Owners of the United Fruit Company forestalled agrarian reform in Guatemala by using the Central Intelligence Agency to overthrow the legitimate government of Jacobo Arbenz Guzmán.
Ownership of land in Guatemala is among the least equitably distributed in the Western world. The vast proportion of foreign-owned holdings not in cultivation has always tempted reformers. As a principal landholder in Central America, the United Fruit Company (UFCO) was particularly vulnerable to pressures for land reform.
The regime of President Jorge Ubico Casteñeda was supported by the landed aristocracy and foreign-owned agribusinesses, which Ubico allowed to operate with almost complete autonomy and without taxation. When it was expedient, Ubico reduced the daily minimum wage to be paid to field hands and had leaders of reform movements executed. To maintain stability, under these social pressures, in the region surrounding the Panama Canal, the United States government contributed generously to Guatemala’s military establishment.
Following this repressive, almost feudal reign that ended with Ubico’s forced resignation in 1944, the governments of Juan José Arévalo Bermejo and Jacobo Arbenz Guzmán seemed socially visionary. Arévalo introduced a social security program, expanded rural education, and instituted open elections. He encouraged cooperatives to aid the peasants whose ownership of tiny parcels of land maintained them in poverty and dependence on foreign employers in a country that showed, by its exports, that it could be self-sustaining.
Pressure for social reform led inevitably to rising feeling against foreign-owned corporations such as UFCO and its subsidiary, the International Railway of Central America
On June 27, 1952, Arbenz introduced Decree 900
The United Fruit Company had been allowed to claim a very low taxable value for its land to reduce its tax liability, and it was this taxable worth that was used to set the payments for expropriated land. The company thought this to be inequitable and asked the U.S. State Department to intervene. The State Department demanded millions of dollars more, asking for $75 an acre. The government of Guatemala had set the price at $2.99 an acre. Because the land in dispute had been acquired by UFCO only twenty years earlier for $1.48 an acre, Guillermo Toriello
While the governments of the two nations argued this question, the United States saw other disturbing developments in Guatemala. Many exiled communists, particularly from Peru and Chile, lived in Central and South America at the time. When Arbenz formed agencies to manage his agrarian reforms, he selected some of the educated and willing workers he needed from among these communist émigrés. He resisted pressure from the United States to purge them from his government, saying that Guatemala was a country where all views were welcome.
In May, 1954, a shipment of weapons from Czechoslovakia arrived in Puerto Barrios, Guatemala, ostensibly to replenish the armories of the Guatemalan military, which had been barred from buying arms from the United States since 1948 as a result of a treaty disagreement. This shipment alarmed many in the United States, who saw it as part of a communist plot to infiltrate Central America.
In the United States, the fear of encroaching communism was having a profound effect on internal policy. Senator Joseph McCarthy
Owners of UFCO included several who occupied positions of prominence in the United States government and the United Nations. The Lodge family was heavily invested, as were the Dulles brothers—Allen, director of the CIA, and John Foster, the secretary of state. When further expropriations of idle land owned by UFCO were made, the CIA was directed to plan and execute a clandestine operation to effect a coup in Guatemala. This action, called “Operation PBSUCCESS,” was intended to protect the holdings of United States corporations and discourage further growth of communist influence in Central America.
On June 18, 1954, Guatemala was invaded by rebels from across the border in Honduras following aerial harassment of the capital and the port of San Jose by aircraft owned by the United States and by the United Fruit Company. The capital was defended in desultory fashion by six obsolete warplanes of American manufacture.
When the assault began, Ambassador Henry Cabot Lodge, Jr., the United States’ delegate to the United Nations Security Council, was president of the council. He introduced a motion to transfer consideration of the Guatemalan “affair” from that international arena to the Organization of American States, which was dominated politically by the United States. He argued that the Guatemalan situation constituted a civil war. The Soviet Union vetoed the motion, representing the affair as an American effort to stifle a commercially uncooperative government.
France introduced a resolution ordering a truce and restraining Security Council members from further participation in the conflict. That action soothed the fears of the nations surrounding Guatemala but had no effect on the actual conflict. On June 27, 1954, Arbenz went on Guatemalan radio and surrendered. Many of his countrymen missed the broadcast, which was jammed by the CIA.
Carlos Castillo Armas replaced Arbenz as president of Guatemala. In a short while, the expropriated lands were returned to the foreign corporations, and labor unions were disbanded. There was widespread bloodshed as workers sought in vain to retain the real and potential reforms gained during the Arévalos and Arbenz regimes. A military response, supported by assistance from the United States, was necessary to restore order. The military continued for decades to sustain the conservative government of Guatemala and offer protection to foreign investments there.
Operation PBSUCCESS had three primary effects on the economy of the Western Hemisphere. First, the two desired outcomes of the coup—restoration of UFCO property and rejection of communist influence in Guatemala—were secured. The pre-Arbenz system of agricultural management was restored to the United Fruit Company and its sister corporations. In an agreement negotiated with President Armas himself, UFCO recovered all of its expropriated lands, and a new, modest income tax plan was negotiated to the company’s benefit.
A second effect on the Guatemalan economy was caused by President Armas’s action to cancel the registration of 533 union
The third important effect of the coup on the Guatemalan economy was the growth of a strong and lasting enmity to the new regime and to the United States’ involvement in its emergence. The new government became synonymous in people’s minds with the frutera, as UFCO was called in Latin America. Modern movements advocating human rights and social reform largely bypassed Guatemala, lest they also be painted by the United States as “communist” and similarly attacked.
As a consequence of these changes, the social and economic situation in Guatemala returned to what it had been in the first half of the twentieth century. Land ownership, skewed heavily in favor of a few large landowners before Arbenz’s Decree 900, was again so skewed. Most small landowners were unable to support their families on the parcels available to them, many on infertile mountainsides.
To earn the sustenance their families required, these small landholders worked on the plantations. Lacking other lodging in the lowlands, many moved their families temporarily directly onto the fields they worked. There they were vulnerable to the health effects of chemicals that, in the absence of modern ecological controls, were generously applied.
Guerrillas intent on maintaining instability engaged in ongoing efforts to cripple the activity of the large foreign companies and to discourage new investment. Domestic and foreign firms increasingly sheltered their capital by moving it out of Guatemala. The necessities of life, such as fuel and food, increasingly had to be imported, driving Guatemala’s economy downward and its debts to others upward.
One lasting effect of the reversal of the reform movement by Operation PBSUCCESS was a greater availability of labor in the cities, as rural people fled the oppressive conditions and starvation wages of the plantations. Unfortunately, the instability of the country’s government discouraged investment to utilize this resource.
The political climate of Guatemala following Operation PBSUCCESS made it impossible to establish a large tax base in the regions actually producing the profits for the foreign owners. Without tax revenues consistent with the value of the land and its products, governmental investment in social, educational, and developmental programs was severely limited.
These severe conditions on the farms resulted in the same migration to the cities found elsewhere in Latin America. Unfortunately, the unsettling factors caused by the militantly conservative government prevented evolution of social programs and infrastructure necessary to keep pace with this influx. Poverty and substandard living conditions plagued cities as well as farms.
Growth of the economy, which was near 5 percent in the years immediately after the coup, ceased. External debt, which was $51 million in 1960, rose into the billions of dollars. Foreign aid declined sharply as the nations of Europe and North America experienced tightening in their own economies. Improvement in the social or economic lot of the people of Guatemala seemed unlikely until something akin to the reforms of 1944-1954 recurred.
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Adams, Richard. Crucifixion by Power. Austin: University of Texas Press, 1970. Covers the period 1944-1966. A comprehensive study of demographics, economics, politics, social development, and government of Guatemala. Includes many tables of economic and demographic interest and thorough investigations of the development of power and wealth. -
Barry, Tom. Central America Inside Out. New York: Grove Weidenfeld, 1991. Barry presents discussions on the government, politics, foreign policy, human rights, military, police, economy, social development, foreign influence, and U.S. military aid for the seven Central American states. Included are discussions of the contributions of the church, guerrillas, civilian police, and communications media to social and economic growth. -
Barry, Tom, Beth Wood, and Deb Preusch. Dollars and Dictators. New York: Grove Press, 1983. A popularized study of the effects that U.S. corporations and the U.S. government have on social programs, agriculture, politics, and economics in the Central American countries. Included are tables and lists of investments by corporations in Central American nations. -
Cullather, Nick. Secret History: The CIA’s Classified Account of Its Operations in Guatemala, 1952-1954. Stanford, Calif.: Stanford University Press, 1999. History of the CIA coup in Guatemala, originally commissioned by the CIA itself as a classified document for internal use only and later released to the public. Mandatory reading for students of the coup. Bibliographic references and index. -
Galeano, Eduardo. Open Veins of Latin America. New York: Monthly Review Press, 1973. A historical account of the exploitation of Central and South America by outsiders. Presented are studies of the opening, exploitation, and modern development of the regions as various mineral and agricultural products were discovered and brought to market. Written from an advocacy viewpoint showing strong antipathy to exploitation. -
Horowitz, Irving. Latin American Radicalism. New York: Random House, 1969. A series of reports on leftist and nationalist impulses in Latin America. It begins with a study of the politics and government of Latin America in the period immediately after World War II. Treatises on social conditions and economic conditions follow. -
Schlesinger, Stephen, and Stephen Kinzer. Bitter Fruit. 2d ed. Cambridge, Mass.: Harvard University Press, 2005. The authors present a minutely detailed account of the events leading to the CIA’s coup against Jacobo Arbenz. Written as an exposé of the “dirty tricks” in the action, the book still serves as an important reference for the minutiae of the period surrounding the coup.
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