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CHAPTER 2

El Pulpo’s South American Rivals

Latin American exporters and their contributions to trade and development are the subject of an incisive essay by Charles Sabel, a professor of law and social science at Columbia University. The essay draws directly on an insight about market prices from Friedrich Hayek, who along with Joseph Schumpeter was among the foremost economic thinkers of the twentieth century. These prices do not comprise a “detailed, reliable, and nearly exhaustive survey of current constraints and opportunities,” as Sabel puts it. Rather, they are “statistical aggregates” that indicate the scarcity of “general classes of goods,” which implies that entrepreneurship involves much more than a careful reading of market data. In Hayek’s view, businessmen and women find opportunities by complementing the broad guidance encapsulated in prices with information about their respective enterprises that is of critical importance yet is not provided by markets—to be specific, “highly detailed, local, or idiosyncratic information regarding inputs, production processes, or products.”¹

This basic entrepreneurial task, which economists Ricardo Hausmann and Dani Rodrik characterize as “self-discovery,” obviously requires time, effort, and thought. Additionally, problems of appropriation, or capture, frequently arise. For example, one firm might go to the trouble of designing a new product and introducing it to consumers, only to see profits slip away as competitors supply facsimiles. Likewise, the improvements one business makes in production processes thanks to its expenditures on research and development benefit other businesses insofar as those improvements are easy to copy—as is often, even typically, the case. Patent law and other arrangements for protecting the intellectual property of innovators exist for the sake of enhancing benefit capture. However, these arrangements are hardly a perfect solution, so entrepreneurial innovation is always discouraged to one degree or another because of imperfect appropriation.²

Imperfect appropriation has been an issue on occasion in the fruit business. For instance, the Chinese gooseberry was unknown outside Asia and the Pacific before the mid-1900s. At that time, New Zealanders developed a variety that could withstand the rigors of international shipping. They also mounted an advertising campaign to acquaint European and North American consumers with kiwifruit, as it is now known throughout the world. However, the benefits of New Zealand’s investment in plant breeding and market development quickly spilled over to other countries—not least Italy and Chile, which are now the leading producers of kiwifruit.

Experiences of this sort have been irrelevant to entrepreneurial self-discovery in Ecuador’s tropical fruit sector, mainly because consumers throughout the world were thoroughly familiar with bananas decades before the country became a major exporter. Also, multinational fruit companies headquartered in the United States determined long ago that their interests would be served by providing technology to Ecuadorian growers, who consequently have been spared the difficulties of appropriation faced by any country, firm, or individual that engages in research and development. Under these circumstances, entrepreneurs such as Luís Noboa have been able to specialize in winning customers for their countrymen’s harvests. Their base of operations—the port city of Guayaquil—has been ideal for this endeavor.

Entrepreneurial Specialization in the Banana Industry

To understand the roles played by transnational firms, South American exporters, and other actors in the global banana business, it is useful to draw on a taxonomy of entrepreneurial innovations proposed by Joseph Schumpeter in the early 1900s. As he saw it, there are five ways that businessmen and women have an impact on the economy.

(1) The introduction of a new good—that is one with which consumers are not yet familiar—or of a new quality of a good. (2) The introduction of a new method of production, that is one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially. (3) The opening of a new market, that is, a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before. (4) The conquest of a new source of supply of raw materials or half-manufactured goods, again irrespective of whether this source already exists or whether it has first to be created. (5) The carrying out of the new organization of any industry, like the creation of a monopoly position (for example through trustification) or the breaking up of a monopoly position.³

Formulated well before Schumpeter’s migration to the United States, this five-part taxonomy was not illustrated with a case study about transnational fruit companies operating in the Western Hemisphere. Such a study would have been fitting, however. What those companies were doing more than one hundred years ago was, first, to acquaint U.S. consumers with bananas. Second, the vertically integrated firms founded by Lorenzo Baker, Minor Keith, Andrew Preston, Joseph Vaccaro, and Samuel Zemurray and much of the technology these firms pioneered represented a genuine departure from old methods of production in the banana business. Third, those same entrepreneurs, whose companies imported and distributed bananas in large quantities, created something that had never existed in the United States: a mass market for tropical fruit. Fourth, new sources of supply were developed, in Central America and elsewhere in the Caribbean Basin. Fifth, the banana business was reorganized, admittedly in a less competitive direction.

Once the tropical fruit industry had established itself, some of the five business innovations identified by Schumpeter figured much in its subsequent unfolding, although others did not. The first sort of innovation, for instance, was unimportant. True, the Gros Michel variety was replaced with Cavendish fruit, although the switch was prompted by the vulnerability of the former type of banana to Panama Disease and every effort was made to avoid changing either the appearance or the taste of the final product. Also, processing (aside from controlled ripening on board reefer ships and in storage facilities) has been a fairly unimportant part of the banana business, which is not the case with much of the food economy. Moreover, retail packaging today is indistinguishable from what it was in the past. Bananas have always been sold fresh and in the skins that nature provided them, adorned these days with nothing more than small stickers that advertise supplying firms and countries.

But while the introduction of novel goods ceased long ago for many intents and purposes in the tropical fruit industry, other innovations have been a recurring part of the business. Methods of production have changed substantially, largely because multinationals have supported much of the experimentation from which better agronomic practices and disease-resistant cultivars stem. For much of the twentieth century, the firms’ willingness to finance research and development was a consequence of their dominance of leading markets, which enabled them to capture the benefits of technological advances not accruing to consumers.⁴ In addition, Standard Fruit had a special motivation to improve technology. Opportunities for the company to establish new plantations after existing farms had been ravaged by Panama Disease were limited because so much territory had been snapped up previously by United Fruit. It is therefore unsurprising that Standard Fruit, not its larger rival, came up with the Cavendish variety, which could resist the soil-borne fungus.

To this day, U.S.-based multinationals invest in technological improvement, even though their standing in the banana industry is not what it used to be. One reason for this is that Chiquita Brands International (formerly United Fruit), the Dole Food Company (formerly Standard Fruit), as well as Del Monte Corporation (which has been in the banana business since its 1967 purchase of the West Indies Fruit Company) still handle a sizable share of the world’s banana exports, and so can gain much from any supply-side advance. In particular, the adoption by independent planters of better cultivars and farming methods created by the multinationals still benefits Chiquita, Dole, and Del Monte, since these companies continue to deal regularly in fruit raised by those planters.

The ready availability of multinational technology in Ecuador, where independent growers predominate, reduces the need there for banana research and development. Spending on laboratories and test plots, salaries for scientists and technicians, and related expenditures are consequently avoided. In addition, “free-riding” growers, who hope to gain from the advances other farmers have paid for but whose reluctance to contribute financially can prevent those advances from materializing, would be a problem if foreign firms did not share their technology. Similarly, Ecuadorian exporters along with their counterparts in Colombia have been the long-term beneficiaries of United Fruit’s popularization of bananas during the late 1800s and early 1900s—a marketing effort like New Zealand’s popularization of kiwifruit and also involving appropriation issues.

Excused from having to undertake either the first or second business innovation identified by Schumpeter, Ecuadorian entrepreneurs have been able to concentrate on other innovations. Time and again, they have placed bananas in new markets. They also have entered a number of existing markets, thereby increasing competition. Exporters from the South American nation, which is smaller and poorer than Colombia to the north and Peru to the south, have been successful thanks largely to the business services and mutually-rewarding partnerships on offer in Guayaquil, which was a haven for international commerce generations before Noboa or any other Ecuadorian began selling bananas overseas. Since the mid-1900s, the country has maintained an edge over its competitors—including the Mesoamerican republics where United Fruit and Standard Fruit got their start.

Central Versus South America

Warm and humid, the Caribbean lowlands of Central America have always been an obvious place to grow tropical fruit for the United States, where demand was seemingly insatiable around the turn of the twentieth century and for many years afterward. Bananas from the region had been finding their way to New Orleans and other U.S. ports since the 1870s. Some of this fruit was harvested alongside the railroad Keith built in Costa Rica and more came from the Bay Islands of Honduras.⁵ However, Central America’s potential for banana production remained largely unexploited as the nineteenth century drew to a close, primarily because few rural laborers were willing to relocate from the temperate highland valleys where the region’s population had long been concentrated to coastal settings that swarmed with disease-bearing insects.⁶

Multinationals dealt with labor shortages and other barriers to large-scale production as they established their own plantations, which were the core of company-controlled enclaves that had few linkages to the Central American economy. Some of the workers in northern Honduras, which during the early 1900s lacked a rail connection to the rest of the country, were from El Salvador, which was (and remains) more densely populated than its neighbors and is the only Mesoamerican nation with no Caribbean coastline. Also, many of Central America’s bananas were harvested by West Indians who spoke English and were of African descent. Migration by this group into the highlands, which was proscribed by law in a number of countries,⁷ was unappealing because the wages paid by foreign fruit companies far exceeded what other rural employers offered.

Sizable expenditures on the clearing and preparation of land and on infrastructure of every description were needed before tropical fruit could be produced and exported. Prior to these expenditures, investing firms demanded long-term concessions, which included grants of real estate as well as guarantees of minimal taxation. The handful of companies that received these concessions from public officials in San José, Tegucigalpa, and other capitals ended up with nearly all the best coastal land from Guatemala to Panama, which effectively preempted competition either on Central Americans’ part or by outsiders.

Circumstances were not the same a century ago in South America. Whereas urban centers were lacking along the Caribbean coasts of Costa Rica, Nicaragua, Honduras, and Guatemala, there were cities of long standing in northern Colombia. Santa Marta, Ciénaga, and Barranquilla, within 100 kilometers of each other, were settled in the sixteenth century. Cartagena, a colonial stronghold built to prevent incursions by Spain’s European adversaries and to discourage attacks by pirates, was a little farther down the coast, in the direction of Panama. In addition, sugar and other crops had been raised in northern Colombia for generations. In no sense, then, could the region be considered a tabula rasa, as Central America’s eastern littoral was regarded in the late 1800s and early 1900s by the tropical fruit industry and even by national governments. Western Ecuador, which is bounded on the east by the Andes (the world’s tallest mountains other than the Himalayas) and opens toward the Pacific Ocean, had agriculture and an urban population as well. Parts of the costa, as the area’s inhabitants and all their countrymen call it, have been farmed continuously for millennia. Also, Guayaquil, which was founded in 1538, was a commercial center decades before Baker, Preston, and Keith joined forces in 1899 to create United Fruit.

The costa was the first part of South America to export bananas, which had been brought to the New World by Spaniards following close on the heels of the conquistadors. However, Ecuadorian fruit traveled south, to Peru and Chile, instead of to the north. This trade, which was under way by 1877, grew modestly over the years and in 1908 a Chilean firm, the South American Fruit Company (SAFCO), opened an agency in Guayaquil to handle bananas and other tropical goods. None of the vessels plying the waters between Ecuador and Chile were refrigerated, so fruit was transported in small quantities as deck cargo. Banana exports amounted to $40,000 in 1915 and had risen to $60,000 in 1933, with SAFCO consistently accounting for more of the business than any other firm.⁸ Tropical fruit comprised less than 1 percent of Ecuador’s total exports at the end of this period,⁹ when United Fruit started to invest in the country.

In Colombia, José Manuel González made an initial shipment of bananas to the United States in 1889. However, this early venture failed because, as Marcelo Bucheli notes, “the fruit rotted by the time it arrived in New York.” More rewarding was an enterprise launched shortly afterward by a pair of Englishmen, Mansel Carr and Laurence Bradbury, who partnered with a firm in New Orleans to deliver bananas regularly to the Crescent City. This enterprise took off around the time Keith began buying farmland in South America. His purchases were subsequently absorbed by United Fruit, as was the Santa Marta Railway Company (originally a British-owned business and Carr’s former employer). Like Keith’s holdings in Central America, northeastern Colombia was thus drawn into the multinational’s orbit, where it remained until World War II.¹⁰

Holland in the Tropics

With its fertile soils, abundant hydrologic resources, and direct access to European ports and the southern and eastern coasts of the United States, the Caribbean Basin has been the source of most of the bananas traded internationally since the late 1800s. But while Europe and the United States are farther from the costa, the region is well suited to fruit production, more so than many other parts of the Western Hemisphere. Northern Chile and the entire Peruvian littoral, for example, are extremely dry. Arid conditions result partly because the Andes impede the movement of moisture-laden clouds out of the Amazon Basin, east of the mountains. Also, clouds that form in and around the Humboldt Current, which has low temperatures owing to its origins in the frigid seas near Tierra del Fuego and which flows northward along the Pacific coast of South America, are thin as a rule and therefore the source of little precipitation. For hundreds of kilometers along the coast, the only green places are the narrow valleys of rivers careening down from the nearby Andes.

A little north of Peru’s boundary with Ecuador but still below the equator, the Humboldt Current turns away from the continental mainland and heads straight to the Galápagos Islands, 1,000 kilometers due west and the only setting anywhere on the equator where the seawater is cool enough to suit penguins. The ocean is like a warm bath a little farther north and the resulting cloud formation is the source of torrential precipitation and lush vegetation in the surrounding region. In stark contrast to the deserts bordering the Pacific Ocean in Peru and northern Chile, rainforests formerly extended from northwestern Ecuador through western Colombia and into Central America. Patches of this ecosystem remain intact. Where Colombia and Panama meet, for example, impenetrable jungles and broken terrain combine to this day to block construction of the final segment of the Pan-American Highway, which otherwise runs the whole distance from Alaska to Patagonia.

Neither arid nor excessively wet, western Ecuador includes locations south of Guayaquil where precipitation falls short of bananas’ water requirements, which are substantial. However, the southern costa is traversed by various rivers and streams flowing out of the Andes, so irrigation is fairly easy. Also, low clouds persist in the area during the dry season, which runs from May to December. As a result, solar radiation and the transpiration of moisture from plants are both limited, thereby reducing the need for irrigation. Geographer James J. Parsons highlighted these climatic advantages in an early description of Ecuador’s tropical fruit industry.¹¹ A few years later, another geographer, David A. Preston, drew attention to an additional benefit of the dry conditions prevailing for half the year in the southern costa, which was that an airborne fungus called Yellow Sigatoka¹² (Mycosphaerella musicola Leach) moved slowly from field to field. Left unchecked, this pathogen manifests itself initially as spots on leaves, yet in short order reduces yields and causes the quality of fruit to deteriorate.¹³

According to Parsons, soils throughout western Ecuador are “good to excellent” and “perhaps as promising as any to be found within the rainy tropics of the New World.”¹⁴ Other observers provide more tempered assessments, emphasizing that soil properties vary. All experts agree that fertility levels are high on average, although problems such as excessive clay content and poor drainage are encountered in many settings.¹⁵

While the soils of western Ecuador may not be superior to soils in different parts of the Caribbean Basin, the costa enjoys geographic advantages of considerable importance. Since the region extends from one degree north of the equator to a few degrees south, bananas are harvested year round. Production peaks from September through March, which coincides with the time of year when demand is elevated in North America and Europe. This timing is advantageous for Ecuadorian growers because bananas cannot be warehoused for months on end, as is an option with apples, for instance.

The costa is also largely free of severe tropical storms, of the sort that hammer one part of the Caribbean Basin or another each and every year. Weather-related risks are correspondingly modest for the costa’s banana farmers. The significance of such risks in other places was put in sharp relief as growers in northeastern Colombia were making a sizable investment in order to convert from Gros Michel to Cavendish. In 1966, when this conversion was under way though not yet complete, a hurricane destroyed 45 percent of the banana crop. Another hurricane struck the following year, which reduced harvested area from 15,000 to 11,000 hectares.¹⁶

By no means are the costa’s environmental attributes valued only by Ecuadorian growers and exporters. So that Chiquita, Dole, and Del Monte can supply their customers with fresh produce regularly and without fail, the three companies purchase bananas in western Ecuador, especially when production falls short in other places. Doing business in the costa is a good way for any firm to cope with the disruptions in Central American and Caribbean supplies caused by hurricanes, which helps explain why multinationals have been willing to share technology with the region’s growers.

While natural resources, the climate, and a location astride the equator all work in the costa’s favor, great obstacles formerly stood in the way of the region’s agricultural development. Yellow fever, which is often fatal, was not brought under control until the second decade of the twentieth century, when critical assistance was provided by the Rockefeller Foundation and the U.S. Public Health Service.¹⁷ Likewise, the Ecuadorian and U.S. governments launched an anti-malaria program in the late 1940s, which among other things involved disease monitoring and eradication of the anopheles mosquito.¹⁸ As long as illnesses such as these were unchecked, there was untold human suffering. Also, agricultural activities that put large numbers of people in close proximity to one another, such as banana production, were impeded due to the risk of disease transmission.

Tropical illnesses were a problem that the costa shared with the Caribbean Basin. However, the region had an additional disadvantage owing to its location. Before the Panama Canal existed and especially before completion of the railroad traversing the Panamanian Isthmus, a long and arduous voyage was needed to reach New York, Hamburg, and other places where Ecuadorian goods could be sold. Setting out from Guayaquil, a ship would first beat its way south against the Humboldt Current. Once off the coast of southern Chile, a sharp look-out had to be kept through the fog and mists that shroud the region’s fjords and mountains for the Strait of Magellan, since missing this passage would necessitate a perilous detour around Cape Horn through heavy seas and gale-force winds. Leaving the Pacific Ocean in its wake and veering north, the ship then had to travel nearly the entire length of the Atlantic before reaching the world’s leading markets.

In spite of mortal diseases and the great distances that separated western Ecuador from its most important customers, the agricultural potential of the region was extolled long before the turn of the twentieth century, including by foreign visitors. On taking up his post as French vice consul in Guayaquil, Charles Wiener was struck in 1879 by the commercial hustle and bustle of his new home as well as the flat, fertile ground surrounding the port city. Indeed, the diplomat was impressed enough to make comparisons with The Netherlands,¹⁹ a nation that coincidentally is not much larger than the valley drained by the river emptying into the Pacific a little south of Guayaquil. Pleased with Wiener’s description, the costa’s inhabitants have called the Río Guayas watershed una Holanda tropical ever since.

Tropical Burghers

While the comparison Charles Wiener made 135 years ago between the costa and The Netherlands had much to do with farmland and its productivity, Guayaquileños were particularly flattered by the suggestion that their city resembled a Dutch port, complete with its population of active merchants. It must be remembered, however, that economic progress does not result automatically whenever entrepreneurs—Dutch, Ecuadorian, or otherwise—exert themselves. As economist William J. Baumol stresses in what he modestly calls “a minor expansion of Schumpeter’s theoretical model,” business activities are often productive, in the specific sense of falling into one or more of Schumpeter’s five categories. However, there are other activities that Schumpeter did not address and which Baumol characterizes as unproductive or, worse yet, destructive. Contributing nothing to overall growth and development, unproductive entrepreneurship is exemplified by the “discovery of a previously unused legal gambit” that only creates rents (as economists call the gains resulting from unproductive pursuits) for individuals and firms able to exploit the gambit. Destructive entrepreneurship, including organized crime, directly harms people and their legitimate livelihoods, so is nothing less than “parasitical.”²⁰

Baumol extends Schumpeter’s analysis primarily with an eye toward addressing issues of public policy—for example, the ways taxes or legal rules strengthen or weaken incentives for businessmen and women to choose productive activities over unproductive or destructive alternatives. But as the same economist recognizes, these choices have multiple determinants, including geographic and historical realities of the kind that underlie the predominance of productive entrepreneurship in Guayaquil.

These realities are best understood by considering the long-term isolation of the port city from seats of governmental authority—isolation that did not truly end until many years after Vice Consul Wiener’s arrival in western Ecuador. During the colonial era, the Spanish viceroy held court in Lima, far to the south. For nearly a century after Ecuador achieved independence, a grueling ascent into the Andes on foot or perhaps on horseback was required to reach the national capital. Before a rail line into the mountains was constructed, in the early 1900s, the authorities in Quito were unable to interfere much with foreign trade and other varieties of commerce in the costa. At the same time, the trouble and expense of reaching the capital city from Guayaquil limited the appeal of trying to win favors from representatives of government.

As unrewarding as unproductive (or destructive) pursuits were, the port city’s entrepreneurs have been productively inclined, routinely putting their talents to use in the wider commercial world. They have sometimes introduced foreign buyers to Ecuadorian products previously unknown outside the country. Far more often, they have opened new markets for goods that Ecuador produces efficiently. Entrepreneurs from the western part of the country even have reorganized global markets in a few instances, always toward greater competition.

For nearly 300 years beginning in the sixteenth century, Guayaquil was the leading ship-building center on the Pacific coast, from Cape Horn to the Bering Strait, and vessels constructed in and around the city were reputed to be made of the “strongest and best” timber in the world.²¹ In the mid-1800s, entrepreneurs from the costa organized the production of tightly woven straw hats, which they sold to gold miners crossing the Panamanian Isthmus on their way to California. These Forty-Niners, who risked exposure to tropical diseases to avoid trekking all the way across North America, mistook the origin of their purchases. Hence, the name they gave their new headgear, Panama hats, is still used today, more than 160 years later.²² Guayaquil’s merchants played a key role in the cacao boom of the late 1800s and early 1900s.²³ More recently, Ecuadorian entrepreneurs have exported shrimp and cut flowers. Local businessmen and women also have worked hard to make their country a favored destination for international tourists.

As one commercial opportunity overseas has been exploited, then another, and so on, business services that the costa formerly lacked have been introduced. For example, Juan F. Marcos built up a sizable enterprise around the turn of the twentieth century dedicated to the management of cacao estates. His approach to client recruitment was simple. An estate owner would be asked how much he or she expected to earn on his or her own, without any specialized assistance. Provided the response to this inquiry was realistic and less than 40,000 sucres per annum, which is worth about $300,000 in today’s money, Marcos would then offer to administer the property, receiving half the income in excess of the figure the owner had named and nothing else.²⁴ This arrangement was accepted nearly every time it was proposed and, with the profits Marcos made, he founded the Sociedad General: a diversified firm that possessed a commercial bank, an insurance company (responding to a strong demand in Guayaquil, with its prevalence of flammable, wooden structures), as well as the huge El Guasmo hacienda on the outskirts of the city and several other rural properties.²⁵

Marcos had a son, Juan X. Marcos, whose encounter with governmental authority at a tender age did little to encourage political engagement on his part, as would have been necessary for a career in rent-seeking. During violent clashes between opposing political parties in 1910, the privileged son of the founder of the Sociedad General had rushed outside the family home in central Guayaquil to investigate the commotion for himself. Nine years old at the time, he was punished for his curiosity with a sharp blow to the forehead, administered by a member of the armed forces. This left the younger Marcos with a permanent scar and, one must suppose, a lasting wariness of the rough and tumble of Ecuadorian politics. After expressing a desire at an early age to study medicine, he decided to join the family business instead.

As partners at the Sociedad General, the Marcoses offered business services in support of overseas trade, including export financing and insurance as well as the brokering of cargo space on oceangoing vessels. The Sociedad General also became the local agent for shipping companies such as Cunard White Star Line and Holland America. Simultaneously, the firm engaged in international trade on its own, exporting rice for example.

From Humble Beginnings

Many of Guayaquil’s entrepreneurs were from the costa’s leading families. This was true of the Marcoses, for instance, who could trace their ancestry to colonial times. However, Noboa’s employment at the Sociedad General and his subsequent rise into the commercial elite demonstrate that upward economic mobility was possible in the costa. The same can be said of northeastern Colombia. For example, Pepe Vives, a leading exporter of bananas from the region during the 1950s, was not “a member of any of the traditional, powerful families in the region and (was) without formal education.” Regardless, he was able to amass “a fortune with his own commercial, financial, and manufacturing businesses.”²⁶ In no sense is the costa or northeastern Colombia egalitarian. However, the barriers to advancement are much worse in places where a land-holding gentry is in complete control, as was true in highland Ecuador well into the twentieth century. Where commerce dominates, as it does in downtown Guayaquil, lofty material aspirations are not completely unrealistic for someone with talent who is willing to work hard.

Even in rural areas, the banana business has provided opportunities for individuals whose origins were modest. One such individual was Manuel Amable-Calle, who was born in 1893 to a rural washerwoman and began his business career when he was all of ten years old. Fashioning a raft by lashing together a few pieces of wood, Amable-Calle ferried people and their goods across the Río Jubones, south of Guayaquil and not too far from Ecuador’s border with Peru. By 1920, he was able to purchase fertile land on the southern shore of the river, where he produced food for the Guayaquil market.²⁷ A decade later, Amable-Calle was a shopkeeper and the leading resident of El Pasaje, up the Río Jubones from the coastal city of Machala. Around that time, SAFCO representatives persuaded him to raise bananas for export. Soon afterward, he planted the Gros Michel variety on his farm and convinced other growers in the area to do the same. By the late 1930s, his own harvests combined with his purchases of neighbors’ output were sizable enough for him to make weekly deliveries to the Chilean firm’s ships anchored in the river by Guayaquil.²⁸

In July 1941, the Peruvian army invaded southern Ecuador, doing much damage in El Pasaje and a number of other towns and cities. Amable-Calle and his family had no choice other than to abandon their farm and flee. Returning home in January 1942, Amable-Calle replanted and, because bananas from his farm could be floated down to Machala in small boats, he was producing fruit again for overseas markets within six months, at which time banana exports were grinding to a halt because of World War II.²⁹

After the global conflict, few people in the Ecuadorian countryside seized opportunities in the banana business better than Esteban Quirola, who was born in 1924 and spent his early years on a small farm on the banks of the Río Jubones. After working part-time on the farm and in a local shop before he was a teenager, Quirola moved at fourteen to Guayaquil, where an older brother with a small grocery employed him. Every day before school, he rose early, went to the central market, bargained with farmers over the produce they had brought to the port city to sell, and took his purchases on the streetcar to his brother’s store. The commercial skills gained from this experience were further honed after Quirola joined the Ecuadorian army in 1944 and served his eighty-man detachment as a purchasing agent. After completing his military service in late 1945, Quirola rented a small cacao farm near his birthplace. He plowed all his earnings into real estate and, within a few years, started raising bananas. Totaling twenty-five to thirty hectares in 1950, Quirola’s holdings dedicated to fruit production increased at a fast pace.³⁰ Ten years later, he was one of the leading landowners in the southern costa, with thousands of hectares planted to bananas.

Of all the South Americans who have prospered in the banana business, none had a more difficult start in life than Segundo Wong, who was born in Guayaquil in 1929 to an Ecuadorian woman who had married a Chinese immigrant. Wong’s father disappeared when the future bananero was fifteen; the elder Wong either died or left the port city—no one seems to know for sure. Wong’s mother passed away soon afterward, which left him to care for himself as well as several younger siblings. After scrambling for jobs in the port city, Wong found employment with a cattle rancher, which enabled him to learn about rural enterprises. He went on to trade bananas on a small scale, buying fruit from farmers and selling to exporters in Guayaquil. Wong subsequently found work with a banana planter in Quevedo who was also named Segundo Wong but was not a relative. Given the coincidence of a shared name, the planter delegated a number of business-related tasks to his employee, who not only gained knowledge about banana production but ended up buying his boss’s entire operation.³¹

Wong would go on to become one of the costa’s leading growers, nearly on a par with Quirola. He also became a successful exporter, with accomplishments in overseas markets rivaling those of Noboa.

A Tycoon’s Early Years

If Wong’s beginnings in life were less auspicious than those of other leading bananeros in Latin America, Noboa took the longest path from humble origins to success in the tropical fruit business. The future entrepreneur was eight years old in 1924, when his father received a fatal kick from a horse. His mother, Zoila Naranjo de Noboa, was pregnant at the time and living with her three sons in northern Chile, where she had migrated with her husband a few years earlier. Aside from three gold sovereigns, worth about $150 apiece, the young widow had nothing to her name.³²

Selling a few household effects, Noboa’s mother scraped together passage for her offspring and herself back to Guayaquil, where one of her husband’s elderly relatives provided modest quarters on the city’s outskirts. Less than four months after losing her husband, Zoila Naranjo de Noboa delivered her last child and only daughter. She also sold one of her three gold coins and used the proceeds to start a small business, thereby providing an early tutorial in entrepreneurship to her sons. The business consisted of selling milk by the serving throughout Guayaquil and required a modest investment in containers, purchases from neighboring dairies, and recruitment of local boys to serve as a sales force. Any merchandise left at the end of the day was mixed with eggs and rum to make rompope, which was hawked along with rolls made from wheat and yucca flour.³³

Out of a desire to help support his family, Noboa decided at eleven to leave school after just three years with the Salesian Fathers. “One day,” he vowed as he presented his mother with the first sucres he had earned, “I will be a rich man and will bring you lots of presents.” After starting out selling magazines on the streets of Guayaquil and even on trains running up to Quito, Noboa consistently engaged in a diverse array of ventures. One was a sidewalk stand, named “Basantes” after its former proprietor, where he and a partner named Modesto Rivadeneira shined shoes and sold magazines and sundry items. The two boys figured out that premium prices could be charged after six in the evening, when other street vendors went home.³⁴ Learning the value of long hours on the job, they each cleared 100 sucres (equivalent to $225 today) a month at a time when the prevailing daily wage for adult laborers was little more than one sucre. Noboa also sold cloths for polishing metal, which led to his job at the Sociedad General as well as lifelong business associations and personal friendships with Juan F. and Juan X. Marcos.³⁵

Fully appreciative of Noboa’s talents and capabilities, the Marcoses were wise enough to give him free rein. For example, Noboa was allowed to continue running his own businesses, including a small office in central Guayaquil where he traded currency and sold souvenirs and Parker Pens starting in 1933. Six months after joining the bank, the former street vendor asked the younger Marcos for a loan of 3,000 sucres ($6,750 in today’s money), promising “you’ll have your money back in three months and a profit of 3,000 sucres.” The loan was made and Noboa delivered on his promise in full. He also asked for a follow-up loan under the same terms. When a third loan was requested—for 10,000 sucres ($22,500)—Marcos could no longer contain his curiosity and asked what was being done with the money. Only then did he find out that the thirteen-year-old had been trading in the auction room of the customs house.³⁶

Just as the proprietors of the Sociedad General did not hold Noboa back from buying and selling on his own, the budding entrepreneur was not prevented from associating with other businessmen. His personal office was close to the Banco La Previsora, a leading financial institution managed by Victor Emilio Estrada. “This young man is worth his weight in gold,” concluded the banker, who not only befriended the teenager but offered him a job as assistant manager. Noboa did not accept the position, although he became Estrada’s partner in a company engaged in importing and in representing foreign firms, including Chrysler and Coca Cola. Before he turned eighteen, Noboa was managing the company, in which he held a one-third equity stake. Renamed Comandato S.A. after a few years, it is still in business.³⁷

Aside from being a superb commercial operator in his own right, Noboa benefited substantially from his partnerships. In this, he had something in common with entrepreneurs who had preceded him in the banana business. Zemurray, for example, got an early boost thanks to associations with other merchants in Mobile as well as financial backing from United Fruit. By the same token, Latin American entrepreneurs who followed Noboa flourished in large part because of their partnerships. A case in point was Vives, who did well as an exporter by working with Francisco Dávila—someone who provided “a touch of sophistication” reflecting his undergraduate studies in France and the MBA he had earned at Stanford University.³⁸

The Right place, the Right Entrepreneurs

In a book about the Ecuadorian operations of United Fruit, Steve Striffler has little to say about the costa’s capitalists, other than to chronicle their disputes with campesinos and workers. He draws no distinctions between commercial farmers, some of whom operate on a large scale while others do not, and individuals engaged in overseas marketing and other non-agricultural pursuits. Nor is he concerned with entrepreneurial innovation and the various forms it takes. His commentary on capitalists largely echoes the convictions of a rural laborer named Patricio, whom Striffler quotes often. Firmly maintaining that workers such as he “produce the bananas,” Patricio complains that farm owners, local intermediaries, and multinationals do little or nothing for the money coming their way.³⁹

Alberto Acosta, author of a widely read economic history of Ecuador, does not endorse the view that capitalists merely appropriate the wealth their employees are solely responsible for creating, as adherents of an ideological perspective at least a quarter century past its expiration date would have it. Rather, he finds fault with the country’s businessmen and women for lacking entrepreneurial verve. According to Acosta, this shortcoming has held Ecuador back—especially during the Great Depression, but also at other times.⁴⁰

As a rule, the apparent defects of entrepreneurs are a weak explanation for disappointing economic performance, when and where it occurs. Along with other economists, Baumol emphasizes that firms and individuals can be counted on to seize opportunities for profit that come their way. If they are not venturing into new markets, for example, then the rewards for doing so must be weak.⁴¹ Such has been the case at times in Ecuador, not to mention other Latin American nations, and Acosta undoubtedly would have arrived at better insights by examining economic incentives more and speculating less about the people responding to those incentives.

If businessmen and women in Ecuador really have been indolent and if the 1930s were an inauspicious time for entrepreneurship, no one seems to have told Marcos, Noboa, and others like them. Based in a port city that for centuries was remote both from its most important markets and from political capitals, these individuals never acquired the habits of rent-seeking and other unproductive pursuits. Instead, Guayaquil’s entrepreneurs have specialized productively, seeking out and serving customers overseas.

Cities with a long tradition of productive entrepreneurship are rare in the banana-growing regions of the Western Hemisphere. There were no such settlements along the Caribbean coast of Central America when United Fruit and Standard Fruit started operating in the region. In addition, Guayaquil differed from cities along Colombia’s Caribbean coast. According to Bucheli, Cartagena, which well into the nineteenth century was a slave-importing terminal, was not a place to cut one’s teeth in foreign trade. The area to the northeast, the same author adds, was “stagnant or decaying prior to the banana export industry,” and Santa Marta languished between the wars of independence, during which it was a pro-Spanish bastion, and the turn of the twentieth century, when United Fruit’s arrival put an end to the city’s “state of abandonment.”⁴²

One by one, the geographic and environmental impediments to economic progress have been overcome in western Ecuador. Yellow fever and other illnesses no longer prevent large numbers of workers from gathering in the same place, as happens routinely on banana farms. Notwithstanding the tolls charged for use of the Panama Canal, which producers in the Caribbean Basin need not reckon with, the waterway constructed under budget and ahead of schedule by the U.S. Army Corps of Engineers has been an enormous boon to Ecuador since it provides a direct route to markets bordering the Atlantic Ocean.

Once obstacles to development were removed, the commercial strengths and orientation of Guayaquil could be brought into play in the banana trade. Finance and other business services, which entrepreneurs in the port city began to provide during the cacao boom, did not disappear once the boom was over. To the contrary, “a financial infrastructure easily adapted to support banana exports as well as individuals with experience in the production and export of agricultural products” was in place,⁴³ which made international commerce much easier. Without local brokers adept at arranging transoceanic shipping, each and every aspiring banana exporter would have needed refrigerated vessels of his or her own. The expense of these vessels undoubtedly would have kept many out of the business.

Guayaquil’s vocation for commerce has worked to the advantage of the surrounding region, the country as a whole, and even foreign customers of Ecuadorian products. Perhaps limited economic development during the centuries when the costa was remote and insalubrious was the price to be paid for the acquisition in the city of the habits of productive entrepreneurship. If so, sacrifices in the past have resulted in sizable dividends. Represented by individuals such as Noboa, Ecuador has been the world’s leading exporter of tropical fruit since the 1950s, without ever being a corporate dependency.