There are two major reasons why Honduras had such a difficult time getting back on its feet after the storm. The first was the land-tenure system it inherited from Spain, in which a small number of extremely wealthy families ended up controlling most of the land. But even more debilitating was the country’s unhealthy relationship with the United States, whose shortsighted policies and business interests had kept the country politically unstable for more than a century. From the time of its independence in 1821 to the present, Honduras has suffered through a tumultuous history that includes close to 300 civil wars, rebellions, coups, and unplanned changes in government.
One might say that modern Honduran history began in 1873, when Jules Verne introduced Americans to the banana in his novel Around the World in 80 Days, where he praised it as being “as healthy as bread and as succulent as cream.” Originally from Asia, bananas had been grown in Central America for centuries since they had been brought there by the Spanish, but they were an exotic delicacy in the United States because of their scarcity and perishability. In 1885, Boston entrepreneur Andrew Preston* and a partner formed the Boston Fruit Company, with the idea of using fast steamships, rather than sail, to get bananas to market before they spoiled. It was a success: Inexpensive, delicious bananas took the country by storm. By the turn of the century Boston Fruit, which was later merged into the United Fruit Company, had carved out forty thousand acres of banana plantations along the northern coastline of Honduras, becoming the largest employer in the country. This was the beginning of a long and destructive relationship between American banana companies and the country of Honduras, earning it the pejorative nickname “Banana Republic.” United Fruit and the other fruit companies that soon followed became infamous for their political and tax machinations, engineered coups, bribery, and exploitation of workers. They strangled the country’s evolution and cultivated a corrupt and extreme form of crony capitalism, in which they subverted the government to their own ends.
A central figure in this history was an American named Samuel Zemurray, a young Russian immigrant who started off as a pushcart peddler in Alabama. When he was eighteen, he noticed that the Boston Fruit cargo ships arriving in the port of Mobile were throwing away the bananas that had ripened during the voyage, because they would spoil before they could get to market. Zemurray bought a load of these ripe bananas for almost nothing, filled up a railroad car, and rolled it inland, telegraphing grocers along the way to meet the boxcar and buy his cheap bananas, quick. By the time he turned twenty-one he had made over $100,000 and had become known as Sam the Banana Man. Zemurray founded the Cuyamel Fruit Company, with two tramp steamers and five thousand acres of banana groves on the Honduran coast. The American appetite for bananas was insatiable. (And it still is; the banana is consistently the number one–selling item in Walmart superstores.)
While the fruit companies were flourishing, the Honduran economy was in almost perpetual crisis. At this time, the British were still the bankers to the world, and they had unwisely loaned Honduras far more money than the country could repay. Honduran sovereign debt had grown so large that the British were threatening to go to war with Honduras to collect it. The possibility of the United Kingdom, or any European power, interfering in Central America was unacceptable to US President William Howard Taft. In 1910 his secretary of state, Philander Knox, recruited J. P. Morgan in a scheme to buy Honduran debt from the British—which he did at fifteen cents on the dollar—and restructure it. Under the deal Morgan struck with the Honduran government, Morgan’s agents would physically occupy Honduran customs offices and shortstop all tax receipts to collect the debt.
This incensed Zemurray. Over the years, he had worked out a web of favorable tax-free deals with the Honduran government. Now Morgan was promising a banana tax so heavy, at a penny a pound, that Cuyamel Fruit would soon go out of business. Traveling to Washington to protest this new arrangement, Zemurray had a meeting with Knox. The meeting did not go well. Knox lectured Zemurray with self-righteous zeal, insisting that Zemurray do his part to help the fine bankers at J. P. Morgan make money for the good of the country. Zemurray left furious, and Knox was worried enough about his reaction that he ordered a Secret Service detail to follow him.
Zemurray saw one simple solution to the problem: Overthrow the government of Honduras that had cut the deal with Morgan. Conveniently, a deposed former president of Honduras, Manuel Bonilla, was living penniless in New Orleans a few blocks from Zemurray’s mansion. Easily avoiding Secret Service surveillance, Zemurray furtively recruited mercenaries to acquire arms, get a ship, and smuggle Bonilla back into Honduras. Meanwhile, he made sure the Honduran press railed against the “Morgan plan,” emphasizing how it would subvert Honduran sovereignty. The Honduran people, already suspicious of the arrangement, were soon roused to revolutionary fervor. The “invasion” worked; Bonilla returned in triumph, the president of Honduras resigned, and Bonilla was elected in a landslide. He rewarded Zemurray with a twenty-five-year tax-free concession, a $500,000 loan, and a gift of 24,700 acres of excellent plantation land on the north coast.
Although the Honduran debt would mostly go unpaid, Zemurray had achieved a remarkable personal victory. He had outmaneuvered Knox, successfully defied the US government, poked J. P. Morgan in the eye, and ended up a much wealthier man. In engineering the “invasion,” he had covered his tracks so well that contemporary investigations into the scheme were never able to connect him to it or prove he broke any laws. But he had also intentionally overthrown a government to achieve his own financial ends.