611.14/5–1750
Memorandum by the Labor Officer of the Office of Regional American Affairs (Fishburn) to the Assistant Secretary of State for Inters American Affairs (Miller)1
Subject: U.S. Guatemalan Relations; United Fruit Company
Mr. Mann has requested a memorandum covering labor problems in Guatemala, the relation of our policy to them and my fear that our policy is of harm to us and of great value to the Communists in Guatemala and throughout Latin America. In large measure our relations with Guatemala appear to hinge on the labor problems of the United Fruit Company. I present my views of these problems below.
The labor difficulties which the United Fruit Company has been experiencing in Guatemala stem from the Company’s feeling that the same regulations which apply to other agricultural firms should also apply to it. This contrasts with the feeling of many Guatemalans that the United Fruit Company, which employs 17,000 persons in contrast to approximately 500 to 1000 for the next largest agricultural firms, has an industrial or commercial rather than an agricultural type of operation and that more rigid labor standards should be applied to it than to smaller agricultural operations. This follows a trend in the United States and in other countries in which large agricultural operations are being required to observe the labor regulations applicable to industrial operations on the grounds that in both cases relations between employer and employee are apt to be impersonal and similar.
Specifically, the United Fruit Company objects to provisions of the Guatemala Labor Code which require it to give ten days vacation: per year in contrast to five days per year for agricultural operations employing less than 500 people, pay time and one-half for overtime in contrast to time and a quarter for small agricultural operators, deal with unions as if it were an industrial or commercial concern, and a few other provisions of the Labor Code of a similar nature. Apart from the provision of the Code which permits strikes against larger [Page 881] agricultural firms and not against smaller ones during the harvest season, and no justification for which has been suggested to this government, all of the other distinctions of the Code appear to be legitimate in terms of modern thinking.
There is no doubt that the employer-employee relations of the United Fruit Company are not those of small agricultural operations but are relatively impersonal and similar to those of any large operation. It seems difficult to justify the United Fruit Company objection to giving its employees ten days vacation per year with pay when all industrial operations employing ten men or more must give the same number of days and all commercial firms must give fifteen days. Similarly with overtime and unions, the Company must obey the same regulations as industrial and commercial firms.
It has been argued that the Code is discriminatory against the United Fruit Company because of the firm’s U.S. ownership. This argument can hardly be sustained inasmuch as no other American firm operating in Guatemala alleges such discrimination with respect to provisions of the Code.
It is frequently argued that the United Fruit Company pays higher wages than any other agricultural firm in Guatemala. This is undoubtedly true, but it is difficult to determine to what degree this is a result of philanthropy or enlightened self-interest on the part of the Company or local pressures which have been exerted on the Company for many recent years. Even if it be argued that the Company’s relatively high wages and favorable working conditions have been granted voluntarily, the Company will have to learn that labor very often does not appreciate paternalism but wishes to share in determining its own fate. This trend to extend democracy into industrial relations is very powerful.
As a foreign-owned corporation and as a large and financially successful one, United Fruit must anticipate a certain amount of anti-company feeling among poor, local circles throughout Central America. The Company will be fortunate if it is able to continue operations over a lengthy period without being expected to do more than grant higher wages and better working conditions than its smaller, local competitors. If it should attempt, with or without Embassy assistance, to fight this inevitable trend and argue that there is unfair discrimination because of such distinctions, it will probably lead to the same conclusions experienced by the American and British oil companies in Mexico. The oil companies and the U.S. Government were defeated at nearly every important point over a period of many years because the U.S. Government was not willing to violate Mexican sovereignty and use military force to protect the interests of the petroleum companies, despite a strong feeling in the State Department that the companies were in the right. It would [Page 882] appear to be a tragedy for this Government to repeat its Mexican experience in Guatemala.
It has been argued that the American companies are in the right and that, therefore, come what may, this Government should protect them. In the labor field it is oftentimes impossible to say where labor demands and where management’s policies are right or wrong. A few years ago pensions were not an approved subject for collective bargaining in this country. However, the Supreme Court has recently ruled that they are. Currently there is a strong trend to attempt to tie wages to prices and profits. Although this concept has not been accepted in this country, it may happen in the next few decades; similarly in Guatemala. It has not seemed possible to objectively state that the United Fruit Company is in the right when it resists demands to pay higher wages or grant better working conditions than its agricultural competitors. An analogy can be drawn with our own income tax structure and the previously mentioned trend in this country to catalogue large agricultural operations as industrial for certain labor laws.
It has been argued that it is not the distinctions as such which are illegal, but the fact that the Company is the only one to have to obey them, in fact if not in law. It is difficult to know how many and to what degree other large agricultural operations obey the disputed provisions of the Code. In addition, it is historically true that in our country, as elsewhere, larger firms and wealthier individuals are often watched more closely than their smaller competitors. This line of reasoning, therefore, does not appear sufficient to warrant diplomatic aid to the United Fruit Company.
In addition to the problems related to the Labor Code, the United Fruit Company went through a difficult strike in 1949. Without going into the details, the Company alleged that the labor laws of Guatemala were not properly enforced and that the administrative and judicial machinery of the government was unfair to the Company in favor of labor. The Embassy supported these contentions. Available evidence supports the Company’s assertions. Nevertheless, I feel it necessary to point out that the steel companies in the U.S. likewise protested that the Taft–Hartley Act was deliberately bypassed by our administration in the 1949 strike. Also, similar pro-labor discrimination has been alleged in a recent purely Guatemalan labor dispute. To quote the Embassy:
“In the case of the Novella [cement] company there has been no opportunity to invoke anti-foreign prejudices. The cement plant is strictly a Guatemalan enterprise and, as some have pointed out, a unit of basic industry which one would expect to cause pride and evoke support on the part of other Guatemalans. The Government ostensibly is interested in the industrialization of Guatemala. Yet the labor authorities in this conflict seem to have shown more hostility [Page 883] than consideration toward the cement industry. Over and above the attitude of labor inspectors and labor judiciary hovers the influential shadow of Minister Bauer Paiz, outspoken opponent of imperialistic capital, who gives in this purely national case the appearance of opposing private capital per se.”2
The problem, therefore, is by no means entirely one of discrimination against foreign firms, but rather it is also one of general, internal labor relations.
Guatemala is currently going through a difficult period of adjustment following the overthrow of Ubico in 1944, similar to that which followed the overthrow of Diaz in Mexico in 1910. One aspect of this is an intense feeling of nationalism. This was partly stimulated in both cases by friendly relations between the large foreign-owned concerns, and the old dictators.
It is quite natural that the companies affected should have attempted in all manners to protect their interest in both countries. Unfortunately, in the case of Mexico the companies were not willing to compromise adequately and, since the United States Government was unwilling to use force, the companies lost the bulk of their claimed rights. Since Guatemala is as sovereign as Mexico, the United Fruit Company may also lose most of its interests unless a satisfactory settlement can be reached.
With respect to this Government’s relations to the case, it would appear most unwise for us to be tied to the Company’s position, without regard for Guatemala’s aspirations or sovereign feelings. It is my judgment that our unfortunate and necessarily ineffective attempts to help the Company have permitted the Communists to pose as the champions of labor and of national sovereignty, and have thereby aided them in achieving control over organized labor in Guatemala. There are, of course, numerous other factors which have also aided them.
In a general sense, whether or not the Guatemalan laws, courts and administrative machinery are fair and objective with respect to labor disputes is a difficult and important question with a number of significant implications. For example, an unwise pro-labor bias may frighten away potential new private or public investment or financial aid, and no one could legitimately object if it does. However, apart from the difficulty of reaching objective judgments of fairness and legality, as a general rule it would appear unwise for this Government to make diplomatic representations in cases of labor disputes. Such representations appear to be undesirable because they permit the Communists to pose as the champions of labor and national sovereignty in the same breath. Any such situation is also a death trap for us, a trap which if permitted to develop very far could threaten [Page 884] our entire Good Neighbor Policy. It is an especially unfortunate sort of trap because in the last analysis we lose no matter what happens. We will not send in troops if all goes wrong and can only retreat miserably. On the other hand, if we cause a friendly government to decide in our favor, we weaken the internal labor support of that group. And, today, strong labor support is essential for any democratic government in Latin America.
It is suggested that the Department adopt a general policy of refraining from attempting to extend diplomatic protection to American firms in connection with labor problems in Latin America. Instead, the Embassies should attempt to obtain the fullest possible information for reporting, should discuss such problems in an appropriate, friendly manner with government and company officials without favoring either; and then, in those situations which reach appropriate, acute stages, indicate quietly that if the company is too seriously harmed, that new private investment will undoubtedly be discouraged and that it would not be possible for this Government to extend financial aid to a country which is harming American interests in an unfair or discriminatory fashion. If this policy is adopted, American firms will probably be much more willing to compromise abroad and may gain a good deal in the end. Although the suggested policy is not satisfactory in some respects, it appears to be the least dangerous of the possible alternatives and will certainly avoid putting this’ Government in the vulnerable position of being anti-national and anti-labor at the same time, a position which the Communists have already exploited with considerable success and which, if it is continued, they will exploit further.