The Union of Banana Exporting Countries ( es, Unión de PaÃses Exportadores de Banano or UPEB) was a cartel of Central and South American banana exporting countries established in 1974, inspired by
OPEC. Its aim was to achieve better remuneration from the North American banana trade oligopoly, which consisted of three US companies. UPEB's proposal of an export tax was undermined by the U.S. oligopoly bribing Honduran and Italian officials. The UPEB cartel collapsed when bribes became public. What is referred to as the Bananagate scandal paved the way for the U.S. Congress to create the 1977
Foreign Corrupt Practices Act.
History
In 1974,
Colombia,
Costa Rica,
Ecuador
Ecuador ( ; ; Quechua: ''Ikwayur''; Shuar: ''Ecuador'' or ''Ekuatur''), officially the Republic of Ecuador ( es, República del Ecuador, which literally translates as "Republic of the Equator"; Quechua: ''Ikwadur Ripuwlika''; Shuar: ' ...
,
Guatemala,
Honduras,
Nicaragua
Nicaragua (; ), officially the Republic of Nicaragua (), is the largest country in Central America, bordered by Honduras to the north, the Caribbean to the east, Costa Rica to the south, and the Pacific Ocean to the west. Managua is the countr ...
, and
Panama
Panama ( , ; es, link=no, Panamá ), officially the Republic of Panama ( es, República de Panamá), is a transcontinental country spanning the southern part of North America and the northern part of South America. It is bordered by Co ...
joined in an attempt to form a banana-exporting country cartel focusing on exports to the
North American market.
The
Philippines
The Philippines (; fil, Pilipinas, links=no), officially the Republic of the Philippines ( fil, Republika ng Pilipinas, links=no),
* bik, Republika kan Filipinas
* ceb, Republika sa Pilipinas
* cbk, República de Filipinas
* hil, Republ ...
was the only major exporter of bananas to the United States which did not join.
The market for banana exports to Europe at this time was quite separate, with mainly former European French and British colonies in the Caribbean supplying European countries.
Banana prices had gone up little in 20 years. A
United Nations
The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and security, develop friendly relations among nations, achieve international cooperation, and be a centre for harmoniz ...
study had concluded that no more than seventeen cents of each
United States dollar
The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...
spent by North Americans on bananas went to producing countries. At the time the banana trade was highly concentrated with only three US companies participating:
United Brands Company (formerly
United Fruit
The United Fruit Company (now Chiquita) was an American multinational corporation that traded in tropical fruit (primarily bananas) grown on Latin American plantations and sold in the United States and Europe. The company was formed in 1899 fro ...
),
Standard Fruit, and the
Del Monte Corporation.
UPEB proposed an export tax of one dollar for every forty-pound box of bananas exported. The companies protested and threatened to withdraw their operations. There was also a glut on the world banana market and Ecuador, the leading producer, refused to enact the tax. Former
President of Costa Rica
The president of the Republic of Costa Rica is the head of state and head of government of Costa Rica. The president is currently elected in direct elections for a period of four years, which is not immediately renewable. Two vice presidents are ...
José Figueres
José is a predominantly Spanish and Portuguese form of the given name Joseph. While spelled alike, this name is pronounced differently in each language: Spanish ; Portuguese (or ).
In French, the name ''José'', pronounced , is an old vernacul ...
stated that
Standard Fruit's property should be nationalized if the companies refused to pay the tax.
Standard Fruit threatened the new president,
Daniel Oduber
Daniel is a masculine given name and a surname of Hebrew origin. It means "God is my judge"Hanks, Hardcastle and Hodges, ''Oxford Dictionary of First Names'', Oxford University Press, 2nd edition, , p. 68. (cf. Gabriel—"God is my strength" ...
that if there were any more threats, the company would pull out of Costa Rica. Costa Rica dropped its demand to 25¢ a crate.
Bananagate
In 1974, Honduras passed a law to raise the tax on banana exports from 25¢ to 50¢ per 40-pound box. Honduras had supplied more than 22% of United Brands Company exports in 1974.
In 1975,
Eli M. Black, the chairman and president of the United Brands Company, jumped to his death from the forty-fourth floor of the
Pan Am Building
The MetLife Building (also 200 Park Avenue and formerly the Pan Am Building) is a skyscraper at Park Avenue and 45th Street (Manhattan), 45th Street, north of Grand Central Terminal, in the Midtown Manhattan neighborhood of New York City. Desi ...
in
Manhattan
Manhattan (), known regionally as the City, is the most densely populated and geographically smallest of the five boroughs of New York City. The borough is also coextensive with New York County, one of the original counties of the U.S. state ...
. When the
Securities and Exchange Commission (SEC) investigated Black's suicide, it uncovered a scandal that was named "Bananagate". United Brands had paid a $1.25 million bribe to Honduran President
Oswaldo López Arellano
Oswaldo Enrique López Arellano (30 June 1921 – 16 May 2010) was a Honduran politician who twice served as the President of Honduras, first from 1963 to 1971 and again from 1972 until 1975.
Early life
Lopez was born in Danlà to Enrique Là ...
, followed by another $1.25 million the next year. The money was to be put in a Swiss bank account. The operation was managed via the Honduran Minister of the Economy, Abraham Bennaton Ramos. After the bribe the Honduran tax was reduced from fifty cents to twenty-five cents per box. This caused the UPEB cartel to collapse. This reduction saved United Brands Company about $7.5 million in tax payments. In addition it was discovered that United Brands Company had paid another $750,000 in bribes to an Italian official to prevent restrictions on United's banana exports to Italy, beginning in 1970. The SEC determined that none of the bribes could have been paid without the knowledge and approval of Black. While it was not illegal at the time for US companies to bribe officials, it was illegal for companies to hide such bribes from their stockholders.
United Brands Company also admitted that it had tried to convince the SEC that the bribes should be kept secret, on the ground that disclosure would hurt the company and its stockholders. The company's Washington law firm,
Covington & Burling
Covington & Burling LLP is an American multinational law firm. Headquartered in Washington, D.C., the firm advises clients on transactional, litigation, regulatory, and public policy matters. In 2021, Vault.com ranked Covington & Burling as ...
, asked the
U.S. State Department to intervene, arguing that news of the Honduran bribe could harm U.S. relations with that country. The State Department declined.
When the bribe was revealed, it provoked the overthrow of the military government in Honduras and this in turn led to the nationalisation of United's railways along with a major divestiture of land by the companies.
Later history
On May 1, 1975, Costa Rica passed a law to raise the tax on banana exports from 25¢ to $1 per 40-pound box. The decree stated that 45¢ of each tax dollar would go to the government and the other 55¢ to subsidize independent banana growers. United Brands' local subsidiary, the Costa Rican Banana Co., then filed a $3 million suit against the government in April 1975, stating that the export levy violated a government guarantee not to tax the company until its contract with the government expired in 1988.
Since its formation, the Union of Banana Exporting Countries has been largely limited to charging a modest tax on corporate banana exports.
See also
*
Banana republic
In political science, the term banana republic describes a politically unstable country with an economy dependent upon the export of natural resources. In 1904, the American author O. Henry coined the term to describe Honduras and neighboring c ...
References
{{reflist, 30em
Banana production
Tropical agriculture
History of Central America
International trade organizations
Corporate scandals