Memorandum of Conversation, by the Acting Chief of the Division of Central America and Panama Affairs (Newbegin)

Participants: Mr. Spruille Braden, Assistant Secretary
Mr. John L. Simpson and Mr. Tennyson, of International Railways of Central America
Mr. Pollan, Vice President, United Fruit Company
Mr. Robert Newbegin, Acting Chief, Division of Central America and Panama Affairs

Mr. Simpson and Mr. Tennyson called in connection with the imminent strike of the International Railways of Central America12 employees scheduled for December 6. Mr. Pollan accompanied them in as much as United Fruit is an important minority stockholder in the International Railways of Central America and because a strike of the Railway employees would seriously handicap the United Fruit Company’s operations. After reviewing the background of the strike (which is apparently governed entirely by the desire of the Union to effect the dismissal by the Company of a small number of its former members), Mr. Simpson stated the Company had received information to the effect that the cabinet had been considering the desirability of taking over the railway with possible eventual expropriation.13 Were the railway taken over, even without expropriation, the Company was concerned as to how or when it would be able to obtain its return. Mr. Pollan inquired as to what steps the Department might be able to take in the event of expropriation and whether it could request prior compensation. He explained that Guatemala was in no position to make such compensation which would amount to some $50,000,000. Mr. Braden explained that the Department’s policy was to require “adequate, prompt and effective compensation”. He said that he had considerable difficulty with the Legal Division in [Page 891] pushing the idea of prior compensation and that apparently according to international law this could not be insisted upon. He felt, however, that the word “effective” was sufficient. Mr. Pollan asked if the Guatemalan government could be informed that before expropriating the property, it should consider its ability to pay for it. He stated that in the case of Guatemala, the Constitution itself provided for prior compensation. Mr. Braden stated that he felt the constitutional provision would be sufficient for our purpose and that he would be glad to call in the Guatemalan Ambassador and go into the matter with him.

Mr. Simpson and Mr. Pollan both expressed their appreciation and stated that they hoped it would be possible to get the Department’s views to the Guatemalan government before the December 6 deadline. Mr. Braden stated that we would communicate with the Guatemalan Embassy today and take immediate action.

R[obert] N[ewbegin]
  1. The International Railways of Central America (IRCA), an American corporation, was incorporated in New Jersey, and American citizens owned the majority of its capital. The Company operated in Guatemala under contracts with the Government which had been approved by the Executive as well as the Legislative body.
  2. On Labor Day, May 1, 1946, the Guatemalan President (Arévalo) made a speech in which he severely criticized contracts granted by previous administrations, referred to “such contracts as those which for a railway line gave away the blood and soul of Guatemala”, and indicated that Guatemala should liberate the wealth wrongfully owned by nationals and foreigners. The President’s speech was construed in certain quarters as a warning of future expropriation in spite of official denials.