Memorandum of Conversation, by Mr. Edward W. Clark of the Office of Middle American Affairs


Subject: United Fruit Company Negotiations With the Guatemalan Government.

Participants: ARA—Mr. Miller
Mr. Mann
MID—Ambassador Nufer,1 Mr. Clark
Representatives of the United Fruit Company:
Mr. Jefferson Coolidge
Mr. Montgomery
Mr. McGovern
Mr. Robert LaFollette

Mr. Coolidge said that the situation with regard to the Fruit Company’s negotiations with the Guatemalan Government had changed since they had made the appointment to call on Mr. Miller. He said that on November 10 the Minister of Economy and Labor2 had replied to the Company’s letter of October 18 and had set forth the minimum conditions under which the Guatemalan Government would negotiate with the Company. Mr. Coolidge said that while the answer had been reasonably satisfactory from the point of view of the Company’s request for assistance in labor matters, in all other respects it failed to give the guarantees deemed necessary by the Company. On the following day, therefore, Mr. Coolidge said, the Company had addressed a letter to the Minister informing him that since the Government’s ideas and those of the Company concerning the possible settlement of difficulties were obviously so far apart, the Company saw no useful purpose that could be served in continuing negotiations. He said that it was at this point, when it seemed that there was no longer any possibility of reaching agreement with the Guatemalan Government, that they had made the appointment with Mr. Miller.

Mr. Coolidge then went on to say that in the meantime there had been a new and important development. He said that when President Arbenz was informed of the Company’s letter, he called in his Minister of Economy and demanded to know what had happened and why the Company thought the Government’s position was too extreme. He ordered the Minister of Economy to find out from the Company what objections they had to the Guatemalan Government’s proposals. Mr. Coolidge said that the President’s quick action had come as a surprise to the Company, which nevertheless interpreted it as an encouraging sign. He said the Company was presently drawing up a letter which [Page 1447] would set forth in specific terms what its objections were to the Government’s proposals. He said that it was, of course, too early to tell what the results of this new development would be but they at least today saw some possibility of making progress with the Government whereas yesterday it had seemed that negotiations had broken down completely.

Mr. Miller inquired in what way the Government’s proposals fell short of meeting the Company’s requirements. Mr. Coolidge stated that the Guatemalan proposals had not offered any guarantee against exchange control measures and had not given guarantees that Guatemala would not pass any laws during the next three years which would further increase the Company’s production costs. Mr. Miller asked if the currency in Guatemala was not freely exchangeable with the dollar. Mr. Coolidge admitted that it was but said that this was a standard clause which the Company had in all its contracts with other Central American countries except Panama. Ambassador Nufer asked if the Company’s position that it could not stand any raise in costs was rigid. Mr. Coolidge replied that probably the Company could stand an increase of up to ten per cent without too much harm.

Mr. Mann asked if insisting that Guatemala bind itself not to pass any laws which would affect the Company’s operations did not conflict with the Government’s sovereign rights. Mr. Montgomery said that this did not necessarily follow, declaring that in his opinion it would be possible for the Government to make such a guarantee without impairing its sovereignty.

Mr. Coolidge said that the disagreement between the Company and the Puerto Barrios dock workers was rapidly reaching a crisis and that early next week a compulsory arbitration award by the labor court in Puerto Barrios unfavorable to the Company was expected. If this were to happen it would be bound to have an adverse effect on the present negotiations with the Government. Mr. Clark asked if President Arbenz’ apparent concern with the trend the negotiations were taking might not have an effect on the outcome of the Puerto Barrios dispute. Mr. Coolidge said that this was an interesting point which would bear watching.

Ambassador Nufer said that it seemed to him that much depended, especially at this particular time, on how the negotiations were conducted by the Company. He agreed that President Arbenz’ quick action seemed to be an encouraging sign but thought the Company would be well advised to answer to the Minister’s request in a spirit of friendly cooperation. The language of the Company’s reply might be equally as important as the content. Mr. Coolidge and the other Company officials said they were in full agreement with this view.

Mr. Mann asked whether if the Government signed an agreement with the Company similar to those in Honduras and Costa Rica, the [Page 1448] Company would then publish financial figures on the Company’s operations in Guatemala. Mr. Coolidge said that the Company would not be obliged to do so but he personally favored the idea. Mr. Mann remarked that the apparent reluctance of the Company to publish its financial figures made a bad impression since it led people to the assumption that the Company was making so much money that the release of the figures would be embarrassing. This in turn permitted demagogues to claim that the Company was making one hundred per cent per year on its investment and the Guatemalan people were prepared to believe it. Mr. Mann then discussed the operations of the oil companies in Venezuela where by cutting the Government in for a 50–50 share of the net profits, they insured that the Government would be vitally interested in the success of the Company’s operations. He suggested that some such similar arrangement, which would tend to make the company’s and the Government’s interests mutual, might well be considered by the Company.

Mr. Mann asked if the Company wished to have the Department’s comments on the letter which the Company was now drafting to the Minister of Economy. Mr. Coolidge said that he would be pleased to let the Department have a look at the letter before it was signed.3

  1. Albert F. Nufer, Director, Office of Middle American Affairs.
  2. Manuel Noriega Morales.
  3. Negotiations concerning wage disputes and other labor problems between the United Fruit Company and the Guatemalan Government continued intermittently into 1952. Pertinent documents are in Department of State files 814.053, 814.06, and 814.20.