Chiquita in Colombia Free Essay Example

For Chiquita Brands International, a pioneer in the globalization of the banana industry, bananas are not only serious business, they represent an array of economic, social, environmental, political, and legal hassles. Since its founding more than a hundred years ago as United Fruit Company, Chiquita has been involved in paying bribes to Latin American government officials in exchange for preferential treatment, encouraging or supporting U.S. coups against smaller nations, putting in place dictatorships in Central America’s “banana republics,” exploiting local workers, creating an abusive monopoly, and now doing business with terrorists.

1 For American multinationals, the rewards of doing business abroad are enormous, but so are the risks. Over the past decades, no place has been more hazardous than Colombia, a country that is just emerging from a deadly civil war and the effects of wide-ranging narco-terrorism. Chiquita found out the hard way.

It made tens of millions in profit growing bananas in Colombia, only to emerge with its reputation splattered in blood.

2 In 2004, Chiquita voluntarily admitted criminal responsibility to the U.S. Justice Department that one of its Colombian banana subsidiaries had made protection payments from 1997 through 2004 to terrorist groups. Consequently, a high-profile investigation and legal trial followed. In 2007, Chiquita entered into a plea agreement to resolve the criminal prosecution.

The interactions between the Justice Department and Chiquita were very contentious, but with the settlement, Chiquita expected that it could put the past behind and refocus on developing its business. However, in 2010, the victims’ families filed a separate lawsuit against Chiquita in an American court, demanding compensation.

At the same time, investigators in Bogota and on Capitol Hill were looking at other U.S. companies that may have engaged in similar practices, dealing with terrorists as part of the conduct of business.

With this in mind, Fernando Aguirre, Chiquita’s CEO since 2004, reflected on how the company had arrived at this point, and what had been done to correct the course so far. He faced major challenges to the company’s competitive position in this dynamic industry. What would it take to position the company on a more positive competitive trajectory? Would this even be possible in this industry and in the business climate Chiquita faced?

Chiquita Brands International: Defendant

The atmosphere in the Washington D.C. courtroom on September 17, 2007, was testy, with the lawyers on both sides pointing fingers at each other. The defendant, Chiquita Brands International Inc., had already signed a plea agreement that included a US$25 million fine and a five-year probation period. In addition, Chiquita was required to hire a permanent compliance officer.

The plea did not stop Assistant U.S. Attorney Jonathan Malis from taking a shot at Chiquita. He accused the company of making millions in profits while paying off Colombian right-wing terrorist groups, including the AUC (United Self Defense Forces of Colombia), for almost seven years. He said the almost US$2 million in payments made by Chiquita “fueled violence” and “paid for weapons and ammunition to kill innocent people.”3 Copyright © 2010 Thunderbird School of Global Management. All rights reserved. This case was prepared by Professors Andreas Schotter and Mary Teagarden, with the assistance of Monika Stoeffl, for the purpose of classroom discussion only, and not to indicate either effective or ineffective management.

This document is authorized for use only in Estrategia 2013-I Preg. Montes by Juan Carlos Montes at UNIVERSITY DE LOS ANDES COLUMBIA from January 2013 to May 2013.

Chiquita’s lead defense attorney, Eric Holder Jr., snapped back, accusing Malis of shading the facts, of “being a little too cute and a little too crafty,” as well as “a little deceptive.” Holder told the judge that the government was partly to blame for the company’s predicament. In 2001, the U.S. Secretary of State, Colin Powell, added Colombia’s AUC to the list of “specially designated foreign terrorist organizations” in company with mostly Middle East-based groups like Al Qaeda and Hamas. Holder argued that in 2003 Chiquita asked the U.S. Department of Justice if it should stop the payments to the terrorists. Holder said, “All the government had to do was, ‘yes, stop the payments,’ just say yes, but they never did.”

Bananas are Serious Business

As one of the first tropical fruits to be internationally traded, bananas are a cheap way to bring “the tropics” to North America and Europe. Over the years, bananas have become such a common, inexpensive grocery item that we often forget where they come from and how they get to us. Bananas flourish in tropical regions, such as the Caribbean and Central America, where the average temperature is 80°F (27°C), and the yearly rainfall is 78-98 inches (198-249 centimeters). In fact, most bananas are grown within 10 degrees north or south of the equator. Iceland is an exception, where banana plants grow in soil heated by geysers.4 Bananas do not grow on trees; instead, they are perennial plants, which grow repeatedly from the same root system. They are related to the orchid, lily, and palm families. Bananas are harvested green and ripened during the transportation process, and as soon as the banana stem is cut from the plant, ripening starts. Within 36 hours, the fruit is packed in boxes and loaded onto refrigerated ships, where the cool temperatures slow down the ripening process.

The whole trip, from plantation to grocery store, takes about two weeks. The earliest recorded writings about the banana date from around 600 BC or earlier in India. There were several different varieties growing in the wild, all of which were inedible due to taste, and some varieties even made people ill. The Indian agriculturalists experimented with crossbreeding wild varieties of bananas, but while some of the resulting hybrids were edible, they were also sterile, which meant that the original plants needed to be crossbred each time someone wanted a new edible banana crop. Eventually, they came up with a hybrid that produced offshoots (suckers) that could be planted to grow into new plants full of sweet bananas. Between 400-300 BC, bananas found their way eastward with Alexander the Great and his armies.

The banana appeared in Chinese literature around 200 AD and then migrated westward to Africa. From there, it likely hitched a ride in the ships of Spanish explorers to the Canary Islands, Central and South America, the Caribbean, and other parts of the western hemisphere. Along the way, other hybrid breeds were created. New varieties were also developed in China. Somehow, a Chinese banana made its way to Great Britain and became famous as the “Cavendish Banana,” named after an important English family. The Cavendish became the great granddaddy of all commercial bananas sold in the 21st century.

In 2010, there were 300 different varieties of bananas worldwide, of which about 20 varieties are being grown commercially, mainly in Africa, Asia, and Latin America. In 2010, bananas were ranked third on the list of staple crops in the world after wheat and coffee, making them critical for economic and global food stability. Bananas are one of the biggest profitmakers in supermarkets. The average American eats 27 pounds of them every year. Europeans also love bananas. For example, in Sweden the per-capita consumption was 35 pounds. In Eastern Europe, consumption was growing strongly and had already reached 20 pounds per capita per annum.

While bananas may simply be a humble fruit with a long history, the banana business creates serious environmental, economic, social, and political problems. Historically, the banana trade symbolized economic imperialism, injustices in the global trade market, and the exploitation of agriculture-dependent third-world countries.