Extortion, Private and Public: The Case of Chiquita Banana
Lefties have protested against Chiquita Banana for so long that most activists probably forget why they are supposed to hate the company. The company does have a spotty history, especially when it was United Fruit. For decades after the turn of the 20th century, US military interventions in Latin America were inspired by the goal of protecting United Fruit's investments in Cuba, Panama, Nicaragua, the Dominican Republic, Haiti, and Mexico. This is why these wars are called the Banana Wars, and why these countries have been variously dubbed Banana Republics (though the main purpose was always to raise taxes for the NY investment banks that held government bonds).
On the other hand, what these critics don't often point out are the fantastic blessings that the company has brought to the region. It helped eradicate malaria. It has dramatically raised living standards. And its interest in protecting its lands and trade relationships has actually served as a brake on socialistic tendencies toward the looting of private enterprise in the region. It has also been a victim of mass theft during revolutions, as happened after Castro's.
More recently, the company has been in the news because of an unjust attack by the US Justice and State Departments. Following 9/11, the US government made a list of groups around the world that it considered purveyors of terrorism (a list that conspicuously excludes any cells within the world's largest military-industrial complex). As a means of balancing out the many "Islamic fundamentalists" on the list, the United States included known paramilitary groups in Latin America.
Two of the groups so named were the Revolutionary Armed Forces of Colombia (FARC), a leftist group, and the United Self-Defense Forces of Colombia (AUC), a right-wing group. FARC was famous for abducting Chiquita workers and killing them, as well as aerial bombings of Chiquita lands. The right wing used similarly violent methods to bring about political instability. Both are prodictatorship, and both resent the role that private corporations have in limiting their political ambitions.
It turned out that Chiquita was funding both groups. This sounds terrible, until you realize the motivation. It was not to fund terrorists or promote violence, but rather the opposite. Chiquita shelled out protection money to get the paramilitary groups to stop killing and bombing. When the payments started, both groups started calibrating their use of violence depending on the cash flow, which was not small. We are talking about millions of dollars being paid so that the company could do business in peace.
Every international business executive understands what was going on. Paying bribes and being subject to this kind of extortion is just part of what it takes to do business in many countries. This might sound awful, but the truth is that such payments are often less than the companies would be paying to the tax man in the US, which runs a similar kind of extortion scam but with legal cover.
It's true that the paramilitary groups did many bad things with the money they were getting, but these decisions involve balancing acts. What was the company supposed to do? Stand by and let its business be destroyed, its lands bombed, and its employees killed? It is too obvious to even have to point this out (except that this point seems to be entirely lost on the company's critics): of course the company would rather not pay a penny to anyone. It forked money over only when faced with the prospect of violence.
One might say that these paramilitary groups were running a privatized version of the tax system we all know too well.
Therefore, it is outrageous that the Justice Department would target Chiquita Banana for funding terrorist organizations. But, being part of the violent US regime, that is exactly what it did. Chiquita was extorted by the US government and had to pay a $25 million fine in 2007. Seeing the writing on the wall, the company ended all its operations in Colombia, and this was to the benefit of no one: not Colombian workers, nor American consumers, nor anyone else.
But that was only the beginning of the company's troubles. Once the legal precedent was in place, an obscure 1789 edict comes into play. The Alien Tort Statute permits foreign citizens to sue in US courts for alleged bad deeds committed on international soil. Whatever the original point (and the Federalists were not exactly friends of freedom), now the law is used by American lawyers to assemble foreign plaintiffs to sue American companies operating overseas.
These attorneys have assembled tens of thousands of victims of FARC and AUC into a class-action suit against Chiquita that claims damages that could be numbered in the billions, and could even bankrupt the company. Again, who benefits from that? Terrorist groups are not going away, but these kinds of attacks end up hurting the economic prospects of Latin America and thereby the workers and poor in this region too.
As for American consumers, in the end, it is their interests that are being served by all the rough-and-tumble associated with multinational dealings. It's all about trying to bring you and me fruit that is not grown in our backyards, and yet that we want and need for our well-being. Shouldn't we have a bit more regard for the sacrifices and struggles that these companies face toward this end?
United Fruit once employed the US government to do its bidding in Latin America. This is imperialism. Also unjust is a government that persecutes American companies that are doing their best to get by. Chiquita is not only the victim of private terrorists but of violent public-sector extortionists in the name of the war on terror.
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.