The Making of a Palm Oil Republic

According to a mixture of history and legend, Honduras received its name when, in August 1502, Colón and his men found themselves in a rough patch of deep coastal waters just south of the island of Guanaco, where Spaniards had had had his first encounter with the seeds of a tree that the natives called cacao. As waves crashed against the ships, threatening to destroy the entire fleet, Colón’s crew sent up a cry to Heaven: “¡Líbrenos Dios de estas honduras!” (Free us God from these depths). Spotting a safe place to disembark at the tip of a cape, the conquistadors made landfall, becoming the first Europeans to do so on the Central American mainland. Colón named the spot Punta de Caxinas; the sea he named Golfo de Honduras.

Unlike this founding myth, the story of how Honduras received its ignoble reputation as the original “banana republic” is based in pure unrelenting fact.

By the time a Texas bank teller named Bill Porter fled to Honduras to escape embezzlement charges in 1896, the banana trade was already tightening its grip on the economies of Central America, especially Honduras. Through his Tropical Trading and Transport Company, Minor Keith controlled an empire that stretched from Guatemala to Colombia. The Costa Rican government had given Keith 800,000 acres of tax-free land in 1884 as compensation for a railroad he was building there, and Keith used the concession to launch his banana business — a strategy the other “banana men” would follow. The cash value of banana exports to the United States from the region’s main port, Puerto Cortés, tripled between 1894 and 1903. The Vaccaro brothers would begin shipping bananas from La Ceiba to New Orleans the year after the fugitive’s arrival, eventually naming their company Standard Fruit. That same year, Keith’s company would merge with the Boston Fruit Company, creating the now infamous United Fruit Company.

The boatloads of money generated by the booming banana trade would allow companies like United Fruit, Standard Fruit and Cuyamel to outright buy further concessions from the governments of Central America. When reforms twice threatened his bottom line — first in Honduras in 1911, and then in Guatemala in 1954 — Sam Zemurray, the founder of Cuyamel who seized control of United Fruit during the Great Depression, simply staged a coup to put someone in charge who knew how to play ball. At its peak, United Fruit owned a few million acres of land throughout Central America, South America and the Caribbean, with over 50 percent of private land in Honduras alone. Banana comprised over 80 percent of Honduran exports, and United Fruit controlled all the major ports in Central America. It may have been even worse in neighboring Guatemala, where United Fruit not only controlled over 40 percent of the land, but the railroads, phone lines, power stations and the country’s main Caribbean port, Puerto Barrios. On the eve of the 1950 presidential election that brought the populist Jacobo Árbenz to power, United Fruit’s reported annual profit of $65 million was twice the entire revenue of the Guatemalan government itself.

This is the Honduras Mr. Porter discovered when he went into hiding in 1896. A budding writer, he began work on a novel set in the Republic of Anchuria, a fictional version of his new surroundings, and a place he describes as a “banana republic.” Cabbages and Kings wouldn’t appear in print until 1904, by which time Porter had returned to the States and served three years at the Ohio Penitentiary. He’d also adopted a pen name — O. Henry.

A fungal pandemic and the outbreak of anti-imperialist socialist movements hobbled United Fruit’s once impervious banana empire, till it was bought in 1984 and renamed Chiquita. This is more or less where Tanya Kerssen picks up the story.

(Legend of Polyglot)
(Legend of Polyglot)

In Grabbing Power: The New Struggles for Land, Food and Democracy in Northern Honduras, her 2013 study of the violent land seizures in and around Honduras’s Bajo Aguán region, Kerssen describes how a wave of neoliberal reforms and environmental campaigns beginning in the 1990s fostered “the rise of a new agro-oligarchy.” Kerssen explains that while the banana men siphoned an immense fortune back to the United States, “an incipient homegrown bourgeoisie, composed largely of Arab Palestinian immigrants” — “with surnames like Kattán, Canahuati, Facussé, Násser, Kafti and Larch” — steadily focused on non-land-based modes of profit until, by 1960, they “controlled 75 percent of investments in the import-export sector and about 50 percent of investments in manufacturing.

The triumph of the 26th of July Movement in Cuba in 1959, especially the subsequent expropriation of the over 270,000 acres owed by United Fruit, inspired landless campesinos across Latin America to demand similar reforms. Such developments sent a chill down the spine of global capitalism, which quickly sought to install safety values that would relieve the mounting pressures from below without conceding too much from above. In 1961 the Honduran government passed the first of three major agrarian reform laws aimed at “colonizing” underpopulated areas of the north — land which had been the private realm of United Fruit — including the Aguán River Valley. A second law in 1974 limited the size of landholdings and required that larger properties up for sale be redistributed to landless campesinos.

Just as Panama disease and guerrilla socialism had heralded the demise of United Fruit, the neoliberal policies imposed by the World Bank and International Monetary Fund in the early 1990s closed the book on any honest attempt at agrarian reform in Honduras. Looking for help to escape an external debt more than two-thirds size of its GDP, the Honduran government began implementing a structural adjustment program mandated by the World Bank and the IMF. Kerssen explains how the resulting monetary devaluation and privatization reversed any of the gains made by campesinos, in favor of the new argo-oligarchs:

“Small and medium and producers buying inputs with a weakened lempira found their production costs rising and their profits plummeting. The privatization of the National Agricultural Marketing Board (IHMA) in February 1991 slashed regulations on grain imports and exports. It also eliminated price guarantees for staples like corn, beans, rice, chicken and milk, leaving both farmers and consumers at the mercy of the global market. …

“SAP-mandated privatization policies generated a tremendous transfer of resources from the public to the private sector. Businessman Miguel Facussé Barjum, now the richest man in Honduras, amassed part of his fortune through the dissolution of the Honduran National Investment Bank (CONADI) in 1990, which had loaned millions to his manufactured goods companies (Galaxia and Químicas Dinant). With the help of this infusion of capital, Facussé quickly began buying up the Aguán Valley and northern coast, from Tela in the West to Río Plátano in the East. Struggling under the weight of debt, low return and rising input costs, highly vulnerable Aguán peasants were susceptible to these buyouts. …

“Up until [the Agricultural Modernization Law of] 1992 … the government prohibited the sale or lease of lands acquired through agrarian reform. The AML, however, reversed these prohibitions, legalizing the private transfer of Aguán lands and permitting the piecemeal sale of cooperatives. With cooperatives already hurting, this abrupt liberalization of the land market led to a dramatic sell-off of peasant land in the Aguán. These ‘voluntary’ sales were helped along through varying degrees of intimidation and manipulation: from bribes to peasant leaders, to menacing letters from [the National Agrarian Institute], to violent threats from large landowners.”

As well as raising production costs on smaller producers, President Callejas’s devaluation of the lempira also meant a devaluation of campesino wealth, since only the upper class held its wealth in dollars. (The same happened in Puerto Rico in 1900, when the newly installed U.S. government devalued the peso by 40 percent.) The Honduran government has manipulated money in other ways of course. Kerssen tells the story of Puerto Rican investor Temístocles Ramírez de Arrellano, who in 1975 buys a piece of coastal land for $4.86 per acre, even though the Honduran constitution forbids non-citizens from owning coastal lands. After he’s forced to surrender his land to the U.S. military for the installation of a military training camp, the Honduran government pays Ramírez $460 per acre for the land taken — giving him a hefty 10,000 percent profit. The land is then seized again by the Honduran government in 1993, only this time its meant to be redistributed to the landless campesino. However, it’s sold to “cattle ranchers, politicians and military officials” for between $1.25 to $1.87 per acre — or about a quarter of the 1975 price.

Lenca boy in Honduras. The Lenca are one of the indigenous peoples fighting against corporate land seizures in Honduras (Honduras2012 ChurchBuild/Flickr)
Lenca boy in Honduras. The Lenca are one of the indigenous peoples fighting against corporate land seizures in Honduras (Honduras2012 ChurchBuild/Flickr)

Which brings me to the new top banana in Honduras: African palm oil. In the 1970s, with petroleum prices soaring and the Honduran government looking for ways to develop the “unused” lands of the north, African palm was viewed as a relatively cheap, potentially beneficial crop for the formerly landless campesinos to grow. Palm oil has a wide variety of uses, as biofuel, as cooking oil, in processed foods, and in manufactured products such as soap. Seeing dollar signs, the Inter-American Development Bank provided loans to develop the Bajo Aguán into a palm oil-producing hub. The infrastructure that had been built to facilitate the growth of the banana industry was hastily revamped to accommodate the nascent palm oil trade. Production continued to expand under state control through the 1980s, until the privatization reforms of the early nineties gifted the booming palm oil industry over to Honduras’s oligarchs:

“In addition to privatization, the liberalization of trade and investments facilitated a slew of mergers, acquisitions and co-investments that incorporated national companies like Facussé’s into the supply chains of powerful transnational firms. Both Unilever and Proctor & Gamble, for instance, gained important footholds in Central America by acquiring distribution networks and brands owned by Facussé. By buying his Cressida Corporation (including patents on soaps, beverages and processed foods) for $314 million in 2000, Unilever doubled its presence in Central America … Facussé retained control of Cressida’s Aguán palm plantations and a number of snack food brands, now under the name Dinant. One of the biggest players in the palm oil trade, Unilever uses around 1.2 million tons of palm oil every year.”

Palm oil is in half of the stuff we buy today, from processed foods (“edible food-like substances,” as Michael Pollan puts it) to biodiesel to soaps, detergents, lubricants, plastics, paper, rubber, animal feed, tobacco products, makeup, pharmaceuticals and explosives. That explains why the World Bank has invested over $2 billion to palm oil initiatives since the 1960s. It also explains why, when the economies of Latin America plummeted in the 1980s, the World Bank lent funds to the palm oil industry in an effort to boost exports:

“These large investments in the corporate sector, combined with the volatility of the global market, favor ‘economies of scale’ that put smallholders at a severe disadvantage. When increased supply depresses international palm oil prices — as it did following the 2008 price spike — large-scale producers benefit. Lower prices for palm oil make it more competitive in the global market vis-à-vis other oils like soybean and rapeseed (canola). With lower production costs and higher volume, large producers are able to compete. Small and medium producers, however, are caught in the infamous ‘cost-price squeeze.’ …

“Of course, there is nothing new about this strategy: large-scale producers capture subsidies, over-produce and drive down world prices, thus ruining smallholders while at the same time stimulating global consumption. The same is true of any commodity, whether it be wheat, bananas or cotton.”

Arguably the worst aspect of this palm oil republic — besides the killing of indigenous, campesino and Garifuna activists by state and private security forces, or that palm oil had a hand in the 2009 coup (just as the banana companies had a hand in past coups) — is the fact that today’s palm oil men continually receive pats on the back from environmental non-governmental organizations for helping reduce global carbon emissions. Even though the palm oil industry is harmful to the environment — polluting the air, contaminating waterways, and ruining the land — groups like the World Wildlife Fund, through its Roundtable on Sustainable Palm Oil, have regularly applauded Facussé’s Dinant Corp. and others for implementing methane reduction processes which “capture methane from wastewater that would otherwise be emitted or avoid methane emissions from the decay of biomass by suing it as a fuel source instead.”

In 2011 the UN’s Clean Development Mechanism, the Kyoto-initiated program that awards carbon credits to greenhouse gas reduction projects, gave a subsidiary of Facusse’s Dinant close to $3.6 million in carbon credits — even after German and French firms “withdrew from the project citing human rights concerns, following the release of a report documenting 23 peasant murders linked to Dinant.” The year before, the World Wildlife Fund gave a similar nod to Dinant. “Whether or not such arrangements lead to ‘impact reduction,'” writes Kerssen, “they undoubtedly grant polluting corporations a sheen of environmental credibility.”

This would be shameful enough if “polluting” were the only sin committed by the palm oil industry in Honduras. Worse than the methane choking the air — much worse — is the blood of over 100 activists, protesters and simply farmers who’ve been killed by Dinant and others through private security forces and the state forces working at their behest. (The Guardian ran a good summary of the atrocities back in 2014.) The most hideous instance involved the killing of five campesinos in November 2010 at El Tumbador, a 1400-acres palm oil plantation owned by Facussé. The recent assassination of prominent environmental activist Berta Cáceres, though traced to a Honduran hydroelectric company, underscores nonetheless the complete subjugation of Honduran law and society to the interests of the oligarchs.

In the new palm oil republic (as it was in the old banana republic), there’s no difference between public policy and corporate goals. Law is merely the legal infrastructure erected to facilitate such goals. State officials act as clerks for the oligarchs. And the victims of this updated system — the campesinos, the Garifuna, the indigenous — find themselves in a new “green prison” brutally similar to the old one.


Featured image: Barna Tanko