Union of Banana Exporting Countries facts for kids
The Union of Banana Exporting Countries (UPEB) was a group of countries in Central and South America that sold bananas. It started in 1974. The idea was to get a better price for their bananas from three big companies in the United States that controlled most of the banana trade. UPEB wanted to add a tax to each box of bananas sold. But this plan ran into trouble when one of the US companies paid money to officials in Honduras and Italy. When these payments became public, UPEB faced big problems. This event was called the Bananagate scandal. It even led to a new law in the U.S. in 1977 called the Foreign Corrupt Practices Act.
How UPEB Started
In 1974, several countries decided to work together. These included Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, and Panama. They wanted to form a group to control banana exports to North America. The Philippines was the only big banana seller to the United States that did not join. At that time, European countries mostly got their bananas from former colonies in the Caribbean.
Banana prices had not changed much for 20 years. A study by the United Nations found that banana-producing countries received very little money. For every dollar spent on bananas in North America, only about seventeen cents went to the countries that grew them. Just three large US companies controlled almost all of the banana trade. These were United Brands Company, Standard Fruit, and Del Monte Corporation.
UPEB suggested a tax of one dollar for every 40-pound box of bananas exported. The banana companies did not like this idea. They even threatened to stop their operations in these countries. There were also too many bananas on the world market. Ecuador, which grew the most bananas, refused to put the tax in place. The former president of Costa Rica, José Figueres Ferrer, said that if the companies would not pay the tax, their property should be taken over by the government. Standard Fruit then warned the new president of Costa Rica, Daniel Oduber Quirós, that they would leave the country if there were more threats. Costa Rica then lowered its tax demand to 25 cents per box.
The Bananagate Scandal
In 1974, Honduras passed a law to raise the tax on banana exports. The tax went from 25 cents to 50 cents for each 40-pound box. Honduras was a very important supplier for United Brands Company at that time.
In 1975, an investigation uncovered a big scandal called "Bananagate." It was found that United Brands Company had paid a large sum of money to the Honduran President, Oswaldo López Arellano. The money was put into a bank account in Switzerland. This payment helped reduce the Honduran banana tax from fifty cents to twenty-five cents per box. This reduction saved United Brands Company a lot of money in taxes. This event caused the UPEB group to fall apart. It was also discovered that United Brands Company had paid money to an official in Italy. This was to prevent limits on their banana sales to Italy. At that time, it was not illegal for US companies to pay foreign officials. But it was illegal for companies to hide these payments from their owners.
United Brands Company also admitted that it tried to keep these payments secret. They argued that telling everyone would hurt the company and its owners. The company's lawyers even asked the U.S. State Department to help. They said that news of the Honduran payment could harm relations between the U.S. and Honduras. But the State Department refused to get involved.
When the payment was revealed, it led to a change in the government in Honduras. It also resulted in the government taking over United Brands' railways and some of their land.
What Happened Later
On May 1, 1975, Costa Rica passed a law to raise its banana export tax. It went from 25 cents to $1 for each 40-pound box. The law said that 45 cents of each tax dollar would go to the government. The other 55 cents would help independent banana growers. United Brands' local company in Costa Rica then sued the government. They said the new tax broke an agreement that the government would not tax the company until 1988.
Since it was formed, the Union of Banana Exporting Countries has mostly focused on charging a small tax on banana exports from companies.
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