Editor’s Note: The following article is based on the Spanish edition of “Empresarios Ecuatorianos del Banano” by historian Lois Roberts. It is a significant publication because of the many misunderstandings about banana companies and their role in economic development. Illustrating this confusion is the book by President Rafael Correa, “Ecuador: de Banana Republic a la No Republic”, in which he argues that a citizens’ revolution was needed to free his country from foreign influence that converted it into a “banana republic”. Lois Roberts and others maintain that Ecuador was never controlled by foreign companies or international agencies. As discussed below, the banana industry led largely by local entrepreneurs transformed this Andean nation and can serve as a model for its future development. --LBC
BY JOHN SANBRAILO
Those interested in the history of Ecuador will be grateful to Lois Roberts for preparing a pioneering book published in Spanish on how it became the world’s leading exporter of bananas. For over sixty years this has been one of Ecuador’s greatest successes, yet the story is not well known or fully appreciated. Building on her many decades of research in Guayaquil, Dr. Roberts demonstrates how national policy-makers, local entrepreneurs, foreign investors and international markets promoted banana production, accelerating the country’s socio-economic development. This book fills a gap in the historiography of an often forgotten Andean nation and provides the context for understanding an important chapter in U.S. cooperation.
How Ecuador and bananas became almost synonymous is one of the most fascinating stories in Latin American history. Yet it has been largely ignored because this country never became the stereotypical “banana republic” dominated by foreign companies, a scenario perhaps more applicable to some Central American countries in the past. Dr. Roberts raises fundamental questions about the conventional view of banana production and the role of the United Fruit and Standard Fruit Companies. She shows what an exception Ecuador has been in the region—a true “Andean Enigma,” as described by economist David Schodt. Her book should encourage greater research on how the banana industry and local entrepreneurs revolutionized a highly traditional society, allowing its bananas to play a role in major world events such as the fall of the Berlin Wall.
Beginning in the late 1940s, the banana boom began dramatically changing Ecuador, encouraging large numbers of people to migrate from depressed rural areas of the Sierra highlands and urban squatter settlements to work on coastal plantations, banana farms, road construction and infrastructure improvements. As a result, the 1950s produced some of the country’s highest economic growth rates marking the only time when international press accounts like that in Time magazine praised Ecuador for a “decade of development and democracy”. One cannot understand the history of Ecuador in the 20th century without appreciating how bananas fundamentally transformed the country, converting this Andean nation from an indigenous to a mestizo society and integrating it into world markets.
A number of observers have noted that one of Ecuador’s most salient characteristics is a deep national pessimism and a pronounced negative self-image. Even referring to a “national success” seems like an oxymoron for many Ecuadoreans, especially in its Sierra highlands. The country has had great difficulty identifying the nation’s achievements and building upon them. This worldview has often misled it into unproductive debates and strident populist rhetoric, leaving its citizens hobbled by a mistaken sense of exploitation, victimization and conspiracy theories that have distorted its own history. Many with Marxist or leftist orientations have accentuated these self-destructive attitudes by re-enforcing the country’s sense that it is incapable of determining its own destiny. Such approaches have contributed to paralysis and an inability to articulate to younger generations positive views of their own achievements. Not encouraging its citizens to learn from important national successes has undermined their ability to promote their own development and modernization.
The history of Ecuador’s banana industry illustrates this phenomenon. Most often it is described in highly negative terms, distorting what is in fact a great national success as presented by Dr. Roberts. In a very short period, the country moved from the almost total collapse of its cacao exports in the early 1920s to become the world’s leading banana exporter in the 1950s and subsequently maintaining its leadership for over sixty years to the present. Today the banana sector represents over 60 percent of its agricultural GDP (USD $1.9 billion) and has consistently been its most important export product after petroleum. Ecuador is the source of about one third of all bananas traded internationally and the fruit sector provides direct and indirect employment to 2.5 million people, or 17 percent of the population.
Unlike other countries, bananas were developed not only on large plantations but also on many small and medium-size farms, thereby opening new opportunities for hundreds of thousands trapped in poverty. This was virtually unprecedented in Latin America. Approximately 70 percent of the area planted in bananas (totaling about 170,000 hectares) is still cultivated by small and medium-size producers. If unregistered farms are included (another 60,000 hectares) the latter percentage is even higher.
Historically the country’s banana sector has been a little-known model of how local entrepreneurs and government officials worked constructively with foreign companies like United Fruit and Standard Fruit in developing an entire new industry while maintaining national control of what became a leading global export. Here is an example from 1948-1952 of how a visionary President and his equally visionary Minister of Economy--Galo Plaza and Clemente Yerovi--successfully established the conditions for the country’s banana development and a social revolution for which they have never received full recognition.
What we see in Lois Roberts’s book is the emergence of dynamic local entrepreneurs who rapidly learned from the technological, production and marketing innovations introduced by United Fruit and Standard Fruit starting in the 1930s, especially those in and around Hacienda Tenguel. Out of this milieu came one of the greatest entrepreneurs in Latin American history-- Luis Noboa Naranjo and the creation of the region’s first multinational banana company, the Noboa Group, which eventually competed on an equal basis with foreign companies, even prevailing over them in some international markets.
As described in “Luis Noboa Naranjo: Profile of a Winner” by Isabel Noboa Pontón, national banana entrepreneurs dominated production and marketing, undermining the view that Ecuadoreans always lose out to multinationals. This is a very different model of development than the one that emerged in Central America and even in Colombia. Yet when one mentions Noboa today, some Ecuadoreans comment on his opposition to labor unions, his reluctance to pay taxes, and his lobbying for government subsidies, rather than any of his major business or export achievements. As with Luis Noboa and others like Segundo Wong, bananas provided the basis for the economic and social advancement of many who came from humble, even destitute circumstances, demonstrating that Ecuador has not always been the exclusionary society so often portrayed.
In the second half of the 20th century bananas opened Ecuador’s tropical coastal plain between the Andes and the Pacific Ocean, more than doubling its agricultural frontier while providing access to land, new sources of income and social advancement for many of its poorest people. The new tropical products developed in these zones would not have been possible without the infrastructure and labor provided by bananas. It was bananas that did more to redistribute land and income than most subsequent government policies, while generating and sustaining permanent employment for well over two million people. Export revenues and tax collections dramatically increased, financing the expansion of the country’s earliest social programs. Bananas produced a revolution by making Guayaquil into the largest metropolitan area with a population today of over three million, and turning Ecuador into a predominantly coastal country.
Perhaps no example better symbolizes the positive impact that bananas had on this society than the family of Luis Felipe Duchicela Huaraca Ramírez (a direct descendant of Atahualpa Duchicela, the last Inca Emperor and Shyri Lord of the Kingdom of Quitus) who as a young man in 1945 was employed by United Fruit’s subsidiary, Compañía Bananera del Ecuador, serving in Guayaquil and Tenguel until 1965. Bananas and the United Fruit Company facilitated Duchicela’s rise in Ecuadorean society, as they did for so many others. This family was able to improve its income and educate its children at leading U.S. universities, again highlighting how bananas made a little-known contribution to social change.
While such successes have been recognized in a few international reports and books such as “The United Fruit Company in Latin America” by Stacy May & Galo Plaza, and “Ecuador: An Andean Enigma” by David Schodt, they have largely been ignored and rarely discussed. Indeed, the centennial celebration of the birth of Galo Plaza in 2006 made almost no mention of his extraordinary achievement in developing the country’s banana industry through his association with the United Fruit Company. For many, this contribution continues to be a “taboo” subject. It is not even cited in the otherwise excellent materials on the banana sector presented by the Asociacion de Exportadores de Bananos del Ecuador (AEBE).
Instead, the literature is dominated by ideologically-driven accounts that have misled many through incomplete and unbalanced analyses, most often produced by non-historians with political agendas. They accentuate the banana industry’s negative impacts, ignore its positive contributions and downplay its unique role in the development and transformation of Ecuador. They reflect prejudices against local entrepreneurs, multinational enterprises, private investors and globalization that are particularly pronounced among Quito’s intellectual establishment and the anti-market biases of some academics. The latter promote ideas presented in the famous novel Ariel by Enrique Rodó, the poetry of Pablo Neruda, the writings of Gabriel García Márquez and lesser-known authors who demonize banana companies and often use them as a foil for their concerns about modernization. When incorporated into the county’s education system and political debates, such attitudes undermine national development, as described so well in “Manual del Perfecto Idiota Latinamericano” and “Fabricantes de Miseria” by Plinio Apuleyo Mendoza, Carlos Alberto Montaner and Alvaro Vargas Llosa.
These tendencies are seen in Carlos Larrea’s “El Banano en el Ecuador”, Oswaldo Albornoz Peralta’s “Las Compañías Extranjeras en el Ecuador”, Steve Striffler’s “In the Shadow of State and Capital”, Carol Pier’s “Tainted Harvest”, Alberto Acosta’s “Breve Historia Económica del Ecuador”, Peter Chapman’s “Bananas: How the United Fruit Company Shaped the World”, Carlos de la Torre’s “Galo Plaza y su época”, and Rafael Correa’s “Ecuador: de Banana Republica a la No República”. While each provides intriguing personal insights, they largely disregard the favorable impacts created by increased incomes and exports produced by the banana sector, exaggerate the political influence of banana companies, convey outdated stereotypes, and lack historic perspective. These writers appear more interested in demonstrating the evils of a market economy than recognizing the significant changes bananas produced for low-income people. Many are self-proclaimed Marxists or socialists who promote conspiracy theories and even paranoia of multinationals while rejecting the benefits of globalization.
In this context, Lois Roberts’s book provides urgently needed perspective and objectivity. Given her long association with Guayaquil and the coast, dating back to 1949, and her previous writings such as “El Ecuador en la Época Cacaotera” and the “Lebanese in Ecuador”, Dr. Roberts brings to this subject the training of a Ph.D. historian who was the first American to be inducted into the country’s prestigious Academia Nacional de Historia. Her career with Ecuador spans the most dramatic developments of the banana industry when she was drawn to Guayaquil by its increasing prosperity. Over the past sixty years, she has experienced Guayaquil’s growth into the country’s largest city and one of South America’s dynamic urban-industrial centers, due in great part to bananas. She is uniquely qualified to write the history of Guayaquil’s greatest entrepreneurs and record how they transformed the country with American and other international support.
UNITED STATES COOPERATION
In a similar manner, the role that the United States played in encouraging banana production and exports has likewise been clouded in mystery and suspicion. Thanks to Dr. Roberts the historic context for understanding this cooperation has now been provided, with its successes and failures, its highs and lows, its triumphs and tragedies. She demonstrates very well that banana development nurtured local entrepreneurship and modernization, although further research is needed on the complex interaction between the growth of the banana industry and U.S. assistance.
The expansion of banana exports, in my view, is one of its most significant American contributions to Ecuador. It is analogous to early United States support for the county’s independence and national consolidation and to the building of the Guayaquil-Quito Railroad during the 1900s that geographically unified its coastal and Andean regions. It is similar in significance to U.S. encouragement to abolish the huasipungo peonage system in the 1960s, thereby facilitating indigenous sociopolitical mobilization as seen today in the CONAIE native federation and its political party Pachacutik.
From the very beginnings of the commercial banana industry in the 1920s and 1930s, United States companies, advisors, investors, aid workers and even Presidents made little-known contributions. For example, some of the most important preconditions were established by the completion of the Guayaquil-Quito Railroad in 1908 led by an American enterprise headed by Archer Harman, the founding of the Ecuadorean Corporation in 1913 by E. Hope Norton, and the opening of the Panama Canal in 1914. The eradication of yellow fever and other diseases in Guayaquil by 1920, with help from the Rockefeller Foundation and U.S. public health doctors, was of critical importance.
The exploratory work of Dr. Wilson Popenoe in 1921 generated new data about the country’s underexploited agricultural potential. The Kemmerer mission from Princeton University in the late 1920s supported reforms that improved Ecuador’s investment climate, as recognized by President-elect Herbert Hoover in his goodwill visit to Guayaquil in December 1928. The publicity surrounding Hoover’s trip, the reports of Popenoe and Kemmerer, the sanitation improvements in Guayaquil, the excitement of the railroad and the establishment of the Ecuadorean Corporation attracted international attention, despite the Great Depression and the county’s pronounced political instability in the 1930s.
At the depth of the Great Depression, the United Fruit Company led by its legendary CEO Samuel Zemurray, made one of the most significant contributions when it purchased Hacienda Tenguel and surrounding lands to convert them into a modern banana plantation. United Fruit transferred to Tenguel its most advanced technology, production and marketing expertise, and scarce capital. While some writers have dismissed this courageous decision as nothing more than United Fruit fleeing banana diseases and labor unrest in Central America, they do not fully appreciate how risky such ventures were in the 1930s. Without United Fruit’s early investments, and later contributions by Standard Fruit and other foreign enterprises, Ecuador would not today be the world’s leading exporter of bananas.
Few other companies would have invested in this very unstable and unknown country, especially given the populist policies aggressively pursued in the 1930s by then President General Alberto Enríquez Gallo. United Fruit even supported pioneering national legislation in 1937-38 that mandated that at least half of its exported bananas be produced on Ecuadorean farms, thereby ensuring the emergence of small and medium-size producers. As Lois Roberts shows, Zemurray and the United Fruit Company, together with Standard Fruit, served as incubators and catalysts for developing the banana industry in the 1940s and 1950s.
As a major supporter of Franklin Roosevelt, Zemurray converted Hacienda Tenguel into a model of corporate social responsibility, a true “New Deal in the Tropics” that has been incorrectly depicted as just another example of multinational exploitation. While Ecuadorean entrepreneurs assumed the lead role in expanding production after the 1950s, they quickly learned from the foreign companies, taking advantage of the export-oriented policies put in place by Galo Plaza that produced the country’s most dynamic period of economic growth and democratic development in the fifties.
Contributing to this unprecedented progress was World War II and the provision of large amounts of U.S. aid to Ecuador to rehabilitate El Oro province after the Peruvian invasion in late 1941, to develop strategic and other commodities needed for the War effort, and to begin modern development programs. In February 1942 the first U.S. bilateral aid agreements were signed to improve public health; to establish Hacienda Pichilingue as a tropical agricultural research center; to develop the country’s transport infrastructure; to expand cultivation of products needed for the War effort, including balsa wood, chinchona bark (for quinine), rubber, and rice. These in turn provided additional stimulus for bananas and other tropical exports following the War.
Building on these precedents, the U.S. provided assistance to Galo Plaza’s initiatives through the new U.S. Point Four aid program (launched by President Truman in 1949), while funding was increased for infrastructure projects from the U.S. Export-Import Bank and the newly formed International Bank for Reconstruction and Development. In the 1940s and 1950s, the U.S. and Ecuador created Cooperative Servicios for Public Health Improvements (SCISP), Malaria Eradication (SNEM), Agricultural Development (SCIA), Education Advancement (SCIE) and Industrial Development (SCIAM). The Servicios assisted many projects that accelerated growth, especially among smaller farmers. The Rockefeller and Kellogg Foundations provided additional assistance that complemented these efforts.
The significant improvements in health conditions on the coast encouraged additional migration and allowed for rapid urban expansion that supported banana production. In the 1940s and 1950s Pichilingue evolved into one of the leading tropical research centers in South America, with assistance from U.S. Department of Agriculture technicians such as Lee Hines and those from SCIA and the Rockefeller Foundation. It pioneered some of the earliest small-farmer technologies for controlling sigatoka and other banana diseases. SCIA technicians Norman Ward, Russell Desrosiers, Robert Smith, Enrique Ampuero, Felipe Orellana, and others, literally saved the banana crop from near collapse in 1956-57 because of rapid spread of diseases.
SCIA helped producers establish the private-sector Asociacion Nacional de Bananeros del Ecuador (ANBE) to expand technical and marketing assistance to those who did not have access to them. This in turn supported a major increase in credit for the banana sector provided through the Banco Nacional de Fomento (BNF) that evolved from the Banco Hipotecario established as part of the earlier Kemmerer reforms. The expansionary monetary policy recommended by the Triffin mission of 1948 provided the basis for the credit growth that was mainly directed to smaller producers.
In the 1960s the Alliance for Progress implemented by USAID and the Inter-American Development Bank increased funding for coastal infrastructure, malaria eradication, rural electrification, agricultural cooperatives, and research and extension that further accelerated banana development. This facilitated the shift from the Gros Michel banana to the more disease-resistant Cavendish by establishing enterprises to facilitate marketing of the new variety. At the same time, the Alliance supported policies that were not always favorable to banana exports, such as Import Substitution Industrialization that discriminated against investments in the agricultural sector and promoted agrarian reform that unintentionally encouraged land invasions that disrupted production. As a result of these protectionist policies, changes in banana markets, the advent of petroleum exports in the 1970s, an overvalued exchange rate, and the rise of a military government, the banana sector stagnated but survived throughout the 1960s and 1970s showing its great resiliency. As explained by Dr. Roberts, this was due to dynamic entrepreneurs like Luis Noboa Naranjo who, despite being exiled by the military government in the seventies, kept the sector growing by developing new markets in Europe, especially in the communist countries of Eastern Europe through innovative barter deals.
ECUADOR’S SECOND BANANA REVOLUTION
The international debt crisis of the 1980s brought greater recognition of the damage done to exports and employment by protectionist policies and the overvalued exchange rate. As a result of fundamental changes in international policies, new trade liberalization and market reforms were gradually implemented starting in the mid-1980s with the León Febres Cordero administration. They were accelerated during the Administrations of Rodrigo Borja and Sixto Durán Ballén in the late 1980s and 1990s, greatly stimulating the growth of exports and creating what one writer termed “Ecuador’s second banana revolution”.
Again, we see a combination of national initiatives with little-known American political and technical support. Following successful policies in Chile, it was Ronald Reagan who encouraged President León Febres-Cordero to accelerate trade liberalization and market reforms that were undertaken from the mid-1980s through the 1990s. This was similar to John Kennedy’s efforts in the early 1960s in urging President Carlos Julio Arosemena to eliminate the huasipungo system and initiate land reform. The change in economic policies in the late 1980s and 1990s provided the incentives to increase investment in banana production and encouraged the introduction of new technologies that further consolidated the country’s leadership in banana exports, dramatically expanding its share of international markets, especially following the fall of the Berlin Wall in 1989.
American economists led by Morris Whitaker of Utah State University (financed by USAID) provided the most important technical advice for formulating these reforms, working through the Ministries of Agriculture and Finance and various private groups like Fundación Idea, FUNDAGRO, PROEXANT, and Fundación Ecuador. Given the expansion and diversification of the country’s exports during these years, Whitaker and his team made one of the most significant contributions since the Kemmerer mission of 1926-27 and the Triffin mission of 1948. It was national policy-makers, however, who actually implemented their recommendations and made them a success with support from private sector leaders and the United States PL-480 program.
These measures helped the Noboa Group and others increase banana exports to the European Union and to Eastern Europe and Russia, well ahead of other companies. During this period Segundo Wong opened the Chinese and Asian markets to bananas and positioned Ecuador as an early leader in that region. As a result of the country’s growing exports to the EU in the 1990s, there emerged what came to be called the “Banana War” as the EU limited imports, threatening the sector’s continued growth and development. This trade dispute intensified up to Ecuador’s victory in the World Trade Organization (WTO) in 2001, which forced the EU to provide greater access to its banana markets, although intermittent disputes have continued to dilute these gains during the past decade.
Here again the United States provided important assistance in disputes with the EU. The leadership of the Clinton administration, through its United States Trade Representative and the active lobbying by Chiquita (formerly the United Fruit Company), helped Ecuador with what the World Bank indicated was one of the most significant trade accomplishments of any developing country in WTO history. Yet Ecuador’s triumph in the “Banana War” went almost unnoticed, further demonstrating how difficult it is to focus on this country’s achievements.
At the same time, the dispute with the EU almost bankrupted the Chiquita Company, while Ecuador emerged with one of the greatest commercial victories in its history. In these years it was even rumored that the Noboa Group might purchase Chiquita. One of the great ironies in the history of bananas would have been the former United Fruit company--the symbol to many of American imperialism--being absorbed by a little-known upstart from Ecuador founded by Luis Noboa, so similar in many ways to Samuel Zemurray. Both played key roles in developing the commercial banana industry that produced fundamental changes in the Ecuadorean economy and society.
As the country has moved into the 21st century, newer challenges have emerged. As a result of the WTO ruling, international human rights groups began focusing more attention on the labor practices of Ecuador’s leading banana plantations and became very critical of abuses, although some may have been exaggerated for political purposes. Since the inauguration of President Rafael Correa in January 2007, the trade reforms that led to a dynamic banana sector have been demonized as a “long neoliberal nightmare” and gradually reversed, with a return to the protectionist measures that undermined the country’s agricultural growth and exports in the 1960s and 1970s. Most economists now recognize that protectionist policies increase costs to consumers, produce windfall profits for selected enterprises favored by the government, subsidize inefficient industries, and weaken the country’s competitiveness.
In this context, major questions have arisen: Will inward-looking protectionist policies weaken Ecuador’s comparative advantage as it confronts increasing banana competition from the Philippines, Colombia, Costa Rica and others? Will Ecuador in fact lose its world leadership to the Philippines, which has come to dominate banana exports to the growing Chinese market due to its lower costs and geographic proximity, despite earlier successes of Segundo Wong and his group? Or will the resurgence of fungal diseases (“Panama disease”) in the Philippines provide new opportunities to Ecuador, as hurricane damages in Central America and the Caribbean have done in the past? Will further progress be made to expand banana markets in EU countries or will they too continue to be limited despite WTO rulings? Will the Correa government follow through on threats to nationalize unlawful exporters or other parts of the banana industry?
With its large number of small and medium-sized producers, can Ecuador meet the labor and environmental certifications that are increasingly required by many buying countries, thus increasing production costs? In the face of an administration that is weakening the investment climate, can Ecuador modernize outdated banana policies and provide greater incentives for stimulating broader introduction of productivity-enhancing technologies that lower costs and combat diseases? Will it continue to embitter relations with foreign investors while rejecting one of the country’s greatest production and export achievements? In its search to save the country, will the Government in fact allow the banana sector to decline and lose its international competitiveness? Will this sector become one of the battlegrounds and causalities of the citizens’ revolution, as is happening in petroleum, mining and other areas?
At the same time, will the 21st century generation of banana leaders be able to move beyond past provincial attitudes and better articulate the great achievements that their enterprises have made? Can they graduate to a new level of development, rather than just preventing the country from becoming a “banana republic” or depending mainly on markets like Russia and