Business & Finance: Banana Road

To carry its 50,000,000 bunches of bananas yearly from plantations to the sea, United Fruit Co. owns nearly 1,160 miles of railroad in Jamaica, Colombia, Costa Rica, Panama, Honduras and Guatemala. In Guatemala, where the Fruit Co. has more than 3,000 men working on 16,000 acres of bananas, it owns 137 miles of track. The principal Guatemalan banana road, however, is International Railways of Central America, which operates some 800 miles of track from the Pacific to the Caribbean with a branch down through Salvador on the West coast. Last week a deal was in progress by which United Fruit would strengthen its already strong hold upon International Railways.

Longtime tropical friends, both railroad and Fruit Company were given sway in Central America by the same man—the late, great imperialist, Minor Cooper Keith. In 1871 Keith went to the pestilential coast town of Limon in Costa Rica to build a railroad inland. In ten years he was $1,000,000 in the hole with 70 miles built and 4,000 men dead of malaria and yellow fever. To give the railroad something to haul he started to plant bananas at about the time people started eating them in the U. S. He finished that rail road, built others, on banana money. In 1899 he merged his railroads and plantations with Andrew W. Preston’s Boston Fruit Co. to form United Fruit, then went north to develop International Railways in Guatemala. United Fruit invested $10,000,000 in the railroad.

Eastern terminus of International Railways, best port in Guatemala and shipping point for most of United Fruit’s Guatemalan bananas, is Puerto Barrios on the Caribbean. In 1927 a United Fruit subsidiary got a concession from the government allowing it to build new ports on the Caribbean and the Pacific. For International Railways a new port on the Gulf of Amatique, competing with Puerto Barrios, would be a serious matter, for in the past few years United Fruit has shipped more and more bananas overland from the Pacific Coast to Puerto Barrios on the International. Thus, bananas reach U. S. distributing centres more quickly. On this increased volume of freight International Railways has made money — $104,000 in 1934, $442,000 in 1935.

To avoid the possible misfortune of holding the bag if United Fruit routes its freight some other way, International Railways last week proposed to its stockholders an agreement with United Fruit. By its terms the Fruit Co. would “protect” International Railways against the construction of a new port either on the Atlantic or Pacific for 20 years. It would also provide additional facilities for the long banana haul across Guatemala by buying ten new locomotives and 300 banana cars according to the railroad’s specifications. It would, furthermore, guarantee the railroad favorable terms on road ballast from mines in its control. Finally, it would pay International Railways $2,165,000 in cash, receiving in return 20-year notes for $1,750,000 and 185,000 new common shares (it already owned 80,000), thus acquiring an approximate 31% interest in the road.