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The Economic Empire of the Tropics

A History of my indirect ancestor Minor C Keith, bananas, railroads, Central America and the institutions he founded: United Fruit Company (Chiquita) and the International Railways of Central America (IRCA).

I recently obtained a 1976 Arno Press reprint of the 1929 Doubleday book The Romance and Rise of the American Tropics by Samuel Crowther. This is an interesting history of Central America. It devotes an entire chapter to Minor Cooper Keith and mentions him in numerous other places. The author appears to consider Keith to be the single most important individual in the history of Central America. Prior to Minor C Keiths intervention, the history of Central America had been one of poverty

Minor C Keith built the first transcontinental railroad across Central America, in Costa Rica with his uncle Henry Meiggs. Henry Miegs, had built the railway between Santiago and Valparaiso in the South Anerican country of Chile (too bad I didn't know that when I was in Santiago) as well as the many other railways in Peru up into the Andes, including the Oroya Railway which rises 15,200 feet, and abolished taxes and revolution in Peru. He not only continued the construction on his own credit when the government of Costa Rica ran out of money, he rearranged the countries debts itself. At least four thousand men died in the construction of the first 25 miles of that railroad; out of the first seven hundred men he brought down from New Orleans, all but 25 died in Limon. In those days, people did not know that mosquitoes carried yellow fever and malaria. By engaging in massive sanitation efforts which included clean water supplies, sewage systems, and landfills he was able to make the swamps of the Carribean coast inhabitable. Minor C. Keith began work in 1871.

Minor C Keith founded the United Fruit Company, one of the early multinational corporations, which is now known as "Chiquita Brands International", a household name. He is responsible for the bananna as we know it. A few banannas had been imported to the US before hand but they were curiousities that were considered to be unhealthy (and by the time the reached the consumer, they probably were); even in central america they apparently were not appreciated. Keith imported the variety know widely cultivated to Costa Rica from Colon. Then he organized the massive infrastructure needed to transform unusable, even deadly, jungle land into plantations and the ground transportation (including tramways, railways, and ports) which could deliver banannas into the holds of the great white fleet, the first fleet of refridgerated steamships (another of his creations), within 60 hours of being picked. He also organized the distribution and marketing of the banana.

Minor C Keith, and the people around him, probably built most of the railroads in central america. He organized the railroads into the International Railroads of Central America with the goal of being able to ship things by rail from anywhere in central america to the United States. He rearranged the finances of many central american countries. He also started a chain of general stores. He married the daughter of a former president of Costa Rica, Christina Castro. He became involved in archaeology when his construction projects uncovered ancient burial sites; upon his death, he donated the worlds "finest collection of ancient indian gold" to the American Museam of Natural History of New York.

I was also interested to learn from the Crowther book that the revolution in Central America was due in large part to the aristocracy (in this case the creoles, spanish who were not born in spain) feeling they had been disrespected by the rulers of their home country. Like in the United States, they did not really want a divorce from their home country - they just wanted to be treated with the respect due a real citizen. The creoles sent their children to spain to be educated and in many ways acted more spanish than the spanish themselves, just as the aristocracy of the future United States of America acted more English than the English. When the US colonies revolted against the stamp act imposed on them by England, they were revolting not against being taxed but against being taxed without even being consulted. See the PBS "liberty" series for more on the US revolution. It appears, however, that the revolution on the part of Central America was almost accidental and largely the result of the colonies to the north and south revolting. Unlike the American colonies which evolved from British culture which, although a monarchy, had centuries of traditions of citizen involvement in government (such as parliament), the spanish colonies had been accustomed to a style of government which was strictly imposed from the top. So when they became independant and tried to institute democracy, it did not work and decades of bloodshed followed. There was also the state imposed religion which resulted in considerable animosity even at the local level when the state mandate was removed and a variety of ethnic groups resulting from the inbreading of spanish, negros, and indians. And there was poverty and widespread disease. Only Costa Rica escaped from much of the bloodshed.

Some quotes from Samuel Crowthers book follow. Most pertain directly to Minor C Keith or place his accomplishments in context.

Minor Cooper Keith ... was the first to learn that the only way to get something out of Central America was first to put something in. [Page 144] ...
[Minor C Keith] is to be considered more as a creator of wealth than as an accumulator of it. With him, as with all truly great pioneers, the money he earns is an incident to the work that he does.

With him begins the story of solid progres toward prosperity. [Pages 160-161].

For centuries these domains have been ravaged from without and from within under the delusion that they some-where held fabulous wealth. The spaniards conquered and ruled them in the notion that they could gain wealth. About all that they got were the gold trinkets from the Indians. Spain put more money into Central America than she took out. [Page 10].
...for the story of the Caribbean, until lately, has been one of blood. [Page 27]
The American tropics have always held out the lure of wealth but they have no wealth for the asking. Spain held her territory preserving a vision againsta a fact. The other powers fought her for that vision and made conquests that never returned even the value of the powder and shot expended. And finally when independence came to thes geographical divisions which were neither nations nor colonies they too fought amongst themselves in pursuit of a mirage. The fable of the wealth of the Indes has never died. It persist even to-day - even though what wealth these countries now have is almost wholly the result of North American effort in developing products that the eighteenth century scarcely knew and then finding purchasers for them in the united states. Until this modern commerce grew up these countries had almost nothing to offer the world. Yet that nothing was bitterly fought for. Hundreds of lives were lost in trying to thurst settlements on shores where white men could not live as they then knew how to live and where they could not have fed themselves. [pages 49-50]
That worthy [M. Felix Belly, who misrepresented himself as the personal representative of the Emperor of France] got both Martinez of Nicaragua and Mora of Costa Rica to cede to him the exclusive right to build a canal, to place their countries under the protection of France, England and Sardinia and to issue a proclamation for circulation in Europe denouncing the imperialistic designs of the United States. This remoarkable proclamation was only the forerunner of thousands of similar proclamations motivated by equal sincerity which have been issued by odds and ends of presidents, revolutionists and other rascally adventures in these Central American countries and which from time to time are still issued in Nicaragua as well as in the other countries of the Caribbean. [Page 125]
No sooner had the United States of Central America been organized than it was offered a loan by British bankers. That was the policy. When the federation broke up this loan was assumed fractionally by the several states and rather soon each of these states was offered loans under a well-considered policy that in this manner the influence of the United States - which had no money to lend - could be nullified. These loans will be described later in this chapter. It is enough here to say that together they form a most remarkable story of financial imperialism. None of these governments knew responsibility. Many of the military leaders who became presidents or high officers could neither read nor write. Few of them know more than vaguely that there was a world beyond their borders. They executed loan agreements with only hazy notions of what they were all about except that they were going to get some money. As to what might happen afterward - they neither knew nor cared. Some of those loans still hang on in nearly their original form. A few have been paid in part or fefunded but, except in Nicaragua, the payments or successful funding operations have been due solely to the efforts of one man - an American by the name of Minor C. Keith. He has played an infinitely more important part than any other individual both in developing these states and in rescuing them from themselves. Of him more later. [Pages 134-135].
It so happens that most of the writing about the Caribean has been by historians who were not at all concerned with economics (or who tried to translate economics into terms of politics) or by romanticests looking for striking yarns. [Page 205].

Land titles are a source of unending trouble. Nearly everywhere a squatter may gain a right by proscription in a year. And utterly regardless of how recently he came on the land, he can summon a cloud of witnesses to swear he has been there a year or more. Every American company which has land reserves most be continually scouting for squatters - else they will wake up to discover that they have lost their land. A favourite device is for a group of politicians, after some construction work has been started, to lay clam to a bit of land which the company must have, else entry to its construction will be blocked. These claims are bought without reference to their validity because the first step towards setting up a claim is taking in the local judge on a percentage basiss. Similar political practices are, however, not entirely unknown in the United States - and on a scale which leaves the Central Americans aghast.

One of the largest obstacles to foreigners doing business in the Carribean countries is this multiplicity of lawsuits in which they inevitably find themselves. There are a dozen lawyers for every possible suit just as there are a dozen doctors for every illness. Legal business has to be created - and it is created. Many of the suits have to do with concessions and much of our misconception of the relation of American companies with the governments of these contries arises out of the wrong use of the words concession and exploit. Every American orator denouncing Latin-American policies talks of concession hunters, greedy concessionaires, and exploiters of backward peoples. It seems to be taken for granted that a concession is something which was had by bribery and that its exploitation is a continued robbery of the people of the country which granted it, and that a concession is always a monopoly. Concesio'n is the Spanish term for a contract made with a government, and I am aware of no concession which does not carry with it as many liabilities as privileges. It corresponds almost exactly to the word "fanchise" as it is used in the united States. No one in the United States can go forward with a public utility or other enterprise of a public nature without first being granted a franchise. A concession ussually has to do with fixing for a term of years the rate of export tax upon the product which the company proposes to raise and take out of the country. This is an absolutely necessary contract with which we are unfamiliar because we do not have export duties. Before a company can start raising bananas or drilling for oil it must know approximately what taxis it is going to pay, else it will not know whether going into business is worth while. The railroad concessions are on exactly the same basis as those on which we constructed our transcontinental railroads. That is, the government, for each kilometre of railroad constructed, grants to the company a certain number of hectares of adjacent land in, as a rule, alternate squares so that first comes a section of company land, then a section of government land, and so on. This land when granted has no value. The coming of the railroad gives it value. It is usually also povided in roalroad contracts that no concession will be given to another railroad company to build within fifteen or twenty miles of either side of the proposed railroad. To this extent the railroads might be called monopolies, but since most of these roads are extremely expensive to build and the profits fome only on a long pull, the monopoly feature is meaningless. For there is hardly a through railroad in Central America on which half a dozen companies did not fall down before its completion. In mining or oil contracts the company stipulates that it will make certain improvements and will pay a certain fixed tax upon its production, and ina all cases where government land is granted the undertaking is to improve within a specified period. It is a method of attracting capital - of developing into something that which previously was nothing. Americans are the only people who do not seek monopolies, and this for the reason that our business men and bankers have reached a sufficent stage of enlightnment to know that monopolies do not pay. As for graft in the obtaining of concessions, if it exists at all it is purely individual and considerably less than that which usually prevails in the United States and other parts of the world. Contracts or concessions give only the privilege of spending money - usually large sums of money - and only a fool pays graft for the right to spend money. A number of fools drift into the tropics. They are not fool proof.

Explotacion means something quite different from the English exploit. In English we have a definition which carries a feeling that the action, if not unfair, is at least without full regard for the rights of the other fellow - at his expense-taking all and giving nothing. In spanish the word is used as "improve" or "develop." If a Honduranian buys a piece of ground and builds a house, he is said to be exploiting the ground. There is no suggestion that he is doing anthing wrong. A columian will say than an American oil company is exploiting the petroleum fields. He does not meean that they are ruthlessly devastating them but simply that they are getting out the oil. [Pages 213-216]

Decades after Minor C Keith died, the government of Guatamala siezed "unused" lands belonging to the united fruit company which was probably directly responsible for 15% of the countries revinues. The nature of banana growing at the time meant undergoing a herculean effort to build a plantation which would produce fruit for only ten years (not exactly sustainable agriculture) before they had to move on and build a new plantation, leaving the jungle to grow back. So the united fruit company would of necessity have owned a large amount of land that was not actively in use. The United Fruit Company complained to the US government which through the CIA in 1954 arranged the overthrow of the allegedly communist Guatamalan government. This took place during the "Red Scare" era; whereas previously American foreign policty had been based on the Monroe Doctrine which forbid the non democratic european powers from medling in the largely democratic western hemisphere (at the time it was instituted, Central America was attempting to be democratic), American cold war foreign policy was now essentially the same but directed at Russian Communism rather than European monarchies. Alexander of Russia and Prince Metternich of Autria's "Holy Alliance" which joined the european powers "to put an end to the system of represntative gorvenments, in whatever country it may exist in Europe, and to prevent its being introduced in those contries where it is not yet known" was replaced by Kruschef's proclamation that "We will bury you". Unfortunately, the government which the CIA overthrew was one which promoted the rights of the working class (in fact, the land had been seized to give to the landless). This later lead to a lot of bad publicity for the company and the U.S government, probably due in large part to US college professors with strong socialist leanings themselves who used this as an example of the the imperialism of US government foreign policy supporting the interests of corporate capitalism at the expense of human rights. I am reminded of a lecture by Noam Chomsky which I attended on the campus of UVA in which he made some quite compelling arguments of this sort. Samuel Crowthers history, written before these events, however, portrays a view of Central American history and the role of american capitalism there which is quite different than that advanced by the likes of Chomsky. He even entitles a chapter (which I haven't read yet) "The Propaganda of Imperialism". Much was made of the fact that the US overthrew the "elected" government of Guatamala. Traditionally, there was nothing democratic about "elections" in Central America, not even in Costa Rica. I don't know if this had improved by around 1944 in Guatemala. After the bad publicity surrounding the Guatamalan incident, United Fruit Company changed hands and names to United Brands International and then in 1975, after company president Eli Black made a free fall descent from his office in the 44th floor of the Pan Am building in New York, Chiquita Brands International and sold off its Guatamalan division to a competitor.

Incidently, I think the largest owner of Chiquita is now American Financial Group, the huge pension company which is what remains of the "Pennsylvania Railroad" corporation which no longer own railroad. So the company which was founded by a railroad is once again in the hands of a railroad. Thanks to my friend Keith Pomroy, a financial writer and analyst and railroad historian, for the info owhich allowed me to realize the irony when I spotted their name.

There was a significant synergy between Keith's railroad and fruit companies - each depended on the other for their existance.

I caution the reader that neither this history nor any of the referenced works in this section are necessarily an acurate and unbiased depiction of the events in question. This web page is in part my notes as I conduct research on the matter. I have interwoven history from a variety sources including a couple obituaries, family records, Samuel Crowther's book, and various web sites.

This document was orignally writen May 8, 1998.

This file is maintained by Mark Whitis (whitis@freelabs.com).

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