811.05118/11–1653

Memorandum by the Assistant Secretary of State for Inter-American Affairs (Cabot) to the Deputy Assistant Secretary of State for Inter-American Affairs (Woodward)1

confidential

Subject:

  • United Fruit Company in Costa Rica.

I am inclined to agree with Mr. Woodward’s points in the attached memo.2

It is to be noted that we have steadily urged the United Fruit Company to adopt a broadminded attitude with regard to Figueres’ demands. On October 10, for example, I emphasized this to Mr. Coolidge, Chairman of the Board of the United Fruit, as well as to Mr. McClintock.3 They are fully aware of our view that it is better that they bend before they are broken, and I trust that they share this view at least within limits.

I have also told Ambassador Hill to remind Figueres of the desirability of negotiating an agreed settlement with the United Fruit Company. It seems to me that our attitude should be that we want an agreed settlement rather than an arbitrary stand by either party which, as Mr. Fishburn points out,4 would place us in an embarrassing position.

I question whether we are in a position to determine the equities of the situation and whether we should make such a determination even if we could. If the position of the United Fruit Company were clearly an abuse, then I think we should strongly urge them to change it but, since it rests on a perfectly valid contract which is not demonstrably unfair to Costa Rica, I do not feel that we should go further than I have suggested above.

Clearly the United Fruit Company is in a different position from the oil companies in that the oil companies are taking a government-owned asset from the ground. The Fruit Company has to buy the land which it uses and pay all costs of improving it and producing the bananas. It takes nothing permanently from the country. To my mind it is questionable whether the mere right to produce bananas in a given country is necessarily equivalent to all the costs and risks of producing them. There is, moreover, the question of whether the rules of the [Page 833] game should be unilaterally changed in a major degree against an American company after it has made a bona fide investment; in this respect it is the reverse of the argument which the Latin Americans use about our tariffs.

I understand that the Fruit Company plans to offer Honduras whatever concessions it makes to Costa Rica, so the question of discrimination against countries will presumably not arise.

Beyond urging the two parties to get together for an agreed settlement, I feel that we can watch the course of the negotiations and decide what to do as the negotiations develop. Due to the deplorable public relations of the United Fruit Company, I quite agree that we should be subjected to quite a lot of criticism in Latin America regardless of what happens. I repeat that I do not feel we should uphold the United Fruit Company in anything which appears abusive, but I do feel that the Company has legitimate rights which we should not prejudice ourselves or permit others to prejudice inequitably.

  1. Addressed also to John T. Fishburn, Labor Adviser, Bureau of Inter-American Affairs.
  2. In the referenced memorandum, which is undated, Deputy Assistant Secretary Woodward stated in part that he doubted if it was “feasible for the State Department to suggest a specific type of business settlement between the United Fruit Co. and the Costa Rican Government.” He also stated that the “magical sound” of a 50–50 profit split could easily turn out to be “something of a delusion” for Costa Rica.
  3. John G. McClintock, Assistant Vice President, United Fruit Company.
  4. In a memorandum, dated Nov. 16, 1953, attached to the source text, but not printed, Mr. Fishburn recommended that Assistant Secretary Cabot should attempt to persuade United Fruit Company officials to accept the idea of a 50–50 split of net profits with the Costa Rican Government.