past its expiration date would have it. Rather, he finds fault with the country’s businessmen and women for lacking entrepreneurial verve. According to Acosta, this shortcoming has held Ecuador back—especially during the Great Depression, but also at other times.40
As a rule, the apparent defects of entrepreneurs are a weak explanation for disappointing economic performance, when and where it occurs. Along with other economists, Baumol emphasizes that firms and individuals can be counted on to seize opportunities for profit that come their way. If they are not venturing into new markets, for example, then the rewards for doing so must be weak.41 Such has been the case at times in Ecuador, not to mention other Latin American nations, and Acosta undoubtedly would have arrived at better insights by examining economic incentives more and speculating less about the people responding to those incentives.
If businessmen and women in Ecuador really have been indolent and if the 1930s were an inauspicious time for entrepreneurship, no one seems to have told Marcos, Noboa, and others like them. Based in a port city that for centuries was remote both from its most important markets and from political capitals, these individuals never acquired the habits of rent-seeking and other unproductive pursuits. Instead, Guayaquil’s entrepreneurs have specialized productively, seeking out and serving customers overseas.
Cities with a long tradition of productive entrepreneurship are rare in the banana-growing regions of the Western Hemisphere. There were no such settlements along the Caribbean coast of Central America when United Fruit and Standard Fruit started operating in the region. In addition, Guayaquil differed from cities along Colombia’s Caribbean coast. According to Bucheli, Cartagena, which well into the nineteenth century was a slave-importing terminal, was not a place to cut one’s teeth in foreign trade. The area to the northeast, the same author adds, was “stagnant or decaying prior to the banana export industry,” and Santa Marta languished between the wars of independence, during which it was a pro-Spanish bastion, and the turn of the twentieth century, when United Fruit’s arrival put an end to the city’s “state of abandonment.”42
One by one, the geographic and environmental impediments to economic progress have been overcome in western Ecuador. Yellow fever and other illnesses no longer prevent large numbers of workers from gathering in the same place, as happens routinely on banana farms. Notwithstanding the tolls charged for use of the Panama Canal, which producers in the Caribbean Basin need not reckon with, the waterway constructed under budget and ahead of schedule by the U.S. Army Corps of Engineers has been an enormous boon to Ecuador since it provides a direct route to markets bordering the Atlantic Ocean.
Once obstacles to development were removed, the commercial strengths and orientation of Guayaquil could be brought into play in the banana trade. Finance and other business services, which entrepreneurs in the port city began to provide during the cacao boom, did not disappear once the boom was over. To the contrary, “a financial infrastructure easily adapted to support banana exports as well as individuals with experience in the production and export of agricultural products” was in place,43 which made international commerce much easier. Without local brokers adept at arranging transoceanic shipping, each and every aspiring banana exporter would have needed refrigerated vessels of his or her own. The expense of these vessels undoubtedly would have kept many out of the business.
Guayaquil’s vocation for commerce has worked to the advantage of the surrounding region, the country as a whole, and even foreign customers of Ecuadorian products. Perhaps limited economic development during the centuries when the costa was remote and insalubrious was the price to be paid for the acquisition in the city of the habits of productive entrepreneurship. If so, sacrifices in the past have resulted in sizable dividends. Represented by individuals such as Noboa, Ecuador has been the world’s leading exporter of tropical fruit since the 1950s, without ever being a corporate dependency.
CHAPTER 3
Never a Banana Republic
As large and as diverse as Colombia is, its candidacy for the ranks of banana republics was never promising. United Fruit might have been unrivaled in the northeastern part of the country during the first four decades of the twentieth century. However, the company exercised much less influence hundreds of kilometers away in Bogotá, especially compared to what it wielded in various Central American capitals. South of Colombia, Ecuador is smaller and less developed, a place where a foreign firm might seize and hold the commanding heights of the national economy and from time to time act as a political kingmaker. Yet the country never has experienced this kind of subservience, which has been examined from various scholarly perspectives.
Although he offers no specific observations about banana republics, economist Andrés Rodríguez-Clare has analyzed the multiple outcomes that can happen if an impoverished nation hosts a company from an affluent part of the world. Investment occurs and technology is introduced, to be sure. However, sizable gains for the host country are not guaranteed. It is possible, for instance, for the multinational to decide that its interests are best served by employing unskilled labor and little else from the local economy to produce “simple final goods,” such as a number of farm products. Even if more complex ventures are undertaken, inexpensive communications with headquarters far away might deter the firm from building up factors of production that are locally scarce, including the human capital needed for management and marketing. If so, overall economic progress in the host country may well disappoint.1
Observations along these lines do not necessarily apply to the tropical fruit business. The operations Chiquita, Dole, and Del Monte have in Central America are intensively administered and most managerial jobs are held by local people. These people are as capable as their counterparts in places like the United States. Moreover, their familiarity with on-the-ground realities, commercial and otherwise, is often of great value and can be hard for foreigners to acquire. Transnational companies know that bringing in an expatriate usually makes less sense than recruiting a talented individual from the host country and training him or her as needed, which is why the local workforces of those companies do not consist only of unskilled laborers. Of course, local hiring is the norm for Latin American firms doing business in their respective nations.
Rodríguez-Clare’s analysis, which does not address foreigners’ possession of land, stands apart from the arguments of many authors who focus on the prolonged control of vital natural resources by multinationals in places like Central America. Writing about Honduras, for example, John Soluri contends that this control has had lasting and adverse effects.2 Similar effects are possible today in Sub-Saharan Africa, where an indeterminate number of large rural holdings now belong to Middle Easterners and other outsiders.3
In the tropical fruit sector, resource ownership has been consequential not only for exporting nations such as Honduras. For decades, United Fruit safeguarded its control of the banana industry as a whole by locking up much of the best agricultural land in the Caribbean Basin. This dominant position traced back to Minor Keith’s acquisitions of Central American real estate during the 1800s and lasted through the 1960s, when United Fruit still exported a large share of the region’s bananas and grew much of the fruit it shipped overseas on its own plantations.4 In northeastern Colombia, corporate control of farmland and its produce took a form other than outright ownership. As explained in this chapter, United Fruit monopolized exports from the region by the way it structured production contracts with local growers.
This monopoly broke down during World War II, when North America and Europe halted imports of tropical fruit, and could not be reestablished after hostilities ended and normal commerce resumed. In western Ecuador, no foreign company ever replicated either the huge plantations and land reserves of Central America or production contracts of the sort used to suppress competition in northeastern Colombia. Additionally, Ecuadorian entrepreneurs have engaged in international
