The 1880s saw the conditions necessary for a company like the United Fruit Company to establish itself and saw Minor Keith and other important United Fruit Company figures begin their journeys into the banana business. After many difficulties and thousands of worker deaths, Minor Keith finally finished the Costa Rican railroad that Costa Rican strong man, Tomas Guardia, had contracted him to build. This railroad and others like it would later prove to be some of the most effective and powerful business tools of the United Fruit Company. Railroads where the only reliable way to transport products, provide communications, and connect inland areas for much of this time period. As it often does not make economic sense to have more than one railroad in a route this naturally leads to monopolies. In countries with strong governments, like America, regulations can be put in to check this, but in unstable countries like Costa Rica the power this railroad provides can be used to fight against this reining in of the power of the railroads.
Due to Guardia’s death during the construction in 1882 and other factors relating to political instability and economic instability in the region, Keith managed to use the fact that he was the only one building a railroad to gain vast tracts of land around the railroad and the railroad itself in return for its completion.1 These payments to Keith allowed him to begin growing and shipping his bananas and his first shipment arrived in New Orleans in 1882.2 Leading to the later creation of one of the precursors of the United Fruit company, the Boston Fruit Company, in 1885. Before this time the inland areas of Costa Rica where largely untapped because without railroads it was not profitable; however with Minor’s monopoly on the only effective means of transportation he gained the ability to become the most powerful business man in the country practically at will.
Despite problems like disease and the French attempt at the Panama Canal driving up the price of labor.3 The railroad was finished in 1890.4 During this time Keith laid the foundation for the United Fruit company by gaining the necessary components. He gained the land from the political instability of Costa Rica, the business contacts from running the railroad as a business, and the political contacts both from people he made contact with during building the railroad and from the marriage to his wife in 1883 who was the daughter of a former Costa Rican president. All of these factors put Minor Keith in a unique position in the region to take advantage of the technologies like steam and refrigeration that would soon make banana exporting to the USA profitable. This unique position that the monopoly of his railroad area provided allowed him the position he needed to invest in the country without the normal problems and risk investing in an unstable foreign country usually has to trip up investors.
In 1883 exports from Costa Rica, all through, Limon totaled 110,000 bunches valued at $47,000.5 By 1890 it had risen to 1,035,000 bunches of bananas exports from Costa Rica, all through Limon which totaled $410,000.6 This dynamic growth of banana demand and supply provided the perfect opportunity for a massive corporation to emerge and despite upcoming problems like the first observation of the Panama disease in 1890. The disease that would later lead to the complete devastation of the main type of banana, the gros michel, which forced a change in the type of banana planted by the United Fruit company.7 The Boston Fruit company was still in a unique position to profit from bananas. Mainly due to the large amount of power Minor already had in Costa Rica which allowed the company to eventually essentially set their own rules and create a state within a state later down the line that would often challenge the power of central American countries, and was only brought down by a changing world and events that left its’ business model untenable.
References
1 Karnes, Thomas L., and Charles L. Stansifer. “Costa Rica in the 21st Century.” Encyclopædia Britannica, Encyclopædia Britannica, Inc., 1 Nov. 2019, http://www.britannica.com/place/Costa-Rica/Costa-Rica-in-the-21st-century.
2 Adams, Federick. Conquest of the Tropics. New York city, 1914, Doubleday, page and Company.
3 Palmer, Jesse T. “The Banana in Caribbean Trade.” Economic Geography 8, No. 3 (Jul., 1932): 263.
4 United Fruit Company – Chronology, http://www.unitedfruit.org.
5 Jones, Clarence F. and Morrison, Paul C. “Evolution of the Banana Industry of Costa Rica.” Economic Geography 28, No. 1 (Jan., 1952): 1-19.
6 Jones, 1-19
7 Jones, 1-19
