TCS Daily

Slipping on the Banana

By Alvaro Vargas Llosa - August 15, 2007 12:00 AM

A recent story in The Washington Post has rekindled interest in a criminal probe targeting the payments made by Chiquita, the Cincinnati-based fruit giant, to a paramilitary organization in Colombia. What is fascinating about this case is that a number of gray areas make it hard to establish whether the company was the culprit or the victim. It also sheds light on the sometimes tortuous relations between government and international business.

According to court filings cited in the story, the company says it was approached in 1997 by the United Self-Defense Forces of Colombia (AUC) about making payments to guarantee its protection from Marxist terrorist organizations. Between 1997 and 2004, Chiquita paid more than $1.7 million. In April 2003, more than a year and a half after the AUC was branded a terrorist organization by the U.S. government, Chiquita executives disclosed their actions to the U.S. authorities, adding that if the payments stopped they would have to leave Colombia, thereby hurting U.S. security interests in the region.

The Justice Department told them their conduct was illegal but executives say they left the meeting without a clear understanding that they should stop paying off the AUC. They claim that U.S. officials said they would confer with the State Department and be back in touch. They never got back to Chiquita, the executives say, so the payments continued for nearly another year. The company has pleaded guilty to making $1.7 million in payments and agreed to pay a $25 million fine. A federal judge still must decide whether to accept the plea agreement. Meanwhile, Colombian authorities are also going after the American company, which left the country in 2004 after doing business there for more than a century.

Clearly, Chiquita's payments to the AUC after September 2001 were illegal. But at various points in this story a chasm separated reality from the written law in Colombia and in the United States, making the company's conduct fall within the boundaries of what both governments understood to be right even if on paper it was not. When Chiquita's payments started in 1997, a large segment of Colombian society, including official institutions desperate to resist the onslaught of Marxist guerrillas, privatized the domestic war by de facto entrusting the AUC with their defense. Suffice it to say that the governor of the state of Antioquia -- the locus of Chiquita's extensive banana operations -- was Alvaro Uribe, the nation's current president and the scourge of the left-wing terrorists. Chiquita was playing by the rules of a lawless nation as both the authorities and thousands of other businesses understood them.

Until the U.S. government decided to brand the AUC a terrorist organization, paying to protect the interests of an American company in a friendly nation seemed legal and even "patriotic." After Chiquita's actions became illegal under U.S. law and company executives approached the Justice Department to disclose their actions, the authorities acted ambiguously. According to the Post's sources, Justice officials acknowledged the case was "complicated" and said they would talk to the State Department -- the implication being that the U.S. would probably not want to weaken the fight against Marxist terrorism and force a major U.S. company to leave a friendly country.

Ultimately, this is a story about double standards -- those applied by Colombia's institutions, which encouraged the AUC for many years by sanctifying the very rules of the game they now decry, and those applied by U.S. authorities, who did not hold Colombia to the same legal standards to which they held their own country.

I am not implying that these things are clear-cut. A civil war, which is what Colombia suffered during the years when Chiquita was making payments to AUC, is not an environment in which the written law can always be applied. And it is easy to see why U.S. authorities were puzzled by the Chiquita case once they were told of the payments, since legality had turned into illegality overnight because of the bureaucratic decision to include AUC on the list of terrorist organizations.

Surely, the first lesson is this: When you respond to terrorists -- in this case Marxist narco-guerrillas -- by using their methods, you end up hurting the cause you thought you were defending, i.e. peace and liberal democracy. The other lesson is that the separation between government and business is crucial. Had there been no doubt as to where the American and the Colombian authorities stood with regard to the laws they were supposed to enforce, Chiquita would have thought twice about continuing the payments and seeking a stamp of approval -- tacit or otherwise -- from the U.S. government.



No fault to Chiquita
The scandal was not one of Chiquita's making, according to such information as has surfaced. After all, Colombia's banana region was a battleground, and the company paid protection money not only to the AUC, but to the ELN and FARC-- the two main rebel groups. It was the cost of doing business there.

The scandal accrues instead to the Uribe government. President Alvaro Uribe grew up with the people who in time became AUC, and has never been able to distance his government from them until the past couple of years. It was Uribe who encouraged the establishment of the local militias that became known as Convivir. And it was Convivir groups who received many of the payments from Chiquita that ended up with AUC.

The reality in Colombia is that we have always backed the Uribe government as being our chosen good guys-- while condemning the behavior of the paramilitary death squads who, in this case, received protection money Chiquita may have had little choice in offering. Yet between Uribe and AUC there has never been enough space to establish any clear separation.

In Colombia there is ultimately no center. There are only the killers of the right and the killers of the left.

going bananas
There should be nothing wrong with a company, or an individual supplying their own protection. Everybody knows you can't depend on any goverment for that. Chiquita and United Fruit are regularly bad mouthed for phoney reasons. Why didn't all those banana republics grow, ship and market their own instead of depending on foreigners to show them how?

Now you are defending corporate interests?
I agree Chiquita got screwed by multiple governments, just as Bill Gates and Microsoft got screwed by the Clinton Administration.

No excuse for supporting terror, especially a terrorist organization as nasty as AUC
AUC is about as bad as they get. From drugs to massacring whole villages, they are every bit as bad as FARC.. perhaps even worse.

This is from:

"The size of the AUC has reportedly tripled in the last three years, mainly due to its deepening involvement in the drug trade, and is said to have anywhere between 8,000 and 15,000 members. Targeting mainly perceived supporters of left-wing groups, specifically the Revolutionary Armed Forces of Colombia (FARC), the National Liberation Army (ELN), as well as political activists, police officials and judges, the AUC is responsible for the largest amount of killings and massacres in Colombia.

"According to the Colombian National Police, in the first ten months of 2000 the AUC conducted 804 assassinations, 203 kidnappings, and 75 massacres with 507 victims. The AUC claims the victims were mostly guerrillas or sympathizers. "
In 2001, the AUC killed at least 1,015 civilians, a statistic that greatly surpasses the 197 civilians killed by the FARC. The AUC also committed over 100 massacres in 2001, a typical terror tactic used to displace large portions of the peasant population in order to better control major coca-growing territories. Indeed, the U.S. State Department noted that the AUC was responsible for about 43 percent of Colombia's internally displaced people in 2001. "

Read the botom of the letter where they detail the recent toll AUC and FARC have had on thier community.

Here's your problem
The problem with your entire life viewpoint is that there are, for you, only two choices possible. Either you have to blindly defend corporate interests against all evidence or you have to attack corporate interests against all evidence. There's no other way. To me, both are fundamentally dishonest.

Why not try the liberal way, which is to look at the evidence first, without prejudice, and then judge each case on an individual basis?

Life is choices
The territory suitable for growing bananas in large plantations in Colombia is disputed between the various rebel groups and AUC. Therefore Chiquita had a choice to make.

Either she could elect to make payoffs to both parties, ensuring her ability to create profit from adversity, or she could elect to take the moral high ground-- and go home broke.

Guess which path she chose?

Question of the century
"Why didn't all those banana republics grow, ship and market their own instead of depending on foreigners to show them how?"

There's a wealth of history to be learned, if you have to ask that question. Look into it and you'll find the banana republics of Central America were all seized by the US Marines in the early 20th century, and held down until governments friendly to the United Fruit Company were installed. The same thing happened in the DR, Haiti, Puerto Rico and Cuba.

That way the wealth to be had from growing bananas on land you didn't have to buy could be shared between the shareholders and the ruling classes of the four republics. Costa Rica and Panama alone escaped becoming banana-fied.

banana republics
It was a rhetorical question; I already know the answer and it's not the one you said. They didn't do it on their own because they didn't have the expertese, or initiative, or gumtion, or savvy to do it, and many other things. They had to wait for foreiners. But in fact United was in Costa Rica before. Also, if you look at the bananas and many other types of fruit and vegetables on sale in those backward coutries, you see that finicky westerners would not buy the stuff. For fussy americans and europeans, the quality has to be good, and the locals down there weren't able to do that on their own. But I do know that the marines invaded some places, sometimes. But, for example, they went into Haiti a few times, not to start banana plantations, but because of them those primitive guys wiping each other out. Indeed, I remember reading one report about one of the early times when the marines went in and took on some volunteers to work for them, roadbuilding etc. The thing was that those guys couldn't believe that the marines actually PAID them for their work, unlike the local war lords who would always just press them into involuntary servitude for no pay.

same everywhere
Companies have to pay off corrupt goverments everywhere, including the States. Some are just slighty better or worse. Do you think Bill Gates enjoyed sweating it out a couple of years ago in front of some crappy senate committe or whatever it was? In the States you do one thing to survive in business, in other countries you do other things to payoff the predator mafias that all governments are.

Evidence first?
It would be great if you would follow you own advice.

Evidence abounds regarding how markets, free of government corruption and restrictions, and but protected by strong government or cultural institutions, results in liberty and prosperity.

This case with Chiquita is another of example of government corruption of free markets.

If you don't have principles and standards, like free markets, limited government, and individual liberty, how will you compare and contrast the Chiquita situation and propose permanent solutions?

Rewriting history
They were hardly "waiting for foreigners" to show up an teach them the ways of civilization. That's a totally self serving myth I don't really think you are dumb enough to believe. Throughout the 19th century there were liberal leaders who tried to develop a broadly based economy, locked in constant battle with an entrenched oligarchy that owned nearly all the land. The struggle was between feudalism and democracy.

Presidents like Taft, and Polk a half century before him, used every trick including the military to open these tiny emerging nations up to US control. Finally, with the help of the Marines, they succeeded. The oligarchies became their clients, and the rest of the population essentially became their serfs. As you say you have studied this, I know you are familiar with it.

Our economic subjugation of Central America has been purely predatory, and has kept the peoples of those tiny countries on the bottom. If you have the interest (I suspect you don't) you might inquire into how the Marines came to occupy Haiti.

Your safe assumption seems to be that all sides are just a bunch of jungle bunnies. But what happened was that the usual dialog was unfolding between the liberals (you would call them socialists) and the money party, which controlled the government. After the appearance of demonstrations the government ordered the slaughter of severla hundred demonstrators in what was then considered a heinous act (such things weren't yet the norm).

Our reaction was to send in the Marines, destroy the liberals and prop up the Creole oligarchy in power by force of arms. Also on display (normal in those days) was an odious racism that didn't even consider the black Haitians to be people, but instinctively took the side of the lighter skins.

It's the same today. CAFTA was put in place to give textile manufacturers a place they could pay their labor only sixty cents an hour and sell at US prices. But the politicians, listening to competing US mill owners, decided to ignore the wording of the treaty and slap import duties in place. It's one more case of what the Indians called the White Man and his forked tongue.

In a word, I think you need to go back and hit the books.

Haiti is the fault of the Marines?
The French had nothing to do with it? (Why are most former French colonies economic basket cases?)

Compare and contrast the Dominican Republic with Haiti, or how about Belize?

Grand Experiment
The Caribbean basin seems like an interesting 'petri' dish to explore how various legal systems benefit or subjugate the people.

Most were at one time the colony of one super power or anther, were populated by slaves from Africa and had some sort of plantation economic system.

It is quite apparent which are poor and destitute. The argument many might make is that most of the destitution is the fault of rich corporations explointing the poor. Empirical evidence suggests the real cause is corrupt government; whether that government claims to be socialist,like Cuba or it is an outright dictatorship.

What do the prosperous Caribbean regions have in common with each other compared to the destitute?

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