By the beginning of the 20th century, Guatemala had evolved into a highly stratified society in which a tiny minority of elite coffee growers, linked to the country’s ruling Liberal regime, gained increasing control over land and labor. Almost completely dependent on the production of a single export commodity, coffee, and subject to the vicissitudes of international markets, Guatemala’s economy nearly collapsed with the onset of the Great Depression. Economic instability led to social and political unrest, particularly in Guatemala City, where bankruptcies and unemployment began to spiral out of control. In 1931 Guatemala’s elite united to restore order and turned to the rule of a strongman or caudillo, Jorge Ubico Castañeda, to restore social stability and economic growth.

Ubico was given virtually unchecked powers, and upon assuming office he suspended constitutional guarantees and crushed all opposition, particularly from organized labor. To restore order he mandated rigid and summary enforcement of the law. Utilizing forced labor, often drafted from among the ranks of prisoners, he constructed public buildings, expanded road networks, and carried out public projects. To stabilize the economy, Ubico staunchly defended private property and landowners’ legal rights to a guaranteed labor supply. He ensured this labor supply through new vagrancy laws which, while officially outlawing debt peonage, effectively reinforced it. In the public sector, he rooted out corruption, drastically cut government spending, and balanced the national budget; middle class bureaucrats bore the brunt of such austerity measures.

Ubico proved to be a staunch political and economic ally of the United States. When Pearl Harbor was attacked in December 1941, he declared war on Japan, Italy, and Germany. In support of the war effort, he eagerly welcomed the stationing of American troops in Guatemala and moved to dispossess German immigrants of their lands. Ubico was also a friend to American businesses in Guatemala. In particular he maintained amicable relations with the United Fruit Company, honoring contracts made with the company during the previous 30 years, while allowing the company to bow out of a contractual obligation to build a Pacific coast port.

By the mid-1940s the economy had fully stabilized and the country enjoyed substantial economic growth, which in turn contributed to the increasing emergence of a small, but clearly identifiable and upwardly mobile middle class. Inspired by Franklin D. Roosevelt’s Four [Page XXIV] Freedoms and the war against fascism and dictatorship in Europe and the Pacific, Guatemala’s emergent middle class increasingly demanded political change within the country. When Ubico announced that he would remain in office until at least 1949, both the middle and upper classes protested. Students, bureaucrats and even junior military officers began to openly demand that the dictator step down. On July 1, 1944, Ubico yielded to this pressure and surrendered power to a junta led by General Federico Ponce Vaides. However, Ponce lasted only 3 months.

On October 19, 1944, a group of junior army officers, led by Captain Jacobo Arbenz Guzmán and Major Francisco Javier Arana, led a coup d’etat, ousting Ponce and sending Ubico into exile. With both Ubico and Ponce out of the picture, Arbenz and Arana joined with a civilian businessman, Jorge Toriello Garrido, to form a revolutionary junta, then scheduled presidential elections for December 1944. Although several candidates initially entered the race, by December most of them had stepped aside, leaving Juan José Arévalo Bermejo and Adrian Recinos (Ubico’s former ambassador to the United States). Almost alone in the field, Arévalo won the election, receiving 85 percent of the vote.

When he assumed the presidency in March 1945, Arévalo espoused what he termed “spiritual socialism,” a philosophy that promoted nationalism and “freedom of spirit,” while stressing the importance of the “dignity of man.” The new president sought to reinforce this lofty, yet ambiguous philosophy, through the creation of a new constitution, which would protect basic rights, while allowing for moderate reform. Two of the document’s articles had particular significance. Article 91 recognized the right to private property, except under circumstances in which that right might impinge upon the national interest. Article 92 narrowed Article 91’s interpretation by indicating that the government would be legally empowered to expropriate land at any time to fulfill the needs of society at large. Although Arévalo never invoked Articles 91 and 92, Guatemala’s landed elite were alarmed at such a possible threat to private property and accused Arévalo of succumbing to Communist influence. Even after the president purged his government of rightwing and leftwing extremists in July 1945, the allegations continued. In addition to calling him a Communist, opponents alternately labeled Arévalo a fascist or “Communist-fascist.”

Initial positive U.S. perceptions of the Guatemalan president changed drastically in 1947, when he signed a labor protection law that implicitly targeted the United Fruit Company. Cables from the American Embassy in Guatemala City increasingly sounded the alarming message that Arévalo was allowing Communists to organize and had reputedly provided known Communists with support. Claims of [Page XXV] Arévalo’s affiliation with Communists gained even greater credence in view of his apparently increasing tolerance of Communist activities in Guatemala and his sponsorship of the Caribbean Legion, a group of ostensibly reformist Latin Americans who plotted to overthrow dictatorships in the Dominican Republic, Venezuela, Nicaragua, and Costa Rica. A 1949 Central Intelligence Agency analysis described the Caribbean Legion as a destabilizing force capable of undermining “democratic” regimes, such as those in Nicaragua and El Salvador.1 Notwithstanding an increasingly unfavorable regional and domestic climate, Arévalo completed his full term of office.

When elections finally came in 1950, Jacobo Arbenz Guzmán, one of the members of the revolutionary junta of 1944, ran almost unopposed on a platform that advocated agrarian reform. When he assumed office in early 1951, Arbenz inherited a country that had changed little during Arévalo’s tenure and remained a seeming economic paradox. Compared with its Central American neighbors, Guatemala was a rich country. It enjoyed the region’s highest gross domestic product (GDP), a per capita GDP second only to Costa Rica, and the strongest currency (stable and at par with the United States dollar) in the region. By 1945 Guatemala had established regional economic dominance in export agriculture, mining and quarrying, and manufacturing. However, in spite of its impressive economic performance, the country suffered from a highly skewed distribution of resources, which contributed to widespread indigence. A mere 2 percent of the population controlled more than 72 percent of Guatemala’s arable land. Of all privately held land, less than 12 percent was being cultivated. In a country dedicated primarily to agriculture, this translated into sweeping poverty and malnutrition.

From the outset of his presidency, Arbenz attempted to tackle Guatemala’s socioeconomic ills through a major agrarian reform. Guatemalan Communists—members of the Guatemalan Labor Party (PGT)—were quick to support the new president’s efforts. While Arévalo had been hesitant to work with the Communists, Arbenz welcomed their participation, and in late 1951 he secretly met with them to draw up an agrarian reform law. By May 1952 a draft bill for the reform had been submitted to Guatemala’s National Assembly. The next month, on June 17, 1952, the bill was passed and President Arbenz promulgated Decree 900, the Agrarian Reform Law. Central to the PGT’s revolutionary agenda, the 1952 law mandated the redistribution of idle lands in excess of 223 acres. Compensation for expropriated [Page XXVI] lands was provided in the form of 25 year bonds with 3 percent interest paid at the declared tax value of the lands in question.

The landed elite vehemently opposed any measure that would challenge their right to private property and immediately began publishing anti-reform pamphlets in which they complained that Communists had infiltrated the government. Complicating the situation, the United Fruit Company immediately recognized that, given its massive land holdings, it would feel the impact of the agrarian reform more than any other entity in the country. In stark contrast to the country’s large landholders, Guatemalan peasants responded exuberantly to the reform. Indeed, for some the land redistribution did not move quickly enough; they resorted to land seizure and the occupation of large plantations.

As early as 1951—well before an agrarian reform law could be written, much less passed—the Central Intelligence Agency was already drawing up a contingency plan (code-named PBFORTUNE) to oust Arbenz. In the Agency’s view, Arbenz’s toleration for known Communists made him at best a “fellow traveler,” and at worst a Communist himself. The social unrest that accompanied the passage and implementation of the Agrarian Reform Law supplied critics in Guatemala and Washington with confirmation that a Communist beachhead had been established in the Americas. Agrarian reform was not the issue—communism was. Action had to be taken before it was too late. Under orders from the State Department, PBFORTUNE and related contingency planning were supplanted by PBSUCCESS, an active plot to oust Jacobo Arbenz and free the hemisphere from the perceived dangers of Soviet-inspired international communism.

  1. Harry S. Truman Library, President’s Secretary File, Central Intelligence Agency, “The Caribbean Legion,” ORE 11–49, March 17, 1949.