Blood Bananas: Chiquita in Colombia
No one laughs at the banana in its areas of origin. It is too serious a business, on which jobs and lives depend.
Peter Chapman, Author of Jungle Capitalists.
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.