The death of the banana republic

US-based banana producer and importer Chiquita, the world’s largest banana company, is almost certain to be bought by a Brazilian consortium, after the collapse of its attempted tax-dodge reverse takeover of Irish-based banana importer Fyffes.

In some ways, this is an entirely normal business story.

It features the collapse of the easy, painless [1] tax revenues that the US government could once reliably collect from US-based multinationals’ overseas ventures, as companies move their formal registration and a couple of dozen accountants and lawyers to low-tax jurisdictions like Bermuda, Ireland and the Netherlands whilst keeping management control in the US. It features the growing importance of Brazil’s highly competent and often highly cash-rich middle class, whose flagship was Brazilian-controlled InBev’s takeover of Budweiser brewer Anheuser-Busch.

But that isn’t the whole of it.

The full story takes us back to the tail-end of the 19th century, when advances in shipping made it viable, for the first time, to ship bananas from South America to urban consumers in the northern US.

The United Fruit Company, founded in 1899 by the merger of banana pioneers in Boston and New York, owned and operated plantations in the Caribbean and Central America, and introduced refrigerated sea transport to provide New Yorkers and New Englanders with the freshest fruit.

The UFC [2] found itself building complex logistics networks in countries that had previously lacked any real communications capacity. And as the US became the world’s leading power, and US consumers became richer and hungrier for bananas, the UFC found itself far richer than any of the governments that nominally ruled the Central American countries where it traded [3].

Which is how the term ‘banana republic‘ was coined. Even before WWI, the UFC controlled telecoms and postal networks in Guatemala, Honduras and Costa Rica. With politicians in the company’s pockets, it dominated the US banana trade. It kept costs low by dispossessing peasants of their lands through crooked legal systems, and then employed them as cheap labour on the grounds that serfdom was mostly better than starving to death.

If this sounds familiar, then you’re probably aware of the history of British India.

The main difference between the United Fruit Company and the East India Company is that the former never even required a show of US military force to protect its interests. The implicit threat was so clear, it never needed to be carried out. Besides, bribes are cheaper than wars.

So why am I blethering on about the United Fruit Company? Well, in 1990, it was renamed to Chiquita Brands International. The same one mentioned above. That’s right: the ultimate US imperialist multinational, the inventor of the banana republic, is about to be bought by South Americans.

In the long run, all empires fall and all companies collapse. And often enough, it’s the people they oppressed who take over. The East India Company brand is now owned by an Indian business. There’s nothing new under the sun, and so on.

But I don’t think I’ve seen a quicker shift from colonial corporate power to re-appropriation than Chiquita.

[1] For US consumers and the US economy in general. I’m sure US CEOs were deeply pained.
[2] The best wrestling abbreviation coincidence since Pandas vs Hulk Hogan.
[3] There is some extremely good development economics work on this; this paper is a great start.