and distribution. It focuses
particularly on the role of United Fruit in the banana industry, its
impact on producing countries, its problems and future trends, not
only with respect to production and marketing of the fruit, but also


THE

UNITED FRUIT COMPANY

IN LA TIN AMERICA


Stacy May and Gal Plaza
Stacy May and Galo Plaza

*








in its relations with governments, its labor force, and with public opin-
ion, both in the United States and Latin America.
The study concentrates on what has happened since 1950. But in
order to better visualize the company's present activities, one must
look back and examine how the banana came to occupy its present
important place in international commerce and how United came
to exercise its present predominantly important place in the world
trade of bananas and, particularly, in the American trade. It is not
a simple success story from the beginning; it is more than that. It
is a story of dreams and ambitions, of struggle and despair, of mis-
understanding and even of hatred, of trial and error; all of this against
the backdrop of sodden humidity, heat nightmares, tropical rains,
hurricanes, and murderous yellow fever, dysentery, and malaria. It is
also the story of improvement through experience; it is the saga of the
rise of stout-hearted men, big as Ulysses in their achievements. It
could be written as a romance, its pages bathed in the clean salt spray
of the tropical seas as flying fish scatter before the bows of graceful
Yankee clipper ships. But our task is the more prosaic one of recording
facts as we found them.
No one has summed up more forcefully the contrast between past
and present attitudes of those responsible for the banana industry than
Samuel Zemurray. This was in a statement attributed to him shortly
after he first became associated with the United Fruit Company as
Managing Director in 1932 after a long career as one of the most
colorful banana pioneers and one of United's most formidable rivals. In
his reference to the past he clearly was speaking of banana pioneers
generally rather than of the company he had just joined when he said:
"I feel guilty about some of the things we did all we cared about
was dividends. Well, you can't do business that way today. We have
learned that what's best for the countries we operate in is best for the
company. Maybe we can't make the people love us, but we can make
ourselves so useful to them, that they will want us to stay." This frank
and deeply felt expression of attitude is still dominant today. Through
mutual understanding between the company and the people and their
governments, a new, clear and mutually profitable relationship is
evolving.


HISTORY OF THE BANANA

THE BANANA'S HISTORY goes back thousands of
years. Rumphius, who has been called the greatest botanist before Lin-








naeus, in his Herbarium Amboinense, written in shadowy antiquity,
mentions that the banana even then was of venerable lineage. It is a
recognized fact that man has used the banana as a food staple for
thousands of years. It was one of the first fruits grown by primitive
agricultural peoples.
The banana is often referred to in ancient Hindu, Chinese, Greek,
and Roman literature. Mention of the banana is found in various
sacred texts of oriental people. Chief of these writings are two Hindu
epics, the Mahabharata, the work of an unknown author, and the
Ramayana of the poet Valmiki, and there also are references in certain
sacred Buddhist texts. These chronicles describe a beverage derived
from bananas which Buddhist monks are allowed to drink. Yang Fu,
a Chinese official in the second century A.D., wrote an Encyclopedia of
Rare Things, in which he describes the banana plant. This possibly is
the first mention made of the banana in Chinese texts. The Greek
naturalist philosopher Theophrastus wrote a book on plants in the
fourth century B.C. in which he describes the banana. His book is
considered the first scientific botanical work extant. The Roman nat-
uralist Pliny the Elder describes the banana plant in his Historia
Naturalis written in 77 A.D. He mentions Theophrastus as his source
of information. Modern archeologists have found the banana depicted
in ancient ruins such as the Buddhist temple of Bharhut dating from
the second century B.C. and the Javanese monument to Buddha
erected in Borobodur in the year 850 A.D.
The exact origin of the banana is not entirely clear. Dr. Herbert
Spinden', anthropologist, wrote: "The first home of the edible banana
was in all probability the humid tropical region of Southern Asia,
which includes Northeast India, Burma, Cambodia and parts of South-
ern China, as well as the large islands of Sumatra, Java, Borneo, the
Philippines and Formosa. Here, the seedless varieties of the true do-
mestic banana are commonly found growing wild, although perhaps
they have merely escaped from cultivation." From the East the banana
was most likely introduced to Egypt and Africa by early eastern trad-
ers. The banana variety that predominates in contemporary world
trade, the Gros Michel, was probably first brought to the New World
by a French botanist, Frangois Pouat, around 1836. The old Spanish
chroniclers state that upon the arrival of the Conquistadores in the
New World's tropics, they found platanos or cooking bananas as early
as 1504, the date the city of Santo Domingo, the first capital of Spanish
America, was founded on the island of Hispaniola.
SQuoted in Charles Morrow Wilson, Empire in Green and Gold, Henry Holt &
Co., Inc., New York, 1947, p. 13.








Oviedo in his Historia General e Natural de Indias assigns to Friar
Tomas de Berlanga, Bishop of Panama and discoverer of the Gala-
pagos Islands, credit for introducing the first plantings of true fruit
banana types from the Canary Islands to Santo Domingo in 1516:
"There is a fruit here, called platanos, but in truth they are not .
nor did they used to be in the Indies, but were brought hither. One
hears on all sides that this special kind was brought from the islands of
Grand Canaria in the year 1516 by the Reverend Friar Tomas de Ber-
langa of the Order of Predicadores to this city of Santo Domingo,
whence they spread to the other settlements of this island and to all
other islands peopled by Christians and they had even been carried to
the mainland and in every port they have flourished ...."


THE BANANA TRADE

FOOD HAS BEEN a major commodity in world
trade for a long time. Grain and fish were traded for pottery and
jewelry among the Greeks, the Phoenicians, and other early settlers of
the Mediterranean. As civilizations matured, and palates became epi-
curean, foreign foods were in high demand. The ancient Romans, at
the height of their civilization, imported jars of salted fish from the
Black Seas at high prices, causing old Senator Cato to complain in a
speech to the Senate that "Rome was the only city in the world where
such a jar of fish cost more than a yoke of oxen."
The banana, until the year 1866, was virtually unknown in Western
Europe and the United States. The first bananas were brought to the
States in the early nineteenth century by sea captains who, on return-
ing from voyages to tropical America had loaded as extraordinary
cargo bunches of the strange yellow tropical fruit. Carl B. Frank
started importing bananas from Colon to New York in 1866 from
plantations near the present Canal Zone. At the Philadelphia Centen-
nial Exposition of American Independence in 1876, bananas wrapped
in tinfoil were sold to intrigued buyers at 10 apiece. Yet, today, less
than a century later, the banana is a staple in almost every home.
The banana trade, in its infant evolution, was hazardous and un-
predictable. Pioneering in the pestilent jungle lowlands, where bananas
grow, was heartbreaking because the jungle fights to reclaim its ter-
rain and only the strong survive. Lack of roads and transportation
made it doubly difficult. In Central America there was not even regu-
lar shipping service to the north before 1855.








In 1870, Captain Lorenzo Dow Baker, commander of the fishing
schooner Telegraph out of Wellfleet, Massachusetts, loaded as extra
cargo 160 bunches of bananas purchased for a shilling a bunch at
Port Antonio, Jamaica. Eleven days after the date of purchase the
Telegraph docked in Jersey City, where the bananas sold at two dol-
lars a bunch. Captain Baker's profitable sale in Jersey City led him
to believe that he could capture the consumer's taste with good tropi-
cal fruit in the same way the fruit had caught his fancy on the wharfs
at Port Antonio. So he continued to carry bananas as extra cargo from
Jamaica, unloading in the larger port of Boston. In Boston, Andrew
Preston, an agent of the small but respected produce firm, Seaverns
& Co., sold the bananas at a commission. Banana sales in Boston were
uniformly successful. Both Baker and Preston thought that increased
shipping and selling of bananas would prove a profitable independent
business. In 1876, Baker was a prosperous shipper and partner in the
Standard Steam Navigation Company. He persuaded Andrew Preston
and nine of his partners to form an independent fruit agency. So, in
1885, the Boston Fruit Company was founded.
Captain Baker settled in Jamaica where he supervised the shipping
and freighting of bananas to Boston on Standard Steam Navigation
Company ships. Preston, as Boston's sales manager, found new
markets for the increasing influx of bananas from Jamaica. The
Boston Fruit Company prospered, more ships were added to the fleets,
more markets were developed.



FORMATION OF THE UNITED FRUIT COMPANY

To MEET INCREASING DEMANDS for bananas in the
States, Baker and Preston realized they would have to look farther
abroad than Jamaica, Cuba, and Santo Domingo for their fruit sup-
ply. They had heard of Minor Keith, a railroad builder in Costa Rica,
whose companies-the Tropical Trading and Transport Company, the
Colombia Land Company, and Snyder Banana Company-had been
shipping bananas from Colombia, Costa Rica, Panama, and Nicaragua
to New Orleans.
The demand for bananas was growing steadily. By 1898, the total
importation of bananas from the American tropics was 16 million
stems. No more were imported only because this was the total product
available. Over a hundred firms were engaged in the importation of
bananas to the United States before 1899. During the early years,








when small cargoes were easily disposed of at ships' sides for high
prices, it was possible to operate at a profit even with the crudest and
most wasteful methods. As the demand grew and the marketing of
bananas expanded beyond the ports of entry, most of the small inef-
ficient firms, that had enjoyed temporary success, fell by the wayside.
At the time the United Fruit Company was founded, about 22 firms
remained in business, including the Boston Fruit Company, which
served the northeastern sector of the United States, and the Keith
interests that operated out of New Orleans.
Minor Keith, who had borrowed heavily on short terms from New
York and London financing companies in order to further railroad con-
struction in Costa Rica, ran into difficulties in meeting his obligations.
Matters were further complicated when the firm of Hoadley & Com-
pany of New Orleans, which had been his distributor for years, failed,
involving Mr. Keith in a loss of $1.5 million. Because of the failure of
his agent, Keith was compelled to make new arrangements for the dis-
tribution of his fruit and entered into negotiations with Preston, Presi-
dent of the Boston Fruit Company. The Fruit Dispatch Company,
which had recently been formed by Boston Fruit for the purpose of
expanding and expediting the distribution and sales of bananas, took
over the handling of some of Keith's fruit.
This business relationship grew into a consolidation of the interests
of the Boston Fruit Company and the companies controlled by Keith.
The motivation of the merger was not to eliminate competition. The
Boston Fruit Company, with production in the Caribbean islands and
marketing organizations in the northeastern United States, served an
entirely different sector of the country than that covered by Keith.
The latter's fruit came from Central America and Colombia and was
marketed throughout the South from New Orleans and Mobile. How-
ever, both saw the need for expanding production and a more efficient
system of marketing. Both had been victims of floods, drought, blow-
downs, and political upheavals. They realized that a more constant
and reliable flow of fruit from the tropics could only be obtained by
spreading their production base to a number of areas so that any local
disaster could be counterbalanced by a good crop elsewhere. These
were the obvious and logical reasons why these two noncompeting
groups of banana companies concluded negotiations and were con-
solidated into a single entity, the United Fruit Company.
Incorporated on March 30, 1899, under the laws of the State of New
Jersey, United Fruit had an authorized capital of $20 million. At the
first offering, only $1,650,000 was invested by the public, but within








one year a total of $11,230,000 had been subscribed. The company was
authorized under its charter to acquire by purchase or development
banana and other properties. Under this charter, United purchased the
property, business, and shares of the Boston Fruit Company and its
associated companies for $5,200,000, and from Keith and his associates
all the properties owned by the Tropical Trading and Transport Com-
pany, Ltd., the Colombia Land Company, Ltd., and the Snyder Ba-
nana Company for about $4 million.
The following were the first officers and directors of the new com-
pany:

President and Director.... Andrew W. Preston, Brookline, Mass.
First Vice President
and Director .......... Minor C. Keith, Brooklyn, N. Y.
Second Vice President
and Director .......... Lamont G. Burnham, Boston, Mass.
Director ........... T. Jefferson Coolidge, Jr., Manchester, Mass.
Director .............. .Kenneth K. McLeren, Jersey City, N.J.
Secretary ............... Bradley W. Palmer, Boston, Mass.
Treasurer ............... Charles A. Hubbard, Boston, Mass.

The organization of the United Fruit Company marked the end of
the era of pioneering, of risks and hardships, easy profits as well as
total failures, and the beginning of a new era that converted the
highly perishable tropical banana into an important item of world
trade.
The new United Fruit Company had 112 miles of railroad; 212,394
acres of land, of which 61,263 acres were in production; and a capital
of $11,230,000. After formation of United, the young organization
began developing and expanding other sources of supply. It bought
lands in Santo Domingo, Honduras, Guatemala, Panama, and Cuba,
and additional acreage in Nicaragua, Jamaica, and Colombia. By 1930,
its capital had increased to $215 million. Land was exceedingly cheap
in the vast undeveloped lowlands, and eager governments made avail-
able large tracts of jungle territories for the prospect of getting them
opened to profitable development through an enterprise that would
supply basic railroad and port facilities that could be furnished in no
other way.
On the home front, Preston developed additional markets in Boston
and surrounding areas. He established outlets in other ports along the
East Coast-Baltimore, Philadelphia, and New York. More ships








were added to the fleets and the company looked to Europe as another
market ground. By 1910, United was shipping its bananas to Europe.
Today, United Fruit is the major banana concern in the world, and in
1956 it sold almost 39 million stems in North America and Europe.


RAILROADS AND THE BANANA INDUSTRY

UNITED FRUIT PROBABLY would not hold its pres-
ent position as the major banana company in the world had it not
been for the ingenuity of Minor Keith. His uncle, Henry Meiggs, in
the 1850's had pioneered in the railroad industry in Chile and Peru.
Tomas Guardia, President of Costa Rica, in 1870 contracted with
Meiggs and Keith to build a national railroad from Port Lim6n on the
Caribbean to the mountain town of San Jose, the country's capital.
The construction of the railroad through the tropical jungles of
Costa Rica met with one disaster after another. Dysentery, malaria,
and other tropical diseases constantly cut down manpower. Meiggs
died of yellow fever; so did three of Keith's brothers, and Keith was
left to carry out the construction. Besides the ever-present toll of dis-
ease, food supplies often spoiled before reaching workers on inland
plantations, and shiploads of construction materials coming from over-
seas were nearly always delayed by storms at sea or lost on reefs and
shoals in the hazardous harbor of Port Lim6n. Minor Keith had mar-
ried the daughter of an ex-President of Costa Rica; he had an engag-
ing personality and made many friends. He was a good organizer and
a man with considerable financial experience; his ambition was to
build a railroad system through all of Central America. At his death,
his German biographer, Herman W. Bitter, referred to Keith as "the
uncrowned King of Central America."
Keith had completed only 60 miles of the railroad when he ran out
of funds. He was forced to find another source of income so that con-
struction could be carried on. Experimentally, he planted bananas in
the Zent Valley, back of Lim6n, for he had heard that the tropical
fruit had a market in the United States. He shipped the first harvest
of Zent Valley bananas via his railroad to Port Lim6n and from there
they were taken to New Orleans where they were promptly sold for a
profit. Highly encouraged, Keith began expanding his banana planting
and shipping, and in 1883 was supplying shipping companies in Costa
Rica, Panama, Nicaragua, and Colombia with bananas. With addi-
tional capital from banana sales, Keith pushed the railroad to com-
pletion in 1890.








Completion of the Costa Rican railroad, despite man-killing diseases
and swampy lands, may be compared to the engineering marvel of the
two North American Harmon brothers in constructing the Quito-
Guayaquil railroad in Ecuador. Keith looked to Panama as his next
railroad site, and United viewed Panama as another potential banana
development. Planting and railroad building in Panama were success-
ful. Soon Panama was producing millions of banana stems for export
by United Fruit. In Guatemala and Honduras, the company also
investigated possibilities and found in the Caribbean lowlands of the
two countries additional banana lands.
It is interesting to observe the close relationship between railroads
in Central America and the development of banana production. All
the Central American republics, at one time or another, dreamed of
building ocean-to-ocean railroads, taking advantage of the narrowness
of the continent in Central America. The immense financial success
of the Panama railroad, built in 1850, was an added incentive.
Some major railroads had been started before United Fruit came
into existence, but the roads were not completed and the dreams of
transcontinental railroads never came true. The fast-growing banana
business furnished abundant cargo for these railroads whenever they
traversed banana country and in some cases the revenues from the
transportation of bananas saved the railroads from bankruptcy. Also,
United and other fruit companies built railroads for the handling of
bananas, freight, and people required for the banana industry. Thus,
economic reasons explain why most of the railroads' mileage in the
Central American countries is to be found on the coastal plains, where
bananas are grown, and why the banana industry has been closely
related with the operation of railroads in that area.
The construction of railroads was an indispensable and integral
part of the development of banana plantations in areas not previously
served by any form of land transportation. The United Fruit Com-
pany was interested in building railroads for the service of its banana
operations; the lines would logically follow the shortest good route
from the port or connecting line to the banana plantation. These rail-
roads were of utmost importance to the countries in tropical America
because they opened up undeveloped land and made possible its trans-
formation into banana plantations, which contributed substantially
to the national wealth in countries where mineral resources have not
been developed and agriculture is the chief source of income. Notably,
bananas contribute a large part of that income.
In Costa Rica, Keith built part of the international railroad, but
when banana growing overshadowed interest in railroad building across







the continent, he concentrated his efforts on rail construction in the
lowlands back of Port Lim6n. Early in the century, United Fruit built
the Northern Railway to serve its banana operations on the Atlantic
Coast. Later it acquired the right to operate the lines of the Costa
Rican Railway which then extended from Port Lim6n to San Jose.
The company has disposed of its interests in the Northern and Costa
Rican railways on the Atlantic Coast, and now has only local banana
railroads on the Pacific Coast.
Honduras also had high hopes of a transcontinental railroad as a
means to encourage the setting up of a federation of Central American
republics and to cash in on the growing traffic from the East to the
California gold fields. An attempt was made to float a loan for this
purpose as far back as 1853, but not much resulted from these efforts
until 1867-70, when a 50-mile road was built from Puerto Cortez
on the Caribbean Coast toward the interior. Banana interests, during
the Bonilla regime, obtained authorization to set up the TELA Rail-
road Company and the Trujillo Railroad Company, and in compen-
sation received government land. In 1924, out of some 400,000 acres
of land controlled by United in Honduras, about 175,000 had been ob-
tained as compensation for railroad construction. Land grants of this
type were ordinary procedure, and in addition national governments
granted exemptions of port duties and other concessions in order to
hasten the construction of rail lines. Several attempts were made to
continue construction of the national railroad toward the Pacific, but
nothing ever materialized. The line never went further inland than
San Pedro Sula. The fact is that to this date, although there are over
900 miles of railroad in Honduras, all are within the rich banana lands
of the North Coast. The capital city, Tegucigalpa, and other major
towns still lack rail communication.
In Guatemala, railroads came long before bananas, and in this
country many of the major towns are connected by rail to the sea. Be-
fore 1885, 20 miles were built from the capital, Guatemala City, toward
the Atlantic. During the decade from 1880 to 1890, American con-
tractors built the Central Railroad of Guatemala, which connects the
capital with San Jose on the Pacific Coast, and the Western Railway,
which connects with Puerto Champerico, also on the Pacific. Later on,
136 miles were constructed from Puerto Barrios on the Atlantic toward
the capital.
In 1904, Keith and William C. van Horn contracted for the con-
struction of the Northern Railroad. A company was formed, called the
Guatemala Railroad Company, and was incorporated under the laws
of the State of New Jersey with a capital of $40 million. The new








company took over the 136 miles in operation from Puerto Barrios
and constructed the remaining 61 miles over the mountains to Guate-
mala City. In 1912, this company changed its name to International
Railways of Central America, and the Western Railroad with 200
miles of track was taken over. This system of railroads which extended
from Guatemala into El Salvador, grew over the years. In 1930, Inter-
national Railways operated about 887 miles of track. Although Keith's
dream of connecting the Central American republics with Mexico to
the north and Panama to the south never came true, his contribution
to the building of railroads in the Caribbean region was extraordinary.
International Railways, with too little traffic to support its expenses,
had been on the verge of bankruptcy and in the hope of solving its
financial difficulties it approached United Fruit and reached an under-
standing that became effective in 1936. Previous to this, United had
signed a contract with the government of Guatemala which granted the
company the right to develop a large banana plantation at Tiquisate
on the Pacific Coast and bound it to build, at its own expense, a rail
line from Tiquisate to an open roadstead on the Pacific at Concepci6n
del Mar. According to the contract, it was to be a port open to all
shippers. Had this port been built, International Railways inevitably
would have lost much of its profitable long-haul traffic from the West
Coast to Puerto Barrios on the Atlantic. Most of that traffic, notably
export coffee, would have moved out via the West Coast port instead.
In this situation, under pressure to help solve the railroad's finan-
cial difficulties, United Fruit agreed in 1936 not to build a port at all
on the Pacific Coast near which its Tiquisate plantations were located.
Instead, it made a traffic rights agreement with International Railways
which enabled it to ship all its Pacific Coast bananas over that com-
pany's lines to Puerto Barrios, some 288 miles away on the Atlantic.
The agreement, originally covering a period of 25 years, was subse-
quently extended until 1968. Under its terms, United made substantial
capital contributions in cash and equipment to International Railways
and was afforded preferential rates on its freight carriage. To enter
into these arrangements, United had to persuade the government of
Guatemala to release it from its obligation to build the .port. After
considerable negotiation, the government agreed in March 1936 that
the building of the port should be optional rather than obligatory.
The modification of United's original plan with respect to its Pacific
Coast operations and its subsequent relationships with International
Railways have been among the major sources of criticism against the
company in Guatemala. (A more extended discussion of the specific
issues in dispute is set forth in Chapter VI.)








In Colombia, the Santa Marta Railroad was originally started in
1881 for the exportation of sugar. After Keith became manager of the
Colombia Land Company, Ltd., the Santa Marta Railroad Company
started to develop transportation of bananas. In 1925, it operated 176
miles of track, 91 of which constituted the main line to Fundaci6n,
and 81 miles of branch lines within the plantations. Long years of
friction between the railroad company controlled by United Fruit
and the Colombian government ended when, in 1932, the company
transferred the railway to the government. The government, in turn,
leased the railway to United for a 30-year period, and gave the
company the right to surrender the lease at an earlier date. The com-
pany exercised this option in 1947, and the railroad has since been
operated as the Magdalena Division of the National Railways of
Colombia.
Although railroad building preceded the development of the banana
industry in Panama, the operation of railroads in the banana-growing
regions of this country is intimately associated with United Fruit.
Early in the century, United built railway lines connecting its plan-
tations with the port of Bocas del Toro on the Atlantic Coast. In 1927,
the government completed its railway from interior points to Puerto
Armuelles on the Pacific. United Fruit then built a network of lines
connecting with the government railway to provide transportation for
bananas from its farms on the Pacific side to this port.
Railroads were vital to the banana enterprise. If the banana inter-
ests had not provided them, railroad service for the scantily popu-
lated lowlands in Central America would have been delayed for many
decades. But the banana companies did not provide a railway network
ideally suited to serve the overall economic needs of the several na-
tional economies. That was not their business. Nevertheless, histori-
cally railroads and bananas have become so closely associated in the
minds of people in the area, that the banana companies more often
have been censured for their failure to provide fully for all railway
needs, than credited for their considerable contributions to this im-
portant field.


UNITED FRUIT'S COMPETITION

THROUGHOUT ITS GROWTH, United Fruit has had
competition. In early years, the Boston Fruit Company had supplied
bananas for the city of Boston and surrounding areas, but as success-
ful sales brought in money, Boston Fruit began to consider the possi-








ability of developing markets in New York, Baltimore, Philadelphia,
Mobile, and New Orleans. In general, Boston Fruit had been more
lucky than other early banana companies. The banana lands of Ja-
maica had not been struck by the sudden hurricanes that had wiped
out so many of the banana lands held by other small enterprises.
Boston Fruit, because of its consistent policy of maintaining several
sources of supply, was a stable and respectable little company with
enough capital to look after its interests. But both Preston and Baker
knew that to insure their business they had to expand both banana
supplies and markets.
Boston Fruit proceeded cautiously and wisely. Wherever it was
financially advantageous, it bought out small companies in ports along
the East Coast. Later, union with Keith's Tropical Trading & Trans-
port Company and the formation of United Fruit gave the Boston
firm additional banana supplies and markets along the East Coast and
in New Orleans. After the Boston and Keith groups joined forces, the
United Fruit Company emerged as the largest enterprise servicing the
world banana trade. From 1900 until 1910, its average yearly business
accounted for well over three-quarters of total stems imported by the
North American and European markets combined. In 1900, there were
about 20 competing companies operating in these markets, but less
than one-quarter of the total trade was divided between them.
United's relative position declined steadily subsequent to this first
decade of its existence. The inherent hazards of the business have
contributed to a high incidence of business casualties among those who
have attempted to enter into this precarious vocation. The risks have
not prevented many from trying, and an ever-increasing number has
met with success. Today, there are about 160 importing firms servic-
ing the North American market alone. The largest of these, after
United Fruit, is the Standard Fruit and Steamship Company, which
imports about 30 percent of the stem volume handled by United Fruit
in this market.
Between 1910 and 1930, United Fruit's competitors made steady
inroads upon its overall position in the two great import markets. A
number of additional mergers, or rather purchases of going companies,
were effected by United during this period, but only one was of
major importance. The portion of the whole trade handled by its com-
petitors increased rather than diminished. On the average, United
handled about 60 percent of the total trade over this 20-year period
as against 77 percent in its first decade of operations.
November 1929 marked the last important merger transaction in
United Fruit's history. That was the date when it purchased the Cuya-








mel Fruit Company. The president of Cuyamel, and the creative brain
that had built it to important stature, was Samuel Zemurray. The
name is one that assumes sufficient importance in United Fruit's sub-
sequent fortunes to warrant here a review of the transaction's back-
ground. But first, to round out the theme under discussion, it is appro-
priate to note that the acquisition of Cuyamel did not appreciably
halt the steady encroachment of United Fruit's competitors upon its
position in the world market. That position continued to decline, until
today the company's share in the world banana trade is of the order of

Chart I
United Fruit's Share of the Combined North
American and European Banana Market
Has Steadily Declined
120

100-

80-
SSales, all companies






20 United Fruit sales

o l .. l l .. I l l I I I I .. |
1900 's '10 '15 '20 '25 '30 '35 '40 '45 '50 '55

28 percent. In the past 10 years, Ecuador has emerged from a very
minor status in the trade to become, since 1951, the largest exporter
of bananas in the world. All but a small fraction of this increase
has been accounted for by competitors of the United Fruit Company,
a number of whom have outstripped United in numbers of stems pro-
duced in that country and exported from it. In Colombia, also, there
has been a very considerable increase in banana production and export
by local producers unaffiliated with United Fruit. They have overcome
the inherent disadvantages of relatively small-scale independent oper-








ation by organizing two cooperatives through which their production
is marketed.
It has been stated that the present-day United Fruit Company rep-
resents the merged businesses of some 21 banana concerns that once
operated independently. The inference is drawn that by acquiring rival
business interests it has succeeded in eliminating serious competitors
and increasing its own stature. The record fails to bear this out. It
shows that over the years there has been a marked growth both in the
numbers of its competitors and the weight of their competition. Since
the earliest days of its formative infancy, the record shows no acqui-
sitions of going businesses by United that were of significant size indi-
vidually or in combination other than that of the Zemurray interests.
And Cuyamel, itself, appears to have increased United Fruit's rela-
tive position in even the North American market by a very scant
margin.


SAMUEL ZEMURRAY AND CUYAMEL

THE SON OF A POOR BESSARABIAN FARMER, Zemur-
ray came to the United States in 1892. At the age of 15 he helped his
uncle and aunt run a little country store in Selma, Alabama. One day
he ran into a banana jobber who was closing a deal with a grocer and
at once saw the possibility of making a profit by selling in nearby com-
munities ripe bananas, which sold at a discount on the docks in Mobile,
before they spoiled completely. Successful in this venture, he expanded
his area by shipping bananas to inland cities by rail. Next he merged
with small competing companies in Mobile, Ashbel Hubbard and
Thatcher Brothers Steamship Company. In 1905, he went to Honduras,
then a country of constantly changing governments and recurrent revo-
lutions. Zemurray had been purchasing bananas in the area, but then
he bought land along the Cuyamel River with the idea of building a
railway and growing his own fruit. However, Zemurray felt that if his
venture were to pay, he would have to have certain government con-
cessions-a guarantee against increased taxes, permission to build a
railroad, and above all customs-free importation of needed construc-
tion materials upon which he considered the import duties
prohibitive.
The President of Honduras at the end of 1910 was Miguel Davila.
As the story is told in the March 1933 issue of Fortune magazine, at
the same time that Zemurray was wondering how he could obtain the
necessary government concessions for his Cuyamel Company, Davila








was negotiating with bankers in the United States for a loan to save
the country from bankruptcy. The banking interests agreed to lend
Honduras the money, but only upon the stipulation that they be al-
lowed to name their own agent, who would have control of Honduran
customs collections to assure that the obligated payments of interest
and principal amortization on their loan would be met. Zemurray
realized that if Davila were to sign the papers for the loan, the New
York banking interests might balk at any transaction that proposed
even minor cuts in the existing schedule of import duties.
Needless to say, the prospect of mortgaging customs revenues to
foreign banking control was not popular with many elements in Hon-
duras. One dissenter was General Manuel Bonilla, an ex-President of
Honduras living in exile in the United States and anxious to return to
power. Upon the basis of a common interest in blocking the proposed
loan, Bonilla went to New Orleans, sought out Zemurray, and obtained
from him a loan sufficient to purchase the yacht Hornet that had been
used for a period by the U. S. Navy. Zemurray financed also the pur-
chase of a case of rifles with ammunition and a machine gun. On Zemur-
ray's own power launch, Bonilla and two soldier-of-fortune cohorts
were carried out to the Hornet and loaded aboard with their guns, thus
eluding U. S. Secret Service men who were assigned to prevent the
coup of which Washington had heard rumors. Zemurray himself waved
the adventurers good-bye as the Hornet sailed from Biloxi for Hon-
duras. The revolutionary trio disembarked in Puerto Cortez, gathered
enough Bonilla sympathizers to oust Davila, and Bonilla was quickly
reinstated as President. The loan agreement that Davila had hastily
signed was repudiated by the Honduran Congress, and Zemurray was
given every concession he had sought. The United Fruit Company, of
course, was in no way involved in this incident, which occurred 20
years before it bought out Samuel Zemurray's interest in Cuyamel.
Zemurray's boundless energy, engaging personality, and many good
friends in Honduras pushed him ahead in his new activity as a grower
of bananas. He proved to be a good farmer. He risked millions in
large-scale irrigation, on selective pruning, on propping trees with
bamboo poles to keep the fruit from falling to the ground and bruis-
ing. He let the floods overflow in inferior lowlands and when later the
water was permitted to drain away, a deep layer of rich alluvial soil
was left on which bigger and better bananas grew. Through these prac-
tices, Zemurray was shipping to northern markets bananas of equal or
better quality than those shipped by United Fruit. He had a further
advantage in that he had his headquarters in the tropics and gave his
banana growing personal attention. United Fruit managers had to fol-








low directions from far-off Boston. Zemurray had become a very se-
rious competitor; his Cuyamel Company sold more and more bananas
and the quotations of its stock rose steadily.
In 1915, Cuyamel had begun to expand into the Motagua Valley
region along the Honduran-Guatemalan border, for which it had been
granted a concession by Honduras. The political jurisdiction of the
area had been in dispute between the two governments for more than
65 years. United Fruit had a well-established interest in the area based
upon the territorial claims of Guatemala. Both Guatemalan and Hon-
duran troops were sent into the area and a few minor skirmishes took
place. The incident is mentioned here because it frequently has been
cited as an example of the close involvement of the early banana pio-
neers in Latin American politics.
In common with a number of parallel situations involving other
foreign corporations that have occurred in various Latin American
countries and elsewhere, opinions differ on this case. Some feel that this
typifies a situation in which political frictions were brought to a head
by the efforts of rival business corporations to enlist governmental
support of their interests. Others feel it was more a matter of govern-
ments seeking to use such influence as important foreign corporations
might bring to bear in support of their respective political claims. We
have no firm basis for forming a judgment upon this issue. It can be
stated that the U. S. State Department offered its services in mediation
of this dispute, which was not settled until after the Cuyamel Fruit
Company had ceased to exist.
In November 1929, Zemurray sold his interest for 300,000 shares of
United Fruit stock worth $31,500,000, which made him the company's
largest single stockholder. Now a man of great wealth, Zemurray
retired to his home in New Orleans, but as soon as the depression took
hold, he found that his wealth was shrinking alarmingly. United Fruit
stock that he had acquired dropped to a record low of 101/4 a share,
which reduced the value of his holdings by $27 million. In 1920, the
company's profit had reached a high of $44.6 million; in 1932, profits
dropped to $6.2 million.
As a large stockholder, Zemurray demanded to be heard in Boston
and after a short struggle with his fellow directors, he took over com-
plete control of Latin American activities under the impressive title
of Managing Director in Charge of Operations. United Fruit stock
climbed back to 26 in a matter of weeks on the strength of his prestige
alone. He moved down to the tropics, established personal contacts
with his old associates, gave local managers a freer hand, and over-
hauled operations all around. He had to face the serious menace of the







rapid spread of sigatoka and of other serious banana plant diseases,
which if left unchecked could have wiped out the industry.



SHIPPING, COMMUNICATIONS, AND MARKETING

IN THE EARLY DAYS, United shipped its fruit on
the small vessels of the New Orleans, Belize, Royal Mail and Central
American Steamship Company and of the Bluefields Steamship Com-
pany, which it controlled. In 1904, the Tropical Fruit Steamship
Company, Ltd., was organized and three ships commissioned for the
banana trade sailed under the British flag.
Andrew Preston created United's Great White Fleet. He saw a profit
in passenger traffic and in 1899 chartered four new ships (the Admiral
Dewey, Admiral Schley, Admiral Sampson, and the Farragut), that
originally had been built for the Navy. Each carried 53 passengers
and 35,000 bunches of bananas, which assured a fast and efficient
service from the tropics to U. S. ports. In 1903, the Venus, owned by
the Weinbergers of New Orleans and chartered by United, was rigged
up for refrigeration, and as the first successful refrigerated ship. started
a new era in ocean transportation. Preston contracted for the building
of three almost identical ships, the San Jose, Lim6n, and Esparta, the
nucleus of the White Fleet which grew to 95 ships by 1933.
Fast, refrigerated ships alone could not assure the efficient move-
ment of bananas from the tropics to the United States. The profitable
handling of bananas also involves rapid communication of directives
and information between domestic offices and the remote plantations.
Telephone and telegraph services between the United States and areas
of United's tropical operations were hopelessly inadequate. As early
as 1903, Preston and Keith became interested in radio. Pioneering in
wireless communication was expensive and not always successful.
Static and tropical storms were a constant problem. In 1904, United
was first to put commercial radio on shipboard. At last in 1910, thanks
to Preston's vision and tenacity, uninterrupted radio communication
between the United States and Central America was formally estab-
lished. For the first time commercial international broadcasting
became trustworthy. In 1913, Tropical Radio Telegraph Company
was incorporated as a subsidiary of United Fruit.
Fast transportation from the tropics and an efficient communication
system helped, but much more was needed to assure the proper mar-
keting of the fruit. The pioneer banana trade was the acme of disorder.








The almost complete lack of quality standards severely handicapped
reliability in merchandising. Not much fruit was moving to interior
markets, and an efficient and rapid distribution system had to be
established if such markets were to be adequately supplied. For this
purpose, Fruit Dispatch was organized by the Boston Fruit Company
in Boston and New York and then expanded throughout the United
States. It was maintained as a separate subsidiary by United Fruit.
Success in the banana trade depends not only on growing large and
healthy stems of bananas, but on the integrated operation of producing
the fruit in the American tropics coordinated with efficient transporta-
tion and distribution throughout the marketing areas.


THE COMPANY IN PERSPECTIVE

To EVALUATE EVENTS of half a century or more
ago in the light of present-day standards and practices is to invite
distortion and commit injustice. Past events can be better weighed
and understood in the light of their own time and scene. The days of
banana pioneering were rough times in Central American politics.
Countries and factions within countries were chronically at war with
each other. A president was no sooner inaugurated than overthrown.
Strong men took over and ran the countries as if they were their own
personal properties until they stopped a bullet or until stronger men
succeeded. International relationships reflected this dismal state of
affairs. Seen through U. S. State Department eyes, tropical America
was a convulsive, unstable region that needed watching and protec-
tion. Looked at from below, the actions and attitudes of the United
States were symbolized by the image of Uncle Sam forwarding his
self-interest with the benefit of a big stick.
The banana-producing countries were poor; few mineral resources
had been developed; they depended almost entirely on the agricul-
ture of their cool, high, inland valleys. Their coastal lowlands were
covered by virgin jungles; the few so-called "ports" that served to
maintain tenuous contact with the outside world were pestholes. No
wonder the governments were eager to attract those enterprising Amer-
icans that had found a use for their wastelands and were willing to in-
vest unheard-of amounts of dollars in clearing the jungle and building
railways for the growing of bananas. This explains why national gov-
ernments were willing to sign contracts and grant concessions on
terms that today would be considered grossly unfavorable. But, at that
time, such arrangements represented to the governments an oppor-








tunity for opening up to civilization without cost great tracts of land
that were valueless to them as they stood, and with no other hope for
increasing their value in sight. To the foreign investors, the terms did
not appear to be unreasonably cheap, in view of what they conceived
the risks to be-a judgment that has been vindicated by time. Even
from the vantage point of hindsight, it is difficult to say whether or
not, if the producing countries had set harder terms, the job would
have got done. It did, and most of the modern ports in Central
America are there because banana pioneers built them.
The early contracts made by United Fruit in tropical countries
fixed low export taxes on bananas for a period of years and granted
certain tax exemptions. Among these were exemption from import duty
on heavy equipment and materials for the construction and operation
of railroads, wharves, electric plants, communication facilities, and in
some instances exemption for materials and supplies for irrigation and
drainage works. Its contract of 1900 with Costa Rica, for example,
remitted export taxes entirely for a period of 10 years, and for the fol-
lowing 20 years set the banana export tax at 1 per stem. In 1930, this
tax was raised to 2 per stem. Its original contract in Guatemala
called for payments to the central government of $14,000 per year
plus an export tax of 10 per stem. The company, however, remained
liable for other taxes payable by local enterprises-such as property
taxes, consular fees, and import duties on all articles except those spe-
cifically exempted.
At the time United Fruit started its tropical operations, there was
no income tax either in the United States or in any of the tropical
countries. When the United States established its income tax in 1914,
the income of U. S. companies from operations abroad was made sub-
ject to income tax here with a credit for income taxes paid abroad.
When the tropical countries, in turn, began enacting income taxes, it
was found that some of the contracts under which United was operat-
ing stipulated that the company was not subject to any taxes beyond
those specifically listed. In all such cases, United Fruit amended these
contracts to accept liability to income taxes in the countries in which
it operates. Costa Rica took the initiative and deserves major credit
for bargaining through the pattern that now applies throughout the
Central American area. This change has greatly increased the revenue
of tropical countries from the operations of United Fruit. From the
detailed accounting of the company's operations in later chapters, it
will be seen that its overall tax contributions to the producing coun-
tries currently run at a level that by no stretch of the imagination could
be held to place it in a preferential position.








The very existence of special contracts between foreign corporations
and sovereign governments is something that grates upon Latin Amer-
ican sensibilities, regardless of whether or not the terms are equitable.
It is only fair to point out, however, that because of the character of
the company's operations in developing jungle areas, some form of
contract with the local government was mandatory. United had to
construct such important works as railways, wharves, electric plants,
radio stations, and other works of a similar character, which is not
permissible without government authorization in the form of a fran-
chise or contract. Furthermore, rightly or wrongly, foreign investors
generally have been reluctant to commit to relatively immature econ-
omies large amounts of capital in this class of development, without
having assurance in explicit contract terms that the burdens on its
works and operations would not be radically increased for a period of
years.
Foreign companies necessarily have to deal with existing govern-
ments. In countries in which there are frequent changes in the govern-
ing establishments and where political passions run high, it is inevi-
table that recriminations will be hurled-both for having dealt with
the deposed and for dealing with those who replace them. United Fruit,
as a foreign corporation conspicuous for its size, has been a particu-
larly eligible target for such double-barreled attacks. Another source
of fear and suspicion has been the comparatively giant size of the
company in a number of the Latin American countries in which it
operates. It frequently is baited by some of the Latin American press
which often refers to it as el pulpo (the octopus), and sometimes ac-
cuses it of installing and deposing governments, bribing officials, and
throwing its weight around in order to obtain advantages.
Although our study did not sift the detailed record of the early tur-
bulent years and therefore we are not qualified to establish the de-
gree of historic truth or falsehood behind these charges, we can say
that they have little relevance to its behavior record of recent times.
Most of the responsible public officials whom we systematically inter-
viewed spoke in generally favorable terms of the company's current
standard of conduct. In searching for an explanation of what is un-
doubtedly a lingering residue of bitter feeling in certain quarters,
it seems likely that the historic setting may have been a contributing
factor. In its formative years at the'turn of the century, United may
have been seized upon as a present and therefore tangible symbol of
widespread Latin American discontent with the U. S. government for
what was considered high-handed practice in its policy toward Latin
America.








What no one has criticized is the way the company developed the
land. Once they fell into United Fruit hands, tropical swamps and
jungles soon blossomed into immense plots of luscious green banana
plants, set out in rows, on well-drained, properly fertilized, and irri-
gated soil. Progressive agriculture practices, never heard of before,
in connection with silting, flooding, and spraying in a never-ending
fight against plant disease, produced millions of stems of the golden
fruit for export. Whole communities sprang up almost overnight;
workers came from afar attracted by the high wages-the highest
paid to rural workers in the tropics. In addition, the company had
free housing for its agricultural labor, free hospitals, schools, and
labor clubs. Extensive programs of sanitation were carried out to
eradicate tropical disease, swamps drained, sewer and potable water
systems put in. Cost of food was kept to a minimum in company com-
missaries where other goods also could be obtained at bargain prices.
In these well-organized agricultural enterprises, every eight banana
farms constituted a district, and four districts a division. Usually
each division was served by a modern port where spotlessly white,
refrigerated ships would stand at the docks loading stems of bananas.
The carefully handled bunches moved by the tens of thousands from
the farms over the extensive railroad network.
The growth of United Fruit in a period of less than 60 years has
been remarkable. It is not a particularly large corporation by stand-
ards in the United States, but it is by Central American terms of
reference. (The comparative size of its economic role in its small host
countries is detailed in Chapter VI.) For example, in Honduras, the
company's taxes, wage payments, and other expenditures are the
largest for any single economic unit in the country. At one time in
Costa Rica, the national budget was not as large as that of the com-
pany. Things that are conspicuously strange are often resented, and
for all of its long residence in the Caribbean, the United Fruit Com-
pany is marked as foreign and, therefore, strange. Things that are
large are often feared and, in the eyes of Central America, the com-
pany is a very large representative of an awesomely large neighbor
to the north. It is not surprising, then, that the image of the United
Fruit Company as reflected in Central American minds should be
partially clouded by resentment and fear. In Ecuador and Colombia,
on the other hand, where the company's roles are of comparatively
modest dimension in the overall economies, its general reputation is
blurred by few misgivings or doubts.
What is surprising is that, shadowed or serene, the images of what
the company's activities mean to the areas of its foreign operation







bear so little resemblance to what the actual record shows. Precon-
ceptions about foreign private investments generally, and about United
Fruit in particular, are so strong that people, both north and south of
the border, tend to see what they expect to see rather than what is
there.
It is probable that the United Fruit Company might have done more
than it has to present a clearer accounting of its complex operations,
and to correct inaccurate statements by others before misconceptions
had time to take root. It is certain that scholars concerned with the
development field have done far too little to provide a clearly under-
standable frame of reference through which the significant effects of
various types of development investments might be appraised in com-
parative terms.
The chapters that follow will develop such a framework for measur-
ing the particular case under study in objective terms that have gen-
eral meaning. The operations of one company will be analyzed in a
way that we hope will add significantly to an understanding of the
important field of direct private investments of international scope-
a field that has scarcely been touched by quantitative investigation.
But the findings of the particular case are of significance, too.
For the United Fruit Company is surely one of the most important
examples extant of international investment based on agriculture.
It can be viewed either as a corporate colossus of exceptional stature
and resources or as an average-sized representative of U. S. busi-
ness of international scope by looking through a single lens of nar-
row sectional perspective. It has been our endeavor to look at the
record through two-lensed spectacles. Clearly the interests of United
Fruit are rooted in both halves of the Western Hemisphere, and its
future depends upon the economic progress of both. Just as clearly,
its operations are of importance to both, though the weighting here is
significantly greater to the south than to the north.
All of us, in this hemisphere, will have to develop vision that under-
standingly spans the gap between the cultures of the two Americas,
a myopia that has persisted too long and stretched too wide in a period
of world history that is driving our interests ever closer together. We
hope and we believe that the record of the United Fruit Company is
one that will serve to cement mutual understanding and respect on the
part of those who have the patience to read our findings as set forth in
the pages that follow.








II.


The World Banana Market


T HE PRESENT STUDY is directed neither toward justification
nor criticism of the United Fruit Company's operations over the
more than half century of its history. We feel that it would be an
essentially sterile exercise to attempt to disentangle the skein of events
since 1899. Since then, a banana industry of sufficient size to assume
importance in international commerce literally has been created by
imaginative traders, with the United Fruit Company exercising a
dominant role in the process. To reconstruct and appraise the his-
torical record in a way that would allow recriminations to be bal-
anced against solid accomplishments would call for an omniscient
judgment that we do not feel we possess.
Rather, we have set ourselves the much more modest, though still
not unambitious, task of attempting to contribute toward an under-
standing of what the banana industry is, of who benefits from it and
by how much, and to appraise the record of the United Fruit Com-
pany in the industry as it operates today. Our perspective, then, is
contemporary rather than historic. Most of our field work was com-
pleted in 1956, and our major concentration is upon operations in the
year 1955, the latest year for which national accounts data for the
several banana-producing countries were available in relatively com-
plete form.
We are acutely conscious of the fact that our study deals with a
field in which the ideas of most people are colored by strongly held
preconceptions based upon an interpretation of past events rather
than upon an examination of the current record. It has seemed to us
that a useful service could be performed by describing the present
organization and procedure of banana production and marketing, by
measuring what can be measured, and by limiting subjective judg-
ments to matters not susceptible to appraisal in objective terms.
Where we are forced to make value judgments, it is our hope that at
least relative objectivity may be achieved through the circumstance
of a joint authorship that combines North American with Latin Amer-
ican outlooks.
More particularly, our interest in the United Fruit Company record
is focused upon its impact upon the economic development process








in the six Latin American republics selected for intensive study-
Guatemala, Honduras, Costa Rica, Panama, Colombia, and Ecuador.
These were singled out because their combined banana shipments rep-
resent close to 60 percent of the tonnage weight of world banana
exports, and because about 95 percent of the bananas handled by the
United Fruit Company in 1955 was produced in or purchased from
these six sources. Through this sampling procedure, we could limit
our field work to supportable dimension, and still cover the bulk of
the world banana production for export, and a preponderant portion
of United's banana procurement operations.
In concentrating upon United Fruit's contributions to economic
development in these six countries, we are guided by our conviction
that the widest possible diffusion of vigorous economic growth is
one of the most important concerns of the contemporary free world.
We are convinced that adherence to and strengthening of democratic
institutions in the less developed countries of the world depends in
large measure upon the demonstration that aspirations for general
economic progress can be realized under free institutions. And we
believe that the flow of investment capital from the capital-generating
nations of high industrial development to the capital-poor countries
is a major instrument for helping to stimulate balanced growth in
the latter.
We start with the premise that investment capital, private or public,
will not continue to flow unless it receives a return judged to be ade-
quate. Therefore we shall examine the profitability of United Fruit
investments in the six republics upon this criterion. But it seems
equally clear to us that continuing hospitality for foreign private
investment ventures cannot be expected to endure unless there is clear
evidence that it is contributing to the development of the host nations
to a degree that would not be realizable without it. Accordingly, we
shall examine the United Fruit record to see whether or not its opera-
tions present convincing evidence of satisfactory performance upon
this score.
Before we embark upon such an examination of the operations of
the company, it is requisite that we establish a frame of reference,
by presenting a picture of the world banana market as a whole.


WORLD BANANA PRODUCTION AND CONSUMPTION

THE FOOD AND AGRICULTURE ORGANIZATION of the
United Nations estimates world banana production in 1955 at 11.6







I I *A 2A


I I I I I --I,


World Banana Production is Primarily Restricted to the Tropics


Chart II









million metric tons or about 25.7 billion pounds. It apportions about
46 percent of this to South America, 23 percent to Central America,
23 percent to Asia, 6.5 percent to Africa', and 1.5 percent to Oceania.
As such, the banana crop is the fourth largest of the world's reported
fruit crops, exceeded in tonnage production only by grapes (88.0 bil-
lion pounds), by citrus fruit (39.2 billion pounds), and by apples (29.1
billion pounds). If the portion of the grape crop produced for making
wine (71.4 billion pounds) rather than for consumption as fruit is
deducted, and that of apples produced for cider (8.8 billion pounds),
bananas displace both grapes and apples and are second only to citrus
among the world's fruit crops consumed directly as food. Excluding
grapes, citrus, and apples, the tonnage of bananas exceeds by a con-
siderable margin the combined weight of the remaining important
fruit crops of the world-pears, pineapples, dates, and figs (17.2 bil-
lion pounds, combined, for 1955).


Table 1 1 1955 World Banana Production


Million % of
Producing area Pounds total

Central America..................................... 5,950 23.2
South America ............... .................... 11,700 45.6
Asia............................................... 5,950 23.2
Africa............................................. 1,650 6.4
Oceania .... ....................................... 400 1.6
World total ....................................... 26,650 100.0

Source: Agricultural and Economic Statistics, monthly bulletin of FAO, July-
August 1957. (Corrected by assigning Canary Island production to Africa
rather than to Europe.)

Table 1 covers a world population for 1955 estimated at 2,490 mil-
lion persons. On this basis, the average consumption of bananas by
each man, woman, and child was 10.3 pounds in 1955 on a stem-weight
basis.2 Only the subcategory of citrus fruits, comprising oranges, tan-

'In the FAO accounting the banana production of the Canary Islands is attributed
to Spain. It has seemed to us more appropriate to attribute this banana production
to Africa since the Canaries, while a Spanish possession, lie off the African Coast
well south of the European boundaries.
'The actual weight of bananas reaching consumers averages about 15 percent
less, and the wastage factor on other fruits varies. Throughout this chapter pro-
duction weights are used for comparisons given.








gerines, and clementines shows a larger per capital consumption, 12.6
pounds; and only apples, 8.1 pounds, and grapes, 6.6 pounds, were
serious rivals of the banana among the world's consumption fruits.
It is, of course, obvious that such blanket averages have little
relationship to the actual pattern of fruit consumption by the world's
populace. Banana production is restricted to the tropics and more
particularly to humid tropic areas. For successful growth, most
varieties require a temperature range between 550 and 1050 F., and
almost all suffer severe damage when temperatures drop below 50
to 52* F. Since the banana cannot be grown as a seasonal crop-its
cycle of development ranges from 12 to 15 months from planting to
harvest-its range of cultivation is restricted to the zones in which
year-round temperatures are within these extremes. It is further
restricted to areas that can provide its exceptionally high moisture
requirements (four to five inches monthly or 60 inches annually as a
minimum) through heavy and evenly spaced rainfall or generous
water supplies for irrigation.
The banana thrives best in alluvial, well-drained soils, though it
will tolerate clay soils of friable consistency. Since its stalk is merely
a tightly rolled cylinder of leaf sheaves, it is particularly vulnerable
to blowdowns or uprooting by floods when heavy with fruit. Even
relatively mild winds can seriously injure the fruit by shredding the
protecting leaf structure upon which healthy fruit production depends.
The areas that can grow bananas successfully upon a commercial basis
must therefore provide the necessary environmental factors of tem-
perature, moisture, soil characteristics, and freedom from damaging
wind and flood recurrence.
In general, the areas that can provide a hospitable environment for
banana culture are found in low-lying, high-precipitation lands be-
tween 200 North and 240 South latitude, with the extremes set by
240 North and 300 South latitude. The range of actual banana pro-
duction is indicated by the areas listed in Table 1. The major Latin
American areas in which bananas are produced for export are shown
in the map on page ii.
It might be assumed that the areas of important production would
be the areas of major consumption. Yet, as indicated in Table 2, some of
the broad areas of banana production are heavy banana consumers
as well, while others are not. On a per capital basis, the highest level
of consumption in 1955 was in South America, 80 pounds per capital;
while Central America (including Mexico and islands of the West
Atlantic) consumed about 52 pounds per capital; Asia less than 7
pounds; Africa about 1.5 pounds; and Oceania, 27 pounds. In the








United States and Canada combined consumption of bananas was 20
pounds per capital, and for Europe it was 9 pounds-an average of
almost 13.5 pounds per capital for the two combined.



Banana Production
Table 2 and Consumption
(Stem-weight basis)

Production Consumption"

Area Billion lbs. Percent Billion lbs Percent

Central America ............... 6.0 23 3.0 12
South America ................. 11.7 46 9.9 38
Asia.......................... 6.0 23 6.0 23
Africa ........................ 1.6 6 0.3 1
Europe........................ 2.5 10
Oceania....................... 0.4 2 0.4 2
North America ................. 3.6 14
Total....................... 25.6 100 25.6 100

SDerived by subtracting exports and adding imports as reported by the U. S.
Department of Agriculture from FAO data on production. Again, Canary
Island production has been assigned to Africa rather than Europe.


Thus, up to the present time, it is fair to say that bananas have
assumed as important a place in the average diet in the two major
industrialized areas of the temperate zone as for the vast majority
of the people living in what we regard as tropical areas. In India,
for example, the apparent annual per capital consumption of bananas
is only about 11 pounds. Since there is so little inter-country trade
in bananas within the tropic zones, it follows that there is an extraor-
dinarily high annual per capital consumption in some of the major
producing countries, while in other tropical countries the consumption
rate of bananas is very low. For 1955, on the basis of reported pro-
duction minus export figures, Brazilians consumed something like
150 pounds per capital; Costa Ricans, 350 pounds; Panamanians, 380
pounds; and Ecuadorians a fantastic 500 to 600 pounds per capital.
Even allowing for apparent inflation in some of the reported produc-
tion figures and for the known fact that there is considerable feeding
of bananas to livestock in some of these countries, the human con-
sumption of bananas where they are grown in profusion clearly reaches
heroic proportions.







INTERNATIONAL TRADE IN BANANAS


OF THE ESTIMATED 25.7 billion pounds of bananas
produced for commercial sale in 1955, something over 25 percent was
exported in international trade.
The breakdown by areas of export and import, given in the Appendix
Table, is adapted from figures compiled by the U. S. Department of
Agriculture. We have adjusted the North American import weights
slightly upward upon the basis of evidence that the official estimates
of the Department of Agriculture do not give sufficient allowance to
the increases in average stem weight in recent years. This has the
effect of raising the world total of 1955 imports from the Department's
estimate of about 6.6 billion to 6.7 billion pounds. It is probable
that, on the export side, there is a comparable degree of understate-
ment of weights for fruit going to North America but we have not
attempted to make this adjustment in the data presented. The dis-
crepancy is not large enough to alter substantially the proportionate
shipments as reported by broad area. Reported import and export
figures never are in exact balance because of inevitable inaccuracies
in accounting and because, due to time consumed in ocean transport,
there are always some shipments credited as exports at the end of
one year that only show up as imports when delivered at the begin-
ning of the following year.
On the export side, the data show that almost 80 percent of all
reported banana exports in 1955 were shipped from Middle America,
including Mexico and the islands of the West Atlantic, and from the
three South American banana exporters-Ecuador, Colombia, and
Brazil. Africa accounted for about 20 percent; Asia (entirely from
Taiwan) for a bit more than 1 percent; and Oceania for less than 1
percent. It is clear, then, that Latin America is the dominant banana-
exporting area of the world, and that the West Coast of Africa (in
which the tabulation includes the Canary Islands) is the only other
major area that plays a significant exporting role, and that a relatively
minor one, in the overall picture.
On the import side, North America (United States and Canada)
and Western Europe, neither of which produces any bananas on a
commercial scale, are the outlets for over 90 percent of world banana
trade. Argentina, Chile, and Uruguay are the principal Latin Amer-
ican importers, with Brazil and Ecuador as sources of supply. The
breakdown of world banana imports for 1955 is shown below.
Of the North American imports, about 92 percent went to the
United States and a little more than 8 percent to Canada, most of





Chart III I I- I I I I I I
North America and Europe Are Major Banana Importers ...
Central and South America Are Chief Exporters






,.' /ASIA








the latter transshipped in bond from U. S. ports. Of the three South
American importing countries, Argentina takes more than 80 percent
of the total. African imports are divided among the Union of South
Africa, Algeria, French Morocco, Southern Rhodesia, and Tunisia in
the order of their importance as banana importers. Japan is the
only listed Asian importer, with about 54 million pounds imported in
1955; and New Zealand the sole importer in Oceania at a slightly
lower level than Japan.


Table 3 World Imports
of Bananas, 1955

Billion lbs. % of world
Importing area imported imports

United States and Canada......................... 3.60 53.8
Europe ................ .......................... 2.47 36.9
South America .................................. .43 6.4
Africa, Asia, Oceania............................. .20 2.9
Total .......................................... 6.70 100.0


It now can be seen that this remarkable tropical fruit, originating
in the Far East and for thousands of years rarely even listed in the
learned chronicles of the West, has undergone a dramatic meta-
morphosis-largely within the last century. Almost in the manner
of historic glacial drifts, it has crept from its original domicile in the
East into western zones, until today of all bananas grown, the roots
of 70 percent thrust down in the soil of the Western Hemisphere.
Another 5 percent grows along the African shores that rim the Atlan-
tic. Considered in marketing terms, within the short span of the
past 60 years this exotic fruit has burst the containing bounds of its
central tropic environment, and has moved northward, and to a
lesser extent to the south, to find a place in the fruit bowls of tem-
perate zone tables from the Yukon to California, from Scandinavia
to Austria and Italy, and from Chile to Uruguay.
Agriculturally, bananas are chained to the tropics. Commercially,
about one-fourth of all that are produced find a market outside the
temperature zones in which they thrive. And nine-tenths of this
fourth find their way to the industrial heart of the western world-
to North America and Western Europe, whose inhabitants a century
ago scarcely knew what a banana was, except for the scholarly few









who read the works of Pliny the Elder or of the Swedish botanist
Linnaeus. An important part of our story is concerned with how this
remarkable change came to be. It is the more remarkable in that it is
a phenomenon that has occurred on a comparable scale with respect to
no other delicately perishable, definitely tropical fruit.
The general picture of major world fruit exports, presented in
Table 4 as the average exports in metric tons, 1951-53, is adapted
from a study by Erik Mortenson, entitled "Trends in Production and
Consumption of Fruit and Vegetables," in the September 1955 issue
of the FAO publication, Agricultural Economics and Statistics. The


Table 4 |


Major World
Fruit Exports


Type of fruit


Export 1951-
53 average
(1,000 metric
tons)


% of
fresh fruit


%of
total


Fresh fruit:
Bananas ........................... 2,552 40.7 36.4
Oranges and tangerines .............. 2,060 32.8 29.4
Lemons and limes ................... 261 4.2 3.7
Grapefruit. ......................... 127 2.0 1.8
Apples, table. ....................... 714 11.4 10.2
Pears, table ......................... 186 3.0 2.7
Grapes, tableb.................. ...... 218 3.5 3.1
Pineapple.......................... 154 2.4 2.2
Total.............................. 6,272 100.0 89.5
Dried fruit:
D ates .............................. 343 4.9
Raisinsd. ........................... 285 4.0
Prunes" ............................ 49 0.7
Dried figs .......................... 48 0.7
Other dried fruit'..... ...... .... ...... 12 0.2
Total dried fruit ..................... 737 10.5
Total all fruit....................... 7,009 100.0

a Excluding China and the U.S.S.R. b Grapes sold for fresh consumption.
Including fresh equivalent of canned pineapple. d Including currants.
Excluding Bulgaria and Romania. Apricots, peaches, apples, and pears.

table, which was evidently compiled on the basis of official FAO
trade statistics, would appear to give a reasonable basis for comparing
the relative magnitudes of the reported trade in the several fruits that
bulk large in international commerce.








On this accounting, the trade in bananas for 1951-53 accounted
for over 36 percent of all world commerce in fruit and for more than
40 percent of world trade in fresh fruits. Oranges and tangerines
make up the only other fruit category that is of even proximate im-
portance as a world trade item upon a weight basis, and the amount
of bananas traded is about 25 percent larger. Citrus fruit, however,
hardly classifies as a tropical fruit. Again using FAO figures, the
1954 record shows that almost two-thirds of commercially produced
oranges and tangerines were grown in temperate zone areas, more
than 50 percent in the United States and Western Europe alone. Tem-
perate zone countries furnish 70 percent of all exports. Over 85 per-
cent of commercial grapefruit culture is restricted to the United States,
and three-quarters of all commercially grown lemons and limes
are produced in the United States, Europe, Japan, Argentina, and
Uruguay. Aside from the fact that citrus fruit is far easier to ship
than bananas, the striking fact is that all citrus shipments from
tropical areas amount to only about one-quarter, by weight, of banana
shipments, all of which originate in tropical areas.
Pineapples qualify as a tropical fruit crop, but the FOA figures
show that only about 10 percent of total production is exported in
world trade, and the great bulk of this was shipped in canned rather
than fresh fruit form. Canned pineapples are included in the fresh
fruit category upon the basis of the equivalent fresh fruit content.
Dates are preponderantly a tropical area crop, and about one-fifth
of reported production is exported internationally. But the big
export is in dry rather than fresh fruit form and, in 1954, world trade
in dates amounted to less than one-ninth that of bananas on a tonnage
basis. Figs are the other entry on the list that in most people's minds
would fall into the classification of tropical fruit. Actually, FAO
figures assign considerably over half of commercial fig culture to
Western Europe and the United States, and total fig exports, again
with shipments preponderantly in dried form, account for less than
1 percent of world fruit trade.
How did it come about that the banana (which is technically a
herbaceous vegetable) should have become the one tropical "fruit"
that has become a major item in the diet of North Americans and
Europeans? Why the banana among the literally scores of fruits
that are native to the tropics? Why not the mangosteen of which
poet-gourmets have written in ecstatic terms, or the luscious mango,
the peptic papaya, or the delicately flavored naranjilla? It is cer-
tainly not because of special qualities that make the banana easy
to grow or to transport.







Chart IV
World Trade in Bananas Averages 40%
of World Trade in Fresh Fruit






40% bananas









39% citrus fruits


apples


other table fruit







We already have pointed out that the banana is singularly de-
manding with respect to the temperature, soil, precipitation, drain-
age, and wind conditions of its environment. The areas that can offer
an even proximate optimum of all of these factors are relatively
limited. As we shall see, bananas are subject to blights of devastating
intensity for which it is tantalizingly difficult and formidably expen-
sive to find adequate controls. This is virtually a seedless plant,
with new cultivations established by planting large pseudobulbs or
rhizomes, and there is no wood stalk to permit grafting. Thus, there
has been no success to date in developing, through the genetic
approach, man-made strains that would combine the disease-resistant
characteristics of certain varieties with the better qualities for han-
dling and ripening inherent in others that are vulnerable to disease.
In addition to disease blights, insect pests that destroy plant and
fruit abound wherever bananas are grown.
The banana is a bulky fruit, shipped attached to a stem that
accounts for about 7 to 8 percent of worthless weight, from which the
fruit fingers protrude in a fashion that invites crushing and bruising
under anything less than the tenderest handling. It must be cut in
a green state, before full maturity-how long before depends upon the
length of haulage to ultimate market-and the permissible time span
between cutting and eating by the consumer is limited to not more
than 21 to 25 days. Yet, bananas regularly travel from 2,000 to
6,000 miles by water and up to 1,500 additional miles by rail and
truck to reach their ultimate markets. Any accumulation of dust or
gravel before or during transit, any roughness or cramping in stowing
or carriage, even fingering by customers on the retailer's shelves shows
up in marring discoloration of the delicate, golden skin of the ripened
fruit and depreciates its marketability. Strict temperature controls
have to be maintained from the time of loading aboard ship to delivery
to retailer, and the latter is under strong compulsion to sell his fruit
to customers within 24 hours after receipt.
Every stage, from plantation to retail sale, requires meticulous
planning and coordination, upon a time schedule far more precise
than pertains to any other major commodity of world trade. Supply
in every market must be geared to a demand that, in turn, is affected
by the availabilities of competitive fruits. The cutting by maturity
grade, the transport to shipping port, the stowing, the ocean carriage,
the unloading, the sorting (by size, condition, and degree of ripeness),
the shipment by truck or rail to distribution centers, the operations
in the jobbers' ripening rooms, the trucking to retailers, and the sale
to customers-every one of these stages is a tailored process with








minimal tolerances for departure from a schedule that has to be
calculated from its beginning. Even small divergences from the
rigid timetable and handling requirements result in losses; whereas
major departures would spell a total loss for the shipments in-
volved.
If Captain Lorenzo Baker, Minor Keith, Thomas Hart, Andrew
Preston, and even the imaginative Sam Zemurray had been able to
visualize the complications that were to beset the production and
marketing of bananas as a large-scale item in world trade, it is im-
probable that they would have had the fortitude to launch and expand
the United Fruit Company. But if they had not made the start, it
is probable that this thoroughly implausible commodity-implausible
in the sense of its inherent lack of adaptability to the hazards of world
marketing-would have bulked no larger in temperate zone food
economies than do pineapples, or figs, or dates today. Happily, for
the North American and European consumer, and for the Latin Amer-
ican banana-producing economies as well, the vision of these pioneers
was too limited to foresee the involvements or, at least, too sanguine
to sense the formidable impediments that were to arise. So they
built the foundations of today's giant trade, largely unaware of the
whirling windmill blades before which even a Don Quixote might
have quailed.


THE VALUATION OF THE WORLD BANANA MARKET

THE MONEY VALUE OF BANANAS that enter into
world trade, to the best of our knowledge, has had no systematic
study. Values are commonly attributed to exports on an f.o.b. basis,
and to imports on a c.i.f. basis. Such reporting is generally made by
applying to the number of stems involved in either case a formula
price that usually grossly understates the prices at which sales are
actually made. Accordingly, the reported export valuation for a
given country as shown in its annual trade account figures often rep-
resents 50 percent, or even less, of what it actually receives upon its
adjusted accounts. The International Monetary Fund, in its work
of keeping track of international balance of payment flows, has been
forced to make radical adjustments in reported banana trade figures
to avoid untenably large distortions in the accounts of the major
banana exporting countries. But the Fund only makes its adjust-
ments for those countries in which banana exports account for a
major portion of foreign exchange revenues.









The authors of this study, in attempting to put valuation figures
on the world banana trade as a whole, have started with the North
American market about which a good deal is known and which repre-
sented 54 percent of the world's total banana imports in 1955. We
have less complete data on the European marketing structure, which
represented 37 percent of 1955 imports by weight, but there is suf-
ficient evidence to indicate that an extrapolation of the American
cost structure to that segment will not give any upward bias to the
whole. The costs per pound of European bananas are consistently
higher from original purchase in the producing areas on through the
transportation and distribution chain. The remaining segment of
world trade in bananas is too small to importantly distort the whole
structure.
Our estimating base, combining relatively complete North American
marketing data with the very detailed information made available by
the United Fruit Company on all phases of its operations, is indicated
in Table 5.

I United Fruit's Share
Table 5 of the World Banana Market
1955

United Fruit Competitors Total

Importing area Million Million Million Million Million Million
stems pounds stems pounds stems pounds

United States and
Canada............. 29.5 2,333 20.4a 1,271b 49.9 3,604&
Europe............... 7.1a 339 62.9a 2,129b 70.0 2,468d
South America........ 8.60 429 8.6e 429d
Africa, Asia, Oceania... 3.9e 196 3.9e 196d
Total................. 36.6 2,672 95.8 4,025 132.4 6,697

Estimated.
b Residual, i.e., total minus United Fruit's share.
5.5 million stems from Central America and 1.6 million from the Cameroons.
d From U. S. Department of Agriculture count bunch data.
S50-pound count bunches.

On a stem basis, the United Fruit Company accounted for 59 per-
cent of North American imports, for 10 percent of European and for
28 percent of the world total. But on a weight basis-and bananas
are sold by weight in markets of distribution-there are indications
that the percentages of United Fruit's shipments are somewhat higher








Chart V

United Fruit's Share of the
World Banana Market


Millions of Lbs. imported*


U. S.C
&
CANADA


Competitors' Share


*ESTIMATED


in each case, since the stem weight of the company's shipments gen-
erally runs above market averages.
Our specific data gleaned from the United Fruit Company's records
furnished a far more precise base for the portion of the field that it
covered than anything available in published studies. To this we
added everything that could be furnished by public officials and pri-
vate banana operators in the six countries in which we made detailed
field surveys. As has been noted, these six, between them, produced
about 60 percent of the bananas shipped in international trade in 1955.
In sum, while our global estimates have been pieced together from
these sources, and then blown up to represent the whole market as
revealed by world trade and production statistics, we believe that
our findings reasonably represent the general magnitudes of a field in
which there has been no previous basis for any general appraisal.
In Chapter III, we shall present in some detail the procedures








through which we arrived at an estimate of how much consumers
spend for bananas in the United States and Canada and how the
consumer's dollar is broken down in this market to cover the costs
and profits of the several services involved in making them available
from the time when they are put aboard ships to the time when they
are slipped into the housewife's shopping bag. In Chapter IV, we
shall trace the consumer's dollar back through its apportionment
among the several operations required to produce the fruit and arrange
for stowage aboard ship for consignment to export markets, leaning
heavily on data gleaned from our six-country survey. Here, how-
ever, it appears appropriate to anticipate a few of the major findings
presented in these forthcoming chapters, in order to round out our
world market picture by assigning money values to the tonnage data
given above.
It is our finding that, in 1955, North American consumers spent
about $527 million for bananas-3,063 million pounds consumption
weight; 3,604 million pounds stem weight-at an average retail price
of 17.20 per pound. We know that Europeans paid a somewhat higher
price per pound than Americans, and that other importing areas paid
somewhat less. Taking the North American price as average, and
knowing that this area accounted for 54 percent of all imports, we can
estimate the world retail expenditure for imported bananas at approx-
imately $976 million.
We have seen earlier that about three-quarters of the reported
world commercial production of bananas is consumed in the coun-
tries where they are produced. We have no overall reporting of
what consumers paid for bananas in the producing countries, but we
have some data on this for our six-country sample. In these coun-
tries, bananas sold on the local market for from one-fifth'to one-
tenth of what they brought when sold as export stems. It is certainly
conservative to estimate that the totality of fruit grown for local
markets throughout the world, although almost three times as great
in quantity, has less than one-half and perhaps not more than a third
the value of that committed to export markets. It is probably safe to
estimate the total retail value of the 1955 world's commercial banana
crop at between $1.3 billion and $1.5 billion.
We are able to make a reasonably proximate estimate of the value
in 1955 of world banana exports f.o.b. vessels at ports of embarkation.
On the basis of our North American consumer dollar analysis that
follows, it will be seen that about 270 out of each such dollar spent
on bananas represents the return actually realized by producing coun-
tries. Hence, of the estimated $976 million sales at retail, $263








million can be assigned as the share of the producing countries from
their banana exports. This general dimension will be confirmed in
Chapter IV as well, where it will be shown that our six countries
actually realized about $157 million from their banana sales in 1955-
which accords with their 60 percent share in the total tonnage of that
year's world banana shipments.








III.


The Consumer's Banana Dollar

in the United States and Canada



A S OF MID-1955, there were just under 181 million inhabitants in
the United States and Canada combined. The peoples of these two
countries consumed a trifle under 300 billion pounds of food in that
year-or about 1,660 pounds per capital. Banana consumption for
the area totaled 3,063 million pounds1 or 17 pounds2 per capital of
population. Thus, upon a weight basis, the banana, an exotic fruit
every pound of which had to be imported from tropical areas, ac-
counted for a full 1 percent of North American diets.
It would be reasonable to expect that this food item, with its in-
herent perishability and its necessarily long carriage by sea, rail,
and truck under constant temperature controls, would qualify as a
luxury food product of relatively high price. This is far from being
the case. The total combined food bill for the United States and
Canada in 1955 is estimated at over $60 billion. The banana bill
of North American consumers for the same year was about $527
million. The average price of 17.20 for bananas was well under the
average of 200 per pound paid for food of all classes.
This relatively low retail cost has put bananas financially within
the reach of practically all North American consumers. These con-
sumers can afford to include more fruit in their diets than can be
afforded in most parts of the world and the banana has fitted well
into the assortment they choose to eat. Not only is it palatable to
most tastes, but it also has characteristics of flavor and texture
sufficiently different from other fruits to enable it to contribute sig-
nificantly to the variety in eating satisfactions which people naturally
desire. When we add to this the fact that the banana is nutritional,
we can begin to understand how this implausible commodity has come
to occupy the place it does in the food consumption pattern of this
continent.

SAlthough 3,604 million pounds was the stem weight of imported bananas, the
actual weight of fruit consumed is about 15 percent less.
2 This is equivalent to about 20 pounds per capital on a stem-weight basis.








In the market lists for low-cost, moderate-cost, and liberal meals
drawn up by the Bureau of Human Nutrition and Home Economics
of the U. S. Department of Agriculture bananas are specifically in-
cluded in the category of "other vegetables and fruits." This classifica-
tion reflects the varied nutrient content of this fruit as distinguished
from the citrus fruits which are recommended specifically for their high
content of Vitamin C. With respect to the 10 other nutrients con-
sidered important enough by the Bureau to be itemized in its pub-
lished tables bananas outrank oranges in all except two. In a list of
20 fruits they rank second in carbohydrates, third in thiamine, fourth
in protein, fifth in riboflavin, sixth in niacin, seventh in Vitamin A,
eighth in phosphorus, and ninth in iron. In terms of food energy
they rank fourth in the list of 20, being surpassed only by avacados,
grapes, and blueberries. As purchased by the housewife, each pound
has an energy content of 264 calories, which compares with 300 in
dressed fish, 312 in fresh whole milk, and 325 in potatoes. Because
of their high content of sugar, vitamins, and minerals and because
they are easily digestible, bananas are recommended for children and
are popular with this important group of consumers. They satisfy
hunger remarkably well in spite of their low fat content and have
proved an acceptable element in the diets of those who have to limit
their overall intake of food. They are convenient for inclusion in
lunch-box meals and can be eaten sanitarily regardless of the sur-
roundings or the cleanliness of the eater's hands.
Nutritional research has demonstrated that the inclusion of bananas
in the diets of normal children stimulates the retention of mineral
elements contained in the various foods they eat and tends to increase
their growth rates. The giving of bananas as the first solid food of
all infants entering the New York Foundling Hospital was made
routine practice more than 25 years ago. For all who suffer from
celiac disease the banana is literally a necessity of life. The digestive
systems of those afflicted with this disease cannot use carbohydrates
obtained from cereals, sugars, and potatoes, since such foods produce
diarrhea. Fortunately, however, carbohydrates in the form of ripe
bananas appear to be tolerated perfectly and thus make possible the
eventual cure of the trouble in almost all cases. Although other
fruits may be substituted before the cure is completed, the banana
has been found to be the most satisfactory and the only safe food for
use in the early stages of the treatment now customarily prescribed
for this disease.
It is the purpose of the present chapter to explain the genuinely
extraordinary phenomenon of how this foreign-produced food, which








now accounts for almost 10 percent of all fruit-fresh, processed,
dried, and frozen-eaten in North America, comes into our market and
to describe and put a price tag on the various stages of its transport
and merchandising.
We start with the bananas loaded aboard ship in the six countries
in which we made a first-hand study of production methods. In 1955,
these countries shipped about 4 billion pounds, the equivalent of
approximately 3.4 billion pounds of retailed fruit after allowing for
15 percent shrinkage in weight of stems and damaged fruit discarded
in the distribution process. As we shall see in the following chapter,
the six countries realized about $157 million for their 1955 banana
shipments, or 3.930 per pound for bananas on the stem and 4.620
per pound of merchantable bananas at retail level.


OCEAN TRANSPORTATION

OUR PRESENT STARTING POINT, then, is the banana
fleet, with hatches battened down upon a cargo of bananas owned by
North American distributors. In 1955, the United Fruit Company,
the major North American distributor, operated a fleet of 62 vessels.
Fifty of these were fully refrigerated fruit carriers, ranging from about
3,000 to over 7,000 gross tons, which handled all but about 120 million
pounds (sold directly at port to European importers supplying their
own shipping) of United's 2,672 million pounds of banana consign-
ments. During 1955, this fleet completed 982 voyages of about 5.2
million nautical miles, the great bulk of which was determined by
the demands of the company's banana distribution. About 90 percent
of all United's banana consignments went to the North American
market, and since 95 percent of all its banana shipments originated
in our six-country sample, we can derive from a study of its shipping
operations a representative picture of the ocean link in the chain of
banana distribution between areas of supply and the U. S.-Canadian
market.
At last count, there were over 160 importers of bananas into the
United States, but most of them are quite small. United Fruit im-
ported about 59 percent of the stems entering the North American
market. As we have noted, its percentage on a weight basis was
probably somewhat higher, although there is no accurate record of
the weight of its competitors' imports. Importers normally purchase
the fruit in the countries where it is produced or themselves produce
an important share of the stems imported-as is the case with United








and its principal competitor in the Western Hemisphere, the Standard
Fruit and Steamship Company. United Fruit, in 1955, produced on
its own plantations about 70 percent of its North American shipments,
while Standard depended to a somewhat larger extent on purchased
fruit.
From about 1875 to 1900, bananas traveled as deck cargo on sailing
vessels and steamships from Central America and the West Indies into
U. S. ports. Gradually, ventilated cargo ships were introduced, with
simple equipment to keep a constant flow of air over bananas stowed
in closed holds. Beginning in the early 1900's the refrigerator ship or
"reefer" has increasingly taken over, until today this type of vessel
carries most bananas shipped in the North American and European
trades, although a few "ventilators" are still in use. The modern
banana reefer is a highly specialized instrument devised for this par-
ticular use, although it can be, and is sometimes, used for shipping
other fruits, dairy products, and meat products.
Bananas are always loaded green-the degree of maturity deter-
mined by the length of the voyage envisaged-but the ripening process
proceeds inexorably day by day. In the course of ripening, a great
amount of heat is generated as well as carbon dioxide, ethylene, and
other gases. Both heat and ethylene gas hasten the ripening process
and they must be dispelled or the cargo will be overly ripe before
reaching its destination. The reefer is equipped to exhaust the gases
in each stowage compartment of every carrying hold. It must have
ample refrigerating capacity to precool each compartment to a suf-
ficiently low temperature to rapidly lower the pulp temperature of
fruit loaded in tropic heat to 53 or 540 F. And the refrigeration must
be sufficiently flexible to keep the subsequent temperatures in each
compartment at between 550 and 60* F. (depending upon the variety
and maturity of the fruit carried) for the duration of the voyage.
Obviously, heating facilities are required also as cargoes move into
northern winter climates. A given ship may have from as few as
six to as many as 14 compartments and up to nine or 10 separate
cooler units. The space served by an individual refrigerating unit
must be completely insulated to minimize the damage done if one
or more coolers should break down.
In addition to the ventilating and cooling systems, banana ships
require other special fittings. The floor of each stowage deck is
covered with a wooden grating that allows constant circulation of air,
under as well as over and through the stowed fruit. Each compart-
ment is subdivided by movable, vertical bin boards to prevent the
cargo from damage through shifting caused by the roll or pitch of








the ship in heavy seas. Within each bin, the banana stems are
carefully stowed by highly skilled men who must gauge with fine
precision the degree of compactness that will prevent shifting or
rubbing without bruising or crushing the fruit fingers. The bottom
layer of stems is always stowed vertically, butt end down, with the
second tier either flat or vertical with either butt or tip end down,
and if there is a third tier, it is stowed flat on top of the vertical tiers.
The hatches of banana ships must be ample to accommodate the
automatic loading and discharging elevators that are used in efficient
ports to hasten these processes. It is of course important to ship-use
efficiency to shorten the time that the ship is held at dockside, but
even more urgent is the necessity for moving the bananas on a minimal
time schedule. For in the banana trade, as in few others, time is
money. Every hour of schedule delay means increased loss through
spoilage; every hour that must be added to the planned scheduling
means that the fruit must be cut at a less mature stage and therefore
entails loss in the weight of merchantable fruit produced or purchased.
The importer has three choices. He can own and operate his own
reefer fleet; he can charter his required tonnage of refrigerator ships
from independent ship operators, thus shifting a heavy capital invest-
ment requirement to other shoulders; or he can combine the two
alternatives. In practice, all three methods are in use in both the
North American and the European banana trades. Banana shipping
costs, over a period of time, have varied little among the three pro-
cedures. But since reefers, with slight shift-over costs, can be used
for other fresh produce moving in world trade, the demand for banana
space may be greater or less than the available reefer supply at any
given time. Chartering rates move up and down accordingly, and
the banana importer may or may not be able to arrange charters at a
tenable price when competitive demand for reefers is heavy. Direct
ownership of a major portion of his reefer requirements eliminates
these short-run risks. Accordingly, United, Standard, and others of
the larger importers have found it desirable to become ship proprietors
and operators on a considerable scale.
For several reasons it is not practical to describe the banana move-
ment to North America in 1955 with precise particularity. The ships
that serviced the North American banana trade that year varied
widely in size, speed, and operating efficiency; there were numerous
new entries and withdrawals during the year; and we have an accurate
record only for United Fruit shipping operations. From the United
record, however, we can construct a hypothetical picture that gives
an adequate notion of the entire movement.








North American imports in 1955 amounted to just about 50 million
stems. From United Fruit experience in this trade, we find that the
average round-trip voyage (for 1953 and 1955) was 4,147 miles.
Therefore, although bananas are carried for only half of the round-
trip distance, it is proper to compute the stem mileage requirements at
4,147 x 50 million stems, a total of 207,350 million stem miles.
An ideal fleet for this carriage would be apportioned between ships
ranging from about 3,700 gross tons to about 8,000 gross tons, with
actual maintained speeds of from under 15 knots per hour to well over
17 (360 to 420 miles per 24-hour day), and carrying anywhere from
27,000 to perhaps 61,000 stems on each voyage. Such flexibility in
the size, speed, and carrying capacity of the banana fleet is dictated
by the wide variations in the length of voyages between the several
major embarkation and debarkation ports serving North American
markets. They range from a little over 1,800 nautical miles for the
round trip between Honduras and Mobile or New Orleans to something
over 7,500 nautical miles between the west coasts of Costa Rica or
Panama and Seattle. Also, flexibility is required because there is a
great deal of variation in the quantities of fruit available for shipment
between different producing centers or even in the receiving capacity
of a given debarkation port from time to time. Experience shows that,
allowing for loading and discharge time in ports and layups for repairs
or cargo inavailability, 255 days per year of actual steaming is a
reasonable average for each ship.
On this basis, the shipping complement needed to accommodate
North American banana imports from Latin American producing
areas would be represented by 43 modern reefer ships, averaging about
5,800 gross tons, maintaining average speeds of 16.5 miles per hour
on both northern and southern voyages, and averaging 255 sea-days
in the year, with each carrying 47,755 stems per voyage upon 24.35
round-trip voyages. Performance standards of this hypothetical, uni-
form fleet may be set forth in the following terms:

(a) 16.5 miles per hour x 24 hours = 396 miles per ship per day.
(b) 255 steaming days x 396 miles = 100,980 miles per ship
per year.
(c) 43 ships x 100,980 miles = 4,342,000 fleet miles per year.
(d) 4,342,000 fleet miles 4,147 miles per round trip = 1,047
voyages.
(e) 50,000,000 stems -- 1,047 voyages = 47,755 stems per voyage.








(f) 100,980 miles per ship per year 4,147 miles per voy-
age = 24.35 round trips per ship per year.
(g) 255 steaming days 24.35 round trips = a shade less than
10.5 days of running time per voyage.
(h) of 10.5 days 5.25 days average running time each way.

Again, basing our estimates upon actual experience in banana ship
acquisitions, the current reproduction cost of efficient banana reefers-
in European yards where construction costs are markedly lower than
in the United States-works out to $3,667 for each 1,000 stems of
carriage in the North American trade. A fleet capable of carrying
50 million stems would cost something over $183 million at current
reproduction costs (50,000 x $3,667 = $183,350,000). Actually, since
the working components of a fleet are continuously being retired and
replaced, with depreciation being taken on allowable estimates of the
degree of obsolescence accrued to each unit, it is appropriate to assume
that the effective valuation of a going fleet at any given time would
be about half of the current reproduction cost-or between $91 and
$92 million (1/2 of $183,350,000 = $91,675,000).
We are able to check this estimate against the actual accounting
figures of the United Fruit Company's fleet. Since this company carried
59 percent of the North American stem imports in 1955, the theoretical
value of its fleet on this trade would be about $54.5 million. The com-
pany's entire fleet, at the end of 1955, had a book value of $52.7 mil-
lion, although some slight deduction should be made from this to cover
the 8 percent of its banana carriage for which the company's own
fleet serviced the European trade, and for a small proportion of fleet
investment in other than fruit-carrying vessels. However, the major
part of the discrepancy reflects the fact that the average age and
quality of vessels of the company's banana fleet in 1955 was some-
what poorer than the theoretical ideal. On a 50 percent depreciated
basis against actual cost, the value of its banana-carrying tonnage at
the end of 1955 comes to $54.2 million. Our overall estimate of some-
thing over $90 million as a realistic investment figure for ships
servicing the entire North American banana trade is thus verified.
Upon the basis of United Fruit operations, the average charge for
banana shipments between port of embarkation and discharge in
North American ports was 1.510 per pound for weight of stems im-
ported. This charge is representative of the going commercial rate
charged by independent fleet operators performing a similar service.
Allowing for the fact that it was necessary to import 1.1764 pounds









stem weight for each pound of bananas reaching the consumer, this
amounts to 1.780 per pound of actual fruit consumed. Applying this
to the total 1955 banana trade for North America (3.063 billion
pounds consumption basis x 1.780), we get a total ocean carriage
charge of about $54.5 million on the year's trade.
It is obvious that if this were the only ship earnings, it would be
insufficient to pay fleet operating costs, depreciation, and return on a
$90 million investment. All of the banana ships in the North American
trade, including those of the United Fruit Company, carry return
cargo, generally at established Conference rates, to earn additional
revenue.
We now have our fruit alongside the dock in one of the North
American entry ports. The ship bringing them in has been notified in
advance of temperatures at the port. If they are very low, the tem-
perature of the stowage compartments aboard ship will have been
raised some 12 hours before arrival to protect the delicate fruit pulp
from undue chilling in the unloading process. It is ready for dis-
charge at a cost averaging 6.40 per consumption pound (4.62~ cost
in country of origin plus 1.78t ocean freight.)s


IMPORTERS' HANDLING AND MARGIN

As A BANANA SHIP noses alongside the pier at,
say, Weehawken near the Jersey end of New York City's Lincoln
Tunnel or at New Orleans, a highly intricate mechanized procedure is
set in motion. By the time the lines have been made fast, the ship's
hatches have been removed. There are four hatches on each of the
larger reefers. A giant elevator crane wheels into position on the dock
opposite each hatch, its top reaching well over the side of the ship
and its arm thrusting across deck and deep into the ship's carrying
holds. The crane is really an endless belt conveyor to which are
affixed at regular, closely spaced intervals horizontal canvas pockets,
rubberized and padded, each of which can cradle even the largest
stems that weigh more than a hundred pounds each.
As the pocketed belts revolve, men of the longshore crew pick the
stems from their firmly stacked rows in the stowage compartments
and swing them onto the shoulder pad of another worker who walks
his stem over to the conveyor and places it on its side in one of the
SOn a stem-weight basis the equivalent charges would be 5.444 per stem-weight
pound (3.934 in country of origin plus 1.514 ocean freight).








belt pockets, and then returns for another. This process goes on
simultaneously in several compartments at a time on each deck level,
so that a good proportion of the pockets on the conveyor serving
each hatch are filled as they move on their upward journey. The
conveyor carries the stems of green fruit up into the daylight, across
the ship's deck and down its side to the dock level. The chain of
pockets passes an electric "eye" which tallies accurately the number
of stems of fruit discharged.
The elevator crane conveyors automatically, and very gently, de-
posit the stems on horizontal conveyors which run in an intricate
pattern along the pier from shipside to railway sidetracks and truck-
loading ports. All stems ride on foam rubber cradles attached to the
horizontal conveyors. At convenient stations along each conveyor
line men are located whose job it is to grade and classify each stem
as it passes. The grader sings out his appraisal and an assistant marks
the call by pasting a small paper tab to the stem, its color designat-
ing the classification made. This color code varies from port to port.
On the New York-Weehawken piers of United, green signifies Heavy
Nines (stems having more than nine hands of well developed fruit);
red marks Light Nines; white, eight-hand stems; and pink, seven-hand
stems, the lightest that are normally imported to this market. Other
colors signify quality, appearance, or condition classifications. A
black label signifies that some of the fingers are beginning to turn
yellow and a gray label that the stem as a whole is too nearly ripe
to stand shipment. Such stems must be disposed of in the local market,
generally at a sacrifice price. A purple label means that the stem, be-
cause of faulty appearance, crushing or bruising of some fingers, or
stem breakage is rejected for sale. Such stems are pulled off the
conveyors at a given point, the salvagable fruit cut off and boxed for
donation to charitable institutions that make regular calls at the
banana piers to collect this perfectly wholesome but nonmerchant-
able fruit. A yellow label denotes that stems have been classified as
"Specials," or substandard for any of a variety of reasons such as
undersized stems or fingers, marred fruit, or other flaws that dictate
its downgrading, and a brown label indicates that the stem is not
to be sold but reserved for experimental ripening or other testing.
The job of accurately classifying stems of fruit as they whirl by
on the conveyor belt at the pace of a brisk walk calls for a high
degree of skill that is born of long experience. The reputation of the
importer depends upon his delivery to the jobber of the size and
type of fruit that the latter has ordered in a condition that meets
requirements. The importer's representatives, at a given port, have








advance notice of the size, source, and general composition by grade
and condition of each cargo, and its precise arrival schedule. This sales
force tries to dispose of the complete cargo through advance orders
from jobbers throughout its distribution area. Fruit arriving in Wee-
hawken may be sold in the New York metropolitan area or be con-
signed to New England, to Buffalo or Rochester in northern New
York State, or to Montreal. Shipments to New Orleans or Mobile fan
out through Louisiana and Texas and move northward to cover the
entire central area of the United States and Canada. Charleston,
Miami, and Tampa generally service the southeastern section of the
United States; Baltimore the Middle Atlantic States; Los Angeles
and San Francisco the Far West, Southwest, and Mountain States;
and Seattle the Northwestern States and Western Canadian provinces.
Fruit that has not been sold in advance may be consigned as "rollers"
to sub-distribution stations along the line, and the importers' sales
forces in these areas are alerted to see that customers are found be-
fore it arrives.
The horizontal conveyors carry the tagged fruit along the piers-
covered piers in northern ports where winter temperatures are low,
for the fruit must be protected from chilling even in the brief interval
of discharge and dispatch-to the freight cars and trucks assembled
to carry the product to points of predetermined destination.
As the fruit arrives opposite the car or truck to be loaded, workers
along the line pick off the stems bearing the appropriate colored
label-Heavy or Light Nines, Eights, or Sevens according to what
the jobber has ordered, carry it a few steps to the waiting railway
car or truck, and hoist it aboard, stepping on a tally indicator that
records each stem loaded. Stowage on railway cars or trucks follows
much the same pattern as stowage in the ship's holds, always with
punctilious care to assure firm packing, bracing, and tying to pre-
vent rubbing in carriage or crushing or bruising that would mar the
fruit. Each car carries about 300 stems, so that 250 to 275 railway
cars may be required to discharge a large reefer's cargo. The standard
railway refrigerator car-and there are now more than 100,000 of
them on North American service-has been carefully engineered to
serve banana haulage requirements. It is light-weight, refrigerated,
heavily insulated, mechanically ventilated, and carries charcoal or
portable alcohol heaters when outside temperatures are low. It is
equipped with inside thermometers to register in-transit temperatures,
and frequent inspection is made along the line with re-icing or re-
fueling of heaters provided at way points to assure that the proper
temperatures are maintained throughout each haul.








The large trailer trucks that are employed for the shorter hauls
are similarly equipped. Each truck has been weighed on a big plat-
form scale before loading and the process is repeated after loading
to record the weight of its banana stem cargo. In a remarkably few
hours, the fruit has passed from the custody of the importer to that
of the jobber who, except in the case of "rollers," takes over when it
is loaded on the internal transport vehicle.
There appear to be no published data covering importers' invest-
ments, operating costs, sales organization, and mark-ups, but from
the United Fruit records we can reconstruct a pattern that is reason-
ably representative of the North American market as a whole. Be-
hind the discharge operations that have been briefly described here,
there is an elaborate network of activities that the importer must
maintain. In the case of United Fruit, at least, this includes pro-
motion and advertising through newspapers, magazines, radio, and
television to keep the product continuously in the public conscious-
ness in order that it may hold its important place against competing
food items in the American diet. It includes sustained research effort
on the banana's nutritional qualities and on all phases of its handling,
with the view of progressive improvement of the condition and at-
tractiveness of the fruit made available to the ultimate consumer. To
this end, there is intensive cooperation with medical groups, dieti-
tians, institutional food purchasers, newspaper and magazine depart-
ments and publishers dealing in food and cookery advice and infor-
mation, as well as with the restaurant, confectioner, and ice cream
industries. The sales force, through a network of subdepots covering
all of United States and Canada, systematically keeps in touch with
jobbers throughout the country, and the inspection force similarly
covers the fruit in transit to assure correct handling by the carriers.
Since the operation of the major importers is not restricted to dis-
tribution alone, but involves also the growing of fruit in centers of
production, the purchase of additional fruit from independents, its
transport to points of embarkation, provision of ocean carriage, and
discharge and sale at ports of entry, it is extremely difficult to appor-
tion accurately the amount of importers' capital that is invested in
this phase of North American banana distribution. The problem is
accentuated by the fact that of the 160 North American importers, only
the United Fruit Company issues annual statements in sufficient par-
ticularity to furnish even an approximate breakdown of the detail of
its operations.
From United Fruit's generous access to its operations accounts,
we are able to derive a very complete picture of its integrated opera-








tions. From these, we find that of the $390 million of total assets at
the end of 1955, $300.7 million may properly be assigned to those
activities of the company directly related to the production, pur-
chase, distribution, and sale of the bananas it handles. Since a frac-
tion over 87 percent of its banana shipments in 1955 went to North
America, its total banana capital for the North American trade can be
estimated at about $262 million. If the other importers had a com-
parably heavy investment, the total could amount to as much as $440
million. But the next largest importer, Standard Fruit, reported total
assets of only $42 million. This is about 16 percent of the banana
assets attributed to United Fruit's integrated North American opera-
tions, although Standard imported almost 30 percent as many stems
to the North American market as did United. And the other importers
-supplying perhaps 23 percent of North American stem imports-
probably had proportionately less capital invested than Standard.
Altogether, the integrated investment of North American importers
in 1955 probably amounted to somewhere in the neighborhood of $335
million, including the estimated $90 million ship investment and per-
haps $12 to $13 million in importer-owned elevator cranes, conveyor
equipment, and other installations in the North American ports.
Again using United Fruit accounting, we can estimate the im-
porters' direct costs of handling and sales in North America at 0.570
per pound of fruit imported on the stem basis and at about 0.67(
per pound of saleable fruit at retail level.
On top of these direct costs, there is the importer's margin, which
must cover the return on all phases of his investment in what we
have seen to be a highly integrated operation, as well as the major
item of taxes in the United States. We estimate this margin to have
amounted in 1955 to 1.41# per pound on a stem basis, or 1.66# per
consumption pound.
Since about 3.063 billion pounds of bananas were consumed in
North America in 1955, the total yield from a margin of a 1.660
per pound comes to $50.85 million, which would amount to a 15 per-
cent return before U. S. income taxes on a $335 million investment.
At current corporate income tax rates, this amounts to from 8 to
10 percent as a final return.


THE JOBBEBS

A VARIETY OF COSTS must be met by the jobber
after payment for the banana stem. These include inland transpor-








station charges, losses from shrinkage in weight, costs for ripening
rooms, delivery to retailers, and so on. In 1955, North American
banana jobbers paid an average of 7.420 per pound for bananas on a
stem-weight basis, the equivalent of 8.783 per pound of fruit avail-
able for sale to retailers.

Inland Transportation

Since the jobber generally takes title to the fruit when it is loaded
onto the railway refrigerator car at port of entry, he has to pay the
cost of inland transport by rail before the operations that are under
his direct control commence. We have estimated that perhaps 84
percent of the fruit coming into North American ports of entry is
forwarded to subdepots of distribution through rail shipments. The
remaining 16 percent is picked up directly by the trucks of those
jobbers serving zones sufficiently close to ports of entry to make rail
shipment to sub-distribution points unnecessary. The lowest trans-
portation cost for any jobber, then, may be estimated at about 0.350
per pound (0.30 per pound stem-weight basis) for average local pick-
up cost. This applies whether the pickup occurs at the ship or at sub-
depots on railway lines at interior points.
But the great bulk of the fruit moving from importer to jobber
moves by rail to subdepots from which the jobbers' trucks take de-
livery. The task of arriving at an exact average railway carriage cost
for all bananas moving by that medium is exceedingly complex. We
have made a computation for the U. S. and Canadian markets involv-
ing individual freight rates between normal shipping and distribution
centers and arrived at an average by weighting the quantities of ship-
ments over each. The mathematical computations are far too in-
tricate to warrant detailed presentation here, but the range of charges
in 1955 over the literally hundreds of routes may be defined as run-
ning between 0.6 per pound (from Weehawken to nearby New
England points) to over 2.60 per pound from Seattle to points in in-
terior Western Canada. On a weighted average basis, we have com-
puted 1955 transportation charges paid by the jobber, including his
local pickup charges, at 1.384 per pound of bananas that he sells to
retailers.
Adding this 1.34 to the 8.730 per pound that the jobbers paid the
importers (the 7.420 per stem-weight pound, plus 1.310 for shrinkage
of weight that the jobber absorbs in cutting the fruit from the stems
and culling substandard or damaged hands and fingers), we arrive at
an average cost to the jobber of 10.070 per pound of saleable fruit.







There is no clean-cut method for arriving at the capital value of
railway and truck facilities that service the North American banana
trade. However, we do have figures of railway revenue derived from
banana haulage which amount to 0.375 percent of total railway reve-
nue. Applying this ratio to the approximately $30 billion of total capi-
tal assets of the U. S. railroad system gives a figure of $112,500,000
that might reasonably be assigned as the value of railway assets de-
voted to banana haulage in the United States. If we add to this a
proportionate amount of the Canadian railroad investments, plus an
allowance for trucking facilities and something for the port facili-
ties that are generally owned by municipalities, we can estimate that
something like $135 million is invested in the internal carriage of
bananas in the North American market.

Jobbers' Facilities, Procedures, and Markups

There are perhaps 1,800 banana jobbers in North America, of
which about 150 are in Canada. They represent the essential middle
link in the distribution chain between the importer and the retailer.
In their hands is the essential process of ripening. They also absorb
the major 15 percent shrinkage in weight, when the fruit is cut from
the stems, is finally culled, and sold to retailers in a form suitable
for final sale to consumers. They provide delivery service to the local
retailers, often extend credit facilities, and carry the burden of main-
taining inventories to balance out fluctuations in the week-to-week
demands of the retailers.
Very few of the North American jobbers deal exclusively with one
importer. The jobber must know the quantity, size, condition, and
type of fruit that the retailers in his area want, and see that it is
furnished. They buy from whatever importer can fill this demand
at the most advantageous price. The first choice of the North Amer-
ican market is for the variety of banana known as the Gros Michel.
This type of banana has certain advantages over all others in size'
and general shipping qualities. The fingers hug the stem rather than
protrude, and thus suffer less from crushing and abrasion in transit,
and its thicker stems provide a lower incidence of breakage. Gros
Michels have a further advantage over other types in that they tend
to ripen in a more uniform fashion under normal handling. The
United Fruit' Company imports nothing but Gros Michel bananas in
its North American trade. Other types of bananas known as "vari-
eties," however, are imported to North America and are even more
prevalent in the European trade. These include Cavendish, Lacatan,







Bout Rond, and others. To insure uniform ripening of the fingers,
it is the general practice with the varieties to introduce ethylene gas
from portable containers into the ripening rooms in which the variety
fruit is hung. With Gros Michels, this is unnecessary unless the
supply-demand situation necessitates a shortening of the standard
ripening cycle.
In addition to specifying the variety of fruit wanted, the jobber
is interested in and keeps close track of the seasonal and cyclical
qualities of fruit from specific areas. Thus, he may find at a given
time that Santa Marta fruit from Colombia, Fortuna (United Fruit)
or Frico (Standard Fruit) from Honduras, Chiriqui or Col6n from
Panama, Golfito from Costa Rica, or Pacific from Ecuador comes
closest in size and condition of fingers, weight of stems, and quality of
fruit to meeting his customers' demands. Or he may find it advan-
tageous, because of the price differential, to purchase Standard Fruit's
Golden Beauty-Cavendish or Bout Rond varieties-from Honduras.
To the housewife in North America, a banana is a banana. Not
one in a million knows the difference between a Gros Michel and a
Cavendish or Lacatan banana, nor are the differences in flavor or
nutritional qualities of any material importance. The general pref-
erence for the Gros Michel banana in the North American market
rests upon the size, appearance, and handling qualities that make it
easier to present this type of banana to the housewife in a way that
will make her pause at the banana display and make a purchase rather
than pass it by. From the firsthand testimony of many jobbers and
retailers, we can record that sales volume responds with extraordinary
sensitivity to attractiveness of the fruit displayed, and there is general
consensus that the Gros Michel meets this specification better than
any of its rivals. It is both easier for the jobber to handle and ripen,
and it has a generally longer life on the retailer's counter before
deterioration of appearance sets in to prejudice consumer accept-
ance.
The jobbers with whom we have talked are acutely conscious of
three factors as major determinants of the profitability of their opera-
tions. The first is quality and appearance of the fruit. There seems
to be general agreement that their volume of sales in North American
markets goes up when they can deliver to retailers bananas of attrac-
tive appearance, uniform ripeness, and with a holding life on retailers'
display shelves of from one to two days.
Second, they are keenly aware of the shrinkage factor. We have
used a 15 percent shrinkage incidence as an average, but the actual
jobbers' shrinkage varies widely on individual consignments (from








between 10 or 12 percent to 21 percent or even higher) depending upon
the number of bananas that he must discard as unsaleable in addition
to the inevitable 7 or 8 percent loss represented by the weight of the
central stem to which the hands are attached. Naturally, the jobbers'
profits are importantly influenced by the ratio of the weight of fruit
purchased on a stem basis, and the weight of merchantable fruit that
he can sell to the retailer. Again, the Gros Michel has advantage
over other varieties in this respect, but here there are wide divergencies
in the shrinkage factor between Gros Michel bananas originating in
the several producing areas, or even those from a given area at dif-
ferent seasons of the year.
Ecuadorean bananas, for example, because they are generally less
carefully handled than Central American fruit, consistently show a
high shrinkage incidence. Jobbers generally testify that the grime
acquired by Ecuadorean fruit under current practices of interior ship-
ment results in more scarring and abrasion in transit, which increases
the percentages that must be discarded. Also, it has a comparatively
high seasonal variation in quality because of the fact that much of
it is grown without irrigation in areas that afford too little moisture
from natural rainfall during three-quarters of the year. Hence, job-
bers generally pay from half to one cent less for Ecuadorean than
for Central American fruit, and a number state that they do not
handle it at all if they can obtain what they need from other sources.
The third factor-and it is significant that it was rated third rather
than first by the jobbers we consulted-is the question of price.
Obviously, the jobber will not pay a higher price to one importer than
to another for fruit that he judges to be of comparable quality, ap-
pearance, condition, and net saleable weight. In most, if not all,
North American areas, jobbers have access to fruit offered by more
than one of the importing companies. The testimony is singularly
unanimous, however, upon the point that an adequate supply of fruit
of the highest quality is more important in determining the level of
consumer demand upon which jobber volume ultimately depends than
minor fluctuations of a cent or two in the retail price level. Accord-
ingly, jobbers generally are swayed to a greater extent by their judg-
ments as to the comparative quality and shrinkage factors in the
fruit offered to them than by minor price concessions linked to what
they regard as compromises in these key factors.
The jobbers in North America vary widely in size and operating
procedure. There are numbers of small firms in this business, each
of which serves a limited group of retailer customers. At the other
extreme are large operators servicing some hundreds of retail stores








within a radius that may extend up to 150 miles. A few of these
large jobbers also sell to smaller regional wholesalers or subjobbers,
who in turn maintain delivery routes over a more limited area. Many
of the large jobbers, in addition to operating their storage and ripening
facilities, extend short-term credit to their customers. An increasing
number of the large-scale operators are owned by the large food-store
chains and supply only their affiliated outlets.
Between 15 and 20 percent of the banana jobbers in the United
States are banana specialists and handle no other produce. This group
embraces some of the oldest and largest firms in the business. Many
of them are family owned, and are now in the third generation of
such family management. More typically, the banana jobber also
handles other fresh fruits and vegetables-citrus fruits, apples, po-
tatoes, onions, and a variety of seasonal fresh fruits and vegetables.
But generally the special handling and ripening facilities required for
bananas and the fact that this is a year-round business make banana
merchandising the core of the operation to which other distribution
is an adjunct.

The Jobber's Plant

The heart of the jobber's establishment is the ripening room. At
the end of 1955, the 1,800 banana jobbers in the United States and
Canada were maintaining collectively over 8,000 ripening rooms or
on an average, about 4.5 to each jobber. Among them were many small
one-room establishments, with others ranging in size up to those main-
taining 10 ripening rooms in active operation. We can best visualize
the jobber's role through describing the facilities of a "typical" four-
room jobbing establishment, and following the operations through
which it serves the retailers in its orbit of distribution.
A plant with four ripening rooms would have cost about $200,000
to reproduce at the 1955 level of construction and equipment costs.
The great bulk of this represents the cost of housing and equipping
the ripening room facilities, with a small amount added for the pro-
vision of trucks and office space and other facilities necessary to the
operation.
In a modern plant, there are provisions for the indoor discharge of
trucks bringing in the stems of fruit and for the loading of the fruit
to be delivered to retailers after it has been properly ripened, severed
from the stems, and packed in box containers that now are pretty
generally standardized at a capacity of 40 pounds. The stems may be
discharged from the incoming trucks and carried to the ripening rooms







on a belt conveyor system of the general type described in connection
with the movement of fruit from shipside to railway cars or trucks.
More generally, the stems are lifted from the trucks, hung by a cord
loop to the hooks of an overhead monorail conveyor, or of wheeled
pipe-rack trucks that may be pushed by hand from the truck ports
to the ripening rooms. In all cases, there is a premium on moving the
received green stems into the ripening rooms with a minimum of
lost time.
The ripening room itself is a well-insulated refrigeration chamber
in which from 250 to over 500 stems, weighing 24,000 to 40,000 pounds,
may be hung under rigorously controlled conditions of temperature
and humidity. Glass panels, thermometers, and humidity gauges
allow accurate readings of conditions inside the chamber and frequent
inspection of the fruit without the disturbance of intermittent opening
and closing of the doors.
Since there are inevitable differences in the size, pulp temperature,
moisture content, condition, and degree of fruit maturity in every
consignment, the job of ripening bananas efficiently requires a high
degree of judgment, skill, and experience. It would be quite unfeasible,
for example, to attempt to handle Gros Michel and "variety" bananas
in the same ripening chamber at the same time. Even with a given
type of banana, the jobber's task is made much easier if his chamber
can be loaded with fruit of a high degree of uniformity in all its char-
acteristics.
His job is to bring the fruit to the exact classification of ripeness
or "color" that will best satisfy the specifications of his retailers
when delivered at the time when it is wanted. There are eight color
specifications in common usage and, by varying the temperature-
humidity controls in his ripening chambers, the jobber can speed up
or hold back the normal five-day or six-day ripening process to pro-
duce the required color within from three to 10 days. When there is
need to accelerate ripening or to counteract the tendency of the
variety bananas toward "wild ripening" (the uneven ripening of the
hands or individual fingers on a given stem), the jobber commonly
introduces a charge of ethylene gas into the chamber as a corrective
measure. At the beginning of the ripening cycle, a relatively high
degree of temperature and humidity is normally employed. For the
first 24 hours, sprayers may be turned on to raise humidity to over
90 percent under 700 F. temperature, with a gradual reduction to 680,
660, and finally to 560-500 on successive days.
When the green fruit has ripened to the required yellow color clas-
sification-lighter in summer when high outside temperatures will







shorten the permissible holding time on the retailers' shelves and
deeper in winter-the fruit is moved out of the ripening rooms by
conveyor or pipetrack truck to the cutting tables.
Here the hands are severed from the stems by cutters, and the
hands themselves are subdivided into units that each retailer to be
served finds most acceptable to fill his customers' needs. Usually,
the dealer requires an assortment of unit sizes, varying from three to
four banana fingers to six, eight, or even a dozen. The units are
carefully nested in the 40-pound boxes or cartons, with shredded paper,
or sometimes the polyethylene bags in which the stems have been
sheathed for protection in transport, as padding. The boxes may be
either one-trip cardboard containers that the retailer discards, or
returnable wooden or aluminum trays for which the retailer normally
pays a deposit refundable when returned to the jobber's truck drivers
at the time when he makes new deliveries.
These practices of fruit delivery are developments of the last 30
years. Formerly, all fruit was delivered to the retailer on the stem
which he hung in his store and from which his clerks cut hands or
portions of hands to the customer's requirements. Modern retail
merchandising methods have made this procedure prohibitively time-
consuming and expensive, and over 95 percent of all bananas are now
delivered to retailers in the manner described.
To an increasing degree, jobbers are prepackaging the fruit for the
retailer by banding each cluster unit with tape on which the retailer
may record weight and price for his customers' convenience and to
minimize the handling by clerks and customers that tends to mar the
delicate skins of ripened fruit. A further refinement is for the jobber
to pack each cluster in "cello-trays"-one or more standard sizes of
cardboard boxes with transparent cellophane tops through which the
fingers inside may be clearly seen without any touching of the fruit
after it leaves the jobber's establishment. This form of packaging
has many advantages, in addition to the protection it affords: The
package retains the fruit moisture and makes for attractive display.
The cartons generally have printed instructions telling the consumer
how to recognize the deep yellow shade with a speckling of small
brown dots that signifies the stage when the banana may be eaten
with maximum enjoyment and nutrition, as well as giving recipe
suggestions for its use in cooking, in salads, or with cereals. This,
together with other merchandising and advertising themes, reflects
the position of bananas as competitors for the consumer's favor not
only with other fresh fruits but with a considerable range of alternate
food products.







The Accountancy of Banana Jobbing


Allowing about 300 stems to the average-sized ripening room and
one week as the average ripening cycle, the 8,000 rooms operated by
North American jobbers have the theoretical capacity to turn over as
much as 125 million stems per year. Since North American con-
sumption in recent years has been averaging only slightly more than
50 million stems annually, it is clear that there is a considerable
margin of surplus capacity. But in this business, as in many others,
fluctuations in seasonal demand, the incidence of holidays, and other
factors call for peak capacities considerably larger than would be
necessary to service perfectly distributed requirements.
The current reproduction cost of North American jobbers' estab-
lishments may be estimated at around $400 million (8,000 rooms at
$50,000 per room). Upon the reasonable assumption that half of the
value of existing plants has been depreciated, it would be fair to esti-
mate the current book value of these facilities at about $200 million.
In addition to their investments in handling facilities, jobbers must
provide working capital to cover their inventory requirements, pay-
rolls, credit extended to retailers, and other current expenses. A
reasonable allowance for this would average $10,000 per jobber, an
$18 million total for the 1,800 North American jobbers. Thus we
arrive at an overall estimate of $218 million as the depreciated value
of capital invested in 1955 by jobbers to service the North American
banana trade. This is a very considerable sum (even if substantially
less than what it would have required to reproduce the same facilities
at 1955 construction and equipment costs). It represents an average
investment of about $121,000 per jobber, although hundreds of the
smaller establishments had no more than $30,000 to $60,000 invested
in this business in 1955, while the investments of some of the larger
jobbers ranged up to half a million dollars.
A composite 1955 operations account per pound of fruit handled by
a jobber located in an area where inland freight charges happened to
approximate the North American average-in Central Texas, Oregon,
or Northern New England, for example-was about as shown in the
table which appears below.
The jobber's margin of 1.1 cents per pound would have yielded, in
1955, a total return before taxes of $33,693,000 on total sales of 3,063
billion pounds of fruit. On a total investment of $218 million, this
would have provided a gross return before income taxes of something
less than 15.5 percent, or about the same as that estimated for the
integrated operations of the importer group.







Cents per
pound
Purchase cost (green, stem basis) ..................... 7.42
Inland transport (including local pickup cost) ............ 1.34
Shrinkage at 15 percent of pound cost on stem basis ...... 1.31
Cost to jobber per pound of saleable fruit .............. 10.07
Ripening room costs per pound of saleable fruit .......... .92
Delivery costs per pound of saleable fruit .............. .81
Total jobber costs per pound of saleable fruit............ 11.80
Jobbers' margin .................................... 1.10
Jobbers' selling price .. ............................. 12.90


OPERATION OF THE RETAILER

THE FINAL LINK in the marketing chain is the
vast array of retail stores which provide direct contact with the ulti-
mate consumer. We have seen that, in 1955, these stores paid an
average of 12.9 cents for each pound of bananas delivered to them
by the jobbers.
Food retailing in the United States and Canada is now dominated
by large unit stores. These are not necessarily units owned by large
chains. It is the costs and the resulting prices set by these large units
which determine the overall costs of retail distribution. As the pace-
setters, their operations are of primary interest. The concept of a
large food unit has come to be defined in current usage (and in
statistical analysis) as a unit having annual sales of $375,000 or more.
This is now the accepted definition of the term supermarket. Some
such large stores are owned and operated as a single unit by one
owner-operator. Many others are owned in small groups of two to
10 stores, all located in single communities or metropolitan areas.
They are thus not chain stores since that term carries the implication
of widely dispersed operations over broad regional areas. A currently
accepted, though arbitrary, definition by the U. S. Department of
Commerce is that these large stores are called "independent" if the
units under single ownership do not exceed 10 in number. Thus,
groups of one to 10 stores owned and managed by a single owner are
not chains. Groups of 11 or more, by this same arbitrary convention,
are to be called chains.
Fairly elaborate efforts are constantly being made in the United
States, both by private and governmental research agencies, to deter-
mine the shares of different types of stores in the total sales volume,







and the numbers of each type in operation. The results can be sum-
marized as follows:
1. Total U. S. food-store sales in 1955 have been estimated as $45.97
billion by the Department of Commerce. This total is exclusive of
food purchased by hotels, restaurants, the military establishment,
and a variety of institutions. Of this food-store total, specialty
stores (delicatessens, bakeries, small meat stores, general stores,
health food outlets, etc.) did $6.55 billion. The remaining $39.42
billion sales volume was in the hands of the true food stores. But
all food stores sell some nonfood items: drugs, household sup-
plies, books and stationery, clothing. Statistically, it is as yet
not known accurately what is the exact nonfood percentage.
Estimates of 4 percent to 5 percent of the dollar total are often
used. This would bring the total food-sale volume down from
$46 billion to about $44 billion. Including Canada, the North
American total would be about $48.5 billion. About 1 percent
of this represented banana sales, since a small part of the esti-
mated $527 million banana consumption in North America was
dispensed through restaurants and institutions rather than sold by
food stores.
2. From a study of food marketing in the United States, it appears
that supermarkets accounted for 59.7 percent, or nearly $24 bil-
lion, of the $39.4 billion total attributed to food stores proper in
1955. Their dominance in the field is thus clear. There were about
21,450 units of this size in operation, of which only 11,140 were
owned by chain stores, now defined as 11 or more units under one
ownership. A medium-sized group (coming to be known in market-
ing parlance as "superettes"), having sales of between $75,000 and
$375,000 per unit annually, account for another 26.4 percent of
the total. The remaining small stores having less than $75,000
annual volume, of which there are still 272,000 in operation in the
United States alone, did the residual 13.9 percent of 1955 volume,
again exclusive of the specialty store category.
The pace-setters in prices and operating methods are clearly the
supermarkets. Within this category, the leaders in North American
food retailing today are the independently owned supermarket units
owning only one store in some cases, and not over 10 at most; they
have forged ahead most rapidly in the past decade. It is the efficiency
of these local leaders and of some, though by no means all, the larger
chain managements which symbolizes the efficiency and operating skill
of U. S. and Canadian retailing.







Such stores sell packaged grocery items at the amazingly low mar-
gin of about 160 out of each $1.00 of sales. This was unheard of in
1900 or 1910-when grocery stores took a comfortable 250 or 30O
for such easy-to-sell items. In the severe depression years, when the
supermarket method of retailing suddenly grew to maturity, this
margin fell as low as 10 to 120 on each sales dollar. The average
margin has crept up since 1940, but the operating performance of these
typically American units in the face of rising labor and real estate
costs is still spectacular.
But their performance in selling fresh fruits and vegetables is not
at comparably low margins. In the elaborate statistical testing that is
currently conducted by trade organizations or publications connected
with retail food merchandising, attention has been drawn to the dif-
ferences in performance, and reasons for them. Two clear-cut indi-
cators of the higher expense involved in handling fresh fruit and
vegetables show up in current analyses of operations. Careful account-
ing methods and analyses of their own operations are important hall-
marks of successful management in the leading stores.
First, retail selling of fresh fruits and vegetables requires more
floor space per sales dollar. In one cross-section sample survey, it
was shown that they required 17.4 percent of space in stores, while
contributing only 12.8 percent of sales volume. Secondly, they require
more man-hours of employees' time. In the same survey, fruit and
vegetable items contributed only $17.05 of sales per man-hour, while
grocery items contributed $34.12 per man-hour. Expert management
recognizes these handicaps by setting gross margins much higher on
produce items than on packaged groceries. Thus, the computed mar-
gins used to set prices show that grocery items were set at 15.680 per
$1.00 of sales, and produce items at 26.380. The produce category,
logically, has to contribute a margin 70 percent higher than that re-
quired for the staple grocery lines, a differential recognizing the higher
space and man-hour requirements involved. Another survey using a
somewhat different sample of stores (but again chosen from the more
efficient leaders) confirms these basic causes for the higher margins
required to handle produce. The third major category of food sales,
meat, falls between the two others, with an average established mar-
gin of 20.180.
There has been in the past few years much less detailed analysis of
the margins set by leading stores on individual products within these
broad categories. But such studies as have been made indicate that,
in addition to the factors of space cost and employee time, the set-
ting of margins also reflects such factors as wastage and spoilage, the







necessity for daily re-handling of particular products (such as night-
and-morning removal of material off display counters and into con-
trolled-temperature storage space), and the necessity for additional
cleanup and sanitation efforts. Thus, indicated margins on some sea-
sonal fruits and vegetables run as high as 356 to 380 on each dollar
of sales. In other cases, rapid sales turnover, ease of handling, and
small bulk permit margins below 200. From the scattered evidence
available, bananas fall into about the middle of the range in one
or two studies where as many as 40 items have been analyzed.
In one local study made in Seattle in 1948 for 40 stores, the margin
on bananas was found to average 21.6S per dollar of sales. In another
study, made in January 1950, the banana margin was 23.1#. A lead-
ing publication in the food retailing field, in an advisory survey for
operators, has suggested that bananas along with a number of other
fruits and vegetables should be placed at a basic 25 percent margin
level. If consideration is taken of the fact that any actual data se-
cured for a single product are nearly always from the more efficient
stores, and do not take into account the wider margins applied by
small independents and by the specialty stores (such as delicatessens),
this margin of 25 percent for bananas probably reflects the North
American average of retail food store practice. Were it not for the
constant pressure from the efficient leader stores, however, the average
level would be much higher-perhaps 35 percent.
Since there is a factor of loss from waste and spoilage included in
the pricing of nearly all items in this category of fresh produce, no
separate allowance needs to be made for this factor. It is considered
by authorities to be in the range of 2 percent to 3 percent in the case
of bananas, but considerably higher in some other fruits and a few
vegetables. The actual margins used by stores include within them-
selves such necessary allowance for this source of higher cost.
It must be remembered that bananas are sold in a great majority
of the 350,000 or more retail food outlets of the country. An exact
computation of the actual margin would require a very large and ex-
pensive sampling survey, and one that would also reflect conditions
at several different times of the year. No such comprehensive survey
has ever been made. Fortunately, we have an entirely independent
check that verifies that the 25 percent margin is the one that actually
applied on 1955 banana sales at retail. The Bureau of Labor Statistics,
in connection with its consumers' price index, tabulates monthly the
actual retail sales prices of a wide variety of items that are considered
representative in the shopping lists of consumers, from centers care-







fully selected to give an accurate cross-section for the United States
as a whole. Bananas are among the items so sampled.
For 1955, the average price paid by U. S. consumers for bananas,
as shown by the Bureau's sampling, averaged 170 per pound. When
allowance is made for the 8 percent of Canadian sales, estimated to
be almost 40 per pound higher because of the higher freight rates for
the longer hauls involved, and for minor adjustments to cover sales
in areas not covered by the survey and direct sales to institutions,
we calculate an average sales price for North America in 1955 of 17.20
for the two countries combined. Twenty-five percent of 17.20 is 4.30
which, subtracted from 17.20, gives us the 12.90 figure which we built
up in our separate and independent calculation as the average jobbers'
selling price to the North American retail trade.
Investment in food retailing stores is, of course, not specifically
allocable to any one item sold, such as bananas. But it is of interest
to place a valuation on what may be termed a "second-level" invest-
ment in the marketing chain for bananas. This is in contrast with the
direct, or "first-level" investment in plantations, refrigerated ships,
dock and handling facilities, and in jobbers' ripening and storage
plants.
As an overall average, food retailing requires capital of about 17.50
for each $1.00 of sales. The ratio would be higher but for the fact
that the vast majority of food stores are located on leased land, and
almost as large a proportion use rented or leased buildings. Some
large chains have a higher investment-sales ratio; but many small
stores and individual units are below this figure. The land and build-
ings so leased are, in a vague sense, part of the necessary capital re-
quired-but this relationship is a tenuous one for our analysis. Much
of food retailers' investment is in working capital, that is, inventory
and cash on hand, plus some fixed investment in warehouses, trucks,
and store fixtures.
The ratio of 17.50 investment per $1.00 of sales would indicate a
rough total of $8.5 billion as the directly identifiable investment asso-
ciated with retailing $48.5 billion in food. For bananas, which account
for about 1 percent of the sales volume, the roughly proportionate
sum of $85 million is the second-level share of that item in a some-
what uncertain total. We can note that the 4.30 retail markup per
pound yielded all North American food retailers approximately $131
million in revenue, but we know of no accurate way of appraising the
particular cost of banana sales and the resulting net revenue. We can
say, however, that the supermarkets, the dominant class among food







retailers, in their overall operations realized about 12 percent to 13
percent of profits before taxes on their invested capital.


SUMMARY OF THE CONSUMER'S BANANA DOLLAR

FROM THESE COMPUTATIONS, then, we can offer
the following summary of how each dollar spent by consumers in the
United States and Canada was distributed among the several links
in the distribution chain through which it traveled on its long route
to the North American larder:
Share of Costs per pound
banana dollar consumption basis
North American consumer
expenditure ................. $1.00" 17.20
The retailers' costs and margin... .25 4.30

Jobber's selling price to retailer.. .75 12.90
The jobber's margin ............ .06 1.10
The jobber's handling costs ...... .10 1.73
Inland transportation (including
jobber's pickup) ............. .08 1.34

Importers' selling price to jobber .51 8.73
Importers' margin ............. .10 1.66

Importers' costs at point of sale .41 7.07
Importers' distribution and
sales expense ................ .04 .67

Importers' landed cost ......... .37 6.40
Ocean freight .................. .10 1.78

Amount realized by producing
countries ................... .27 4.62
"In 1955, at an average North American retail price of 17.20 per pound, $1.00
purchased a shade above 5.8 pounds of bananas.
In translating the costs and margins of each step in the distribu-
tion process into theequivalent share of the consumer's dollar, it is, of
course, possible to read the figures in the first column as percentage




















0- *
0 w


() Amount Realized By
Producing Countries 4.6.


S( Retailer's Purchase Price -12.9
Retailer's Cost and Margin 4.3.



Consumer's Purchase Price 17.2c








Chart VI
The Cost of
Bringing Bananas to
the American Consumer


(Based on Price Per Pound)










Chart VII
Of Each Dollar Spent for Bananas-
ocean while the
freight producer
distribution costs in the U. S. are: is: receives:

63v 10 27


For Foods (other than Meat) Grown
in the U. S.
costs for distribution are: and the farmer receives:

62o 38g
7: ,. ." -: .. o -. ,


shares that accrue to each link in the distribution chain-27 percent
to the countries of origin, 24 percent for importers' costs of ocean car-
riage and subsequent distribution and the return on their complete in-
vestment of capital and effort, 24 percent for jobber's costs and mar-
gins, and 25 percent for retailers.
Two explanatory comments would seem to be in order.
First, in apportioning the share assignable to the importer's margin,
we have taken into consideration the realistic fact that close to 80
percent on a stem-count basis and over 80 percent on a weight basis
of all North American banana imports are handled by integrated op-
erators. Such operators produce a large portion of the fruit they handle,
provide extensive services to many of the independent producers from
whom they purchase fruit, operate extensive transportation systems
in the countries of procurement, and own and operate a large propor-
tion of the fleet of ocean carriers that bring it in. Hence, our importer's







margin in this accounting is related to the integrated operations of
North American importers, rather than exclusively to that part of
their operations that actually takes place in North America as such.
One of the main purposes of our exercise is to arrive at an accurate
estimate of the return realized by the countries of production. There-
fore, in our accounting here and in the next chapter, we have adopted
the procedure of accounting for all steps up to the importers' margin
at estimated actual cost. Accordingly, our listing of the importers'
margin of 10 percent includes estimated return on the complete inte-
grated operation of North American importers, deducting only income
taxes that the importer pays to the countries of production, but in-
cluding the income taxes that he pays in the United States and Canada.
Second, the 27 percent return from the consumer's dollar that our
accounting shows as accruing to the countries of production repre-
sents an accurate appraisal of what those countries actually re-
ceive and retain from their banana exports. If we add to it the 10
percent represented by cost of ocean transport, it will be seen that the
landed cost of bananas at 37 percent of retail value closely approxi-
mates the 37 percent or 38 percent share of the retail value of all food-
stuffs other than meat produced and consumed within the United
States that accrued to American farmers in 1955.
We have ended this chapter, then, by giving a final table that sum-
marizes the estimated capital investments in the North American
distributive system that have been presented piecemeal in earlier
pages.
We make no pretense of precise accuracy for the figures set forth in
Table 6. They are admittedly estimates, derived by methods that have
been explained in this chapter, but we believe that they represent rea-
sonable orders of magnitude for the North American banana trade as
a whole. As such, they serve to dramatize the formidably large North
American investment-more than three-quarters of a billion dollars
-that has been required to develop and sustain the market for bananas
in this area at something over an annual level of a half-billion dollars.
If foreign investment had not been forthcoming, there is no ground
for believing that the present North American trade in this com-
modity would have developed into anything larger than the trade in
other tropical fruits, none of which represents more than a trickle com-
pared to the flood of banana commerce. Since the United States pio-
neered in banana trade development, it is not even clear that without
this initiative the remaining 46 percent of the worlM banana trade
would have grown to anything like its present magnitude. If the mar-
ket had not thus been created, whatever benefit has been derived by







Chart VIII
North American Investment Supporting
Banana Supply is Estimated at...


$773 million*

85




218





135

invest't in No. America
35
ocean shipping
90


investment in
producing countries


210


retailing
facilities



jobbers'
facilities



North American
inland transport
facilities


importers'
total
investment
$335 mill.


*Depreciated book value basis.









the countries that produce bananas would never have been realized.
The appraisal of just how much the producing countries have bene-
fited from their banana exports is the subject of the chapter that
follows.


Table 6


Approximate Capital Investment
in Banana Distribution
United States and Canada
Book Value (Depreciated) Basis
(In U. S. dollars)


Cost element


First-level
investment


Second-level
investment


1. Ocean transportation facilities .......... $ 90,000,000
2. Distributor-owned port discharge facilities. 12,500,000
3. Other distributor investment ........... 232,500,000a
4. Inland transportation facilities. ......... $135,000,000
5. Banana jobbers' investment............ 218,000,000
6. Food retailers' facilities ............... 85,000,000
7. Total North American banana investment. $553,000,000 $220,000,000
a We know that all but a small fraction of United Fruit's total banana invest-
ments, other than investment in shipping facilities, are located in the tropical
producing areas from which its imports are derived. It is reasonable to assume
that this applies equally in the case of other North American banana importers.
Therefore, something like 90 percent of Item 3 in Table 6, represents invest-
ment of North American importers in countries of origin rather than in the
United States or Canada. To arrive at a rough estimate of the total first-level
banana investment actually located in North America, one would have to
reduce the $553 million estimate in the first column under Item 7 by sub-
tracting 90 percent of Item 3, leaving about $344 million. However, since our
calculation of importers' margin covers the entire realization of North Amer-
ican investment wherever located, deducting only income taxes actually paid
in countries of origin, the estimates as presented in Table 6 are appropriate to
the accounting method employed for our consumer dollar breakdown.








IV.


Banana Production and Producers' Revenue


THE MOVEMENT OF BANANAS over the oceans to North
American entry ports and from St. John, New York, Baltimore,
Charleston, Mobile, New Orleans, Los Angeles, San Francisco, and
Seattle to consumers throughout the United States and Canada has
been described. We broke down the average consumer's price of 17.2S a
pound in 1955 among the several main steps in the distribution chain.
In doing so, we found that the f.o.b. value to countries of shipment
amounted to a little under 53 percent of the importer's selling price
of 8.738 in North America, and to about 27 percent of the consumer's
banana dollar.
In general, Latin American bananas consigned to Europe were
worth about 1.350 more per pound than North American shipments
upon an f.o.b. basis, largely because the European fruit must be cut
at a lighter, less mature stage in order to survive the longer sea voyage.
Yet the cost of growing and handling these light stems is virtually the
same as that of the heavier stems consigned to the North American
market. Thus we have estimated the average weight per stem of all
North American imports in 1955 at a trifle over 72 pounds against an
average weight per stem for European imports of 35 pounds.1 Much
of this weight disparity results from Europe's heavy dependence upon
supply areas where bananas are grown under conditions and agricul-
tural practices far inferior to those in Latin America. A better measure
of the distance-from-market factor upon weight is found in the record
of United Fruit Company shipments to the two markets. In 1955,
United's shipments from Latin American countries to North America
averaged 79.1 pounds per stem, while its European shipments from the
same area averaged 49.7 pounds per stem, or about 37 percent lighter.
Most, though not all, of this is attributable to the differences in the
maturity stage of the fruit cut for the respective markets.


THE PRODUCING COUNTRIES

PRODUCTION OPERATIONS will be examined on the
basis largely of our firsthand study of banana culture in the six coun-
SBased on data given in Table 5, Chapter II.







tries-Guatemala, Honduras, Costa Rica, Panama, Colombia, and
Ecuador-which collectively produced about 60 percent of the 1955
banana tonnage that entered world trade, and about 92 percent of
North American imports.
A parenthetical statement about these six countries may be in
order. They have only two conspicuous common attributes that lend
themselves to safe generalization: All are Spanish-speaking countries,
at least in the sense that in each Spanish is the official language. All
grow bananas for export on low-lying, humid lands in the American
tropics that have been cleared of their tangled rain-forest cover, or
on swampland that has been drained and silted over for this purpose.
On almost every other count their differences are at least as striking
as their similarities. Their combined populations in 1955 totaled
something over 23 million, of which Colombia alone, with about 13
million, had well over half, Ecuador and Guatemala between 3 and 4
million each, Honduras about 1.7 million, and Costa Rica and Panama
less than 1 million each. Colombia has more than 60 percent of the
total land area of the six republics. Three of the six, Guatemala,
Honduras, and Costa Rica are Central American countries; two-
Colombia and Ecuador-are South American. Panama is ambiguously
perched between the two. It is Central American in location but since
historically it was once a part of Colombia, it regards itself as one of
the South American republics.
There are very wide divergences among the six in ethnic composi-
tion. In Ecuador and Guatemala the indigenous Indian cultures are
very dominant; in Costa Rica they have all but disappeared; while
in the others there have been varying degrees of admixture between the
Indian and white, Indian and Negro, and Negro-white inhabitants.
There are marked differences also in the degree of literacy, the relative
political stability, the cultural and economic patterns, and the levels
of economic accomplishments among these six republics. Although
the data for such comparisons are far from satisfactory, it is probable
that the levels of per capital income are almost twice as high in Panama,
Colombia, and Costa Rica as in Ecuador, Honduras, and Guatemala.
Colombia, with its much larger population and area has carried in-
dustrial development further than any of the others. In Panama, as
might be expected, the operation of the Canal has importantly in-
fluenced the national economic trends.
It is obvious that even with respect to the common economic interest
that all of the six countries share-the growing of bananas for export
-the impact of this endeavor upon their several economies varies
widely. There is a correspondingly wide divergence in the relative








importance of the United Fruit Company operations in the banana
production and export business of the six republics. Accordingly, de-
tailed analysis of these two factors must await the country-by-country
examination that will be set forth in chapters to follow. Table 7, how-
ever, will serve to dramatize both of these points. It will be seen from
this tabulation that while bananas accounted for 20 percent of the
total value of 1955 exports of the six countries, the incidence varied
widely among them. For Panama, bananas earned 74 percent of all
export revenue, for Ecuador 55 percent, Honduras 50 per cent, Costa
Rica 41 percent, Guatemala 18 percent, while for Colombia they ac-
counted for only 4 percent of export earnings.2
For the six countries combined, coffee exports brought in more than
three times as much revenue as banana exports-$631 million against
$192 million from bananas. But the great magnitude of the discrepancy
was almost completely accounted for by the huge coffee export of
Colombia. The year's foreign exchange earnings from coffee were
considerably higher than banana earnings in Guatemala, and slightly
higher in Costa Rica as well, but bananas were more important than
coffee in each of the other three countries. Panama exported no coffee
at all. The combined banana exports of the five republics other than
Colombia exceeded their combined coffee exports by about 15 percent.
The United Fruit Company marketed 60 percent by value of all
bananas exported from the combined area, but again the incidence of
its importance was very different from country to country. Its ship-
ments accounted for virtually all of Costa Rica's banana export earn-
ings,3 93 percent of Panama's, 75 percent of Guatemala's, 69 percent
in the case of Honduras, 58 percent for Colombia, and only 19 percent
with respect to Ecuador's banana shipments. It should be noted that
Ecuador's shipments, even on a value basis, exceeded the combined
exports of its two closest rivals in the banana trade, and accounted for
about 33 percent of the total banana exports of the six countries.
One additional comment will add useful perspective on how the
pattern of United Fruit Company's banana operations varied from

'It is worthy of note that in Panama, largely because of revenues from the
Panama Canal, exports play a far less decisive role in the overall balance-of-
payments position than in the other five republics. In 1955, Panama's merchandise
exports accounted for only about 25 percent of its total foreign exchange earnings
upon current account, as compared with 85 percent for Costa Rica and more than
90 percent in each of the other four countries.
8 This situation may be expected to change substantially over the next few years.
Standard Fruit has just started to plant variety bananas, highly resistant to
Panama disease, on a large area in the Atlantic Zone where the United Fruit
Company formerly grew Gros Michels, but which it abandoned many years ago
because the soil had become infested with the fusaria of Panama disease.










Relative Importance of Total Banana Exports
And United Fruit Banana Exports
In the Six Countries, 1955
(Value figures in thousand U.S. dollars)


.Country





Colombia .....................
Costa Rica...................
Ecuador ..... ..............
Guatemala...................
Honduras ...................
Panama......................

Total .........................


Value of
total
exports


Value of
banana
exports


United Fruit
banana exports


United Fruit
shipments"


National coffee
exports


% bananal I I----------------:----


exports
to total
exports


Value


% of total
banana
exports


% %
Produced Purchased


579,600 24,200 4 13,973 58 30 70 484,100 84
80,900 33,210 41 32,843 99 88 12 37,360 46
113,900 62,300 55 11,594 19 25 75 23,100 20
109,200 19,900 18 14,943 75 81 19 75,200 69
50,500 25,500 50 17,577 69 66 34 11,100 22
36,300 27,000 74 25,194 93 100 -


970,400


192,110


116,124


630,860


6 On a stem basis.


Table 7


Value


% of
total
exports







Chart IX
Importance of Bananas in Six Countries'
Total Exports in 1955


EXPORTS IN BANANAS AS A %
MILLION DOLLARS OF TOTAL EXPORTS
TOTAL EXPORTS $970.4 -7

BANANA EXPORTS
S19 21 -
-6


M T


COLOMBIA COSTA RICA ECUADOR GUATEMALA
77


000


0%


-50%


-40%


-30%


-20%


-10%


U a P -


HONDURAS PANAMA


rI--


I









Chart X

United Fruit's Share of Six Countries'
Banana Exports in 1955









Million Dollars

60



50
OTHER
UNITED FRUIT EXPORTERS
$116 MILUON $76 MILLION
40



30




OTHER


UNITED
FRUIT I -10


PANAMA


COLOMBIA COSTA RIA ECUADOR GUATEMALA HONDURAS
78








country to country. On an overall basis, the company grew 68 percent
of the stems that it shipped from the six countries. From Panama, it
shipped only fruit that was grown on its own plantations. In Costa
Rica, it grew 88 percent of the bananas it exported and procured the
other 12 percent from independent banana farmers. For Guatemala
and Honduras, respectively, the percentages were 81 and 66 percent
grown versus 19 percent and 34 percent purchased. But the pattern was
radically different in both Colombia and Ecuador. In the former,
United Fruit produced only 30 percent of its banana shipments. It
procured the rest from local independent growers, under contracts
calling for a variety of company-provided services including sigatoka
control and fertilizer supply. In the case of Ecuador, the company's
own plantations provided only 25 percent of its shipped fruit, and in
that country almost all of its purchased fruit was procured on the
open market, without any contractual relationships with the inde-
pendents who supplied it. The significance of these variations will be
discussed as we review the situation on a country-by-country basis.
But first we will follow the production and distribution procedures
step by step.

BANANA LANDS

THE FIRST STEP in banana production is the
acquisition of suitable land. Table 8 helps to give some perspective
on the relationship of banana lands to total areas and acreage planted
to all crops in the six republics as well as upon the weight of United
Fruit holdings and banana operations in the overall picture. A number
of observations may be drawn from this table.
The term "Banana Republic" has been rather widely and loosely
applied to at least all of the countries of the isthmus, but it is clear
that banana production is far from monopolizing a large percent-
age of even that portion of land devoted to crop production. For
the six republics collectively, banana culture represented only a trifle
over 3.5 percent of total crop acreage. The incidence is highest-12
percent-in Ecuador, which has never been termed a "Banana Re-
public." It is next highest in Costa Rica where banana acreage
amounts to about 7 percent of total crop acreage; in Panama the
incidence is on the order of 6 percent; and in Honduras about 4 percent.
In Guatemala and Colombia, banana culture takes less than 2 percent
of the land planted in crops.
This picture hardly conforms to the general concept conjured up
by the term "monoculture"--a label contrived by sociologists and








SBanana Acreage and Land Use
in Six Countries
Table 8 with United Fruit's Share
(In thousands of acres)

Six countries United Fruit Company

Total banana
acreage*

Total Total Total Total Acreage Mature Other
Country area crop- banana acreage owned acreage crop
lands acreage owned owned or acreage
controlled

Guatemala..... 27,000 3,683 40 461 21 28 31
Honduras...... 28,000 1,815 70 325 34 28 91
Costa Rica..... 13,000 875 60 497 35 39 72
Panama....... 18,000 650 42 151 27 23 41
Colombia...... 256,000 7,200 112 100 7 20 10
Ecuador...... 72,000 2,344 284b 192 9 7 10
Total......... 414,000 16,567 608 1,726 133 145 255

a United Fruit banana acreage owned includes acreage planted but not mature;
mature acreage owned or controlled shows company-owned producing acre-
age, plus acreage of independent growers under contract to sell to United Fruit.
b Acreage reported for 1954; 1955 acreage figures not available.


frequently attached to at least several of the countries that produce
bananas. The total agricultural acreage in the six republics-that is,
the cleared land devoted either to crop production or animal grazing-
is about seven times as large as their combined crop acreage, and at
least a large portion of this could be turned into crop production.
Furthermore all six republics have even larger areas of uncleared land
that could be put to agricultural use. These facts drive the point home
that whatever else may be said about them, bananas are not pre-
empting land that might be better employed.
An additional perspective is offered by the data set forth in Table
8. The United Fruit Company, in 1955, held ownership title to
1,726,000 acres (2,700 square miles) of land in the six republics, a
little less than a fourth of which was planted in productive crops. Its
banana planting of 133,000 acres, in turn, accounted for just over a
third of United Fruit's total crop acreage on its own lands. A brief
analysis of these company landholdings may throw some light upon
the highly controversial issue of whether or not United Fruit has








THE SETTING


A


Six Latin American Republics


* Colombia Costa Rica Ecuador
* Guatemala Honduras Panama
which were the source in 1955 of 60%c
of world banana exports and 92% of
North American banana imports


I


The U. S. Business


* United Fruit Company
which grew or bought
in these six republics 95% of
all its banana shipments in 1955.


I


?


~nli
L, 'F~YIV~C:








THE VOLUME OF BANANAS
shipped in international trade ex-
ceeds that of any other fruit and
decisively dwarfs that of other
tropical fruits. This is despite the
fact that bananas are exception-
ally susceptible to diseases, blow-
downs, and floods, and to deterio-
ration or complete loss with any-
thing less than tender handling
S' under demanding harvesting,
shipping, and marketing sched-
ules.

UNITED FRUIT COMPANY, since its incorporation in 1899, has
played a leading role in most developments that have made this trade
feasible-from large-scale production through disease-control tech-
niques, land and ocean transport, and sales promotion. The company
handled 59% of U. S. and Canadian banana imports in 1955 and 10%
of Europe's, or 28% of the world total. In that same year, bananas
accounted for 4% of Colombia's total exports, 41% of Costa Rica's,
.55% of Ecuador's, 18% of Guatemala's, 50% of Honduras', and 74%
of Panama's. United Fruit's share of the total banana exports from
these six countries amounted to 60%.








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