Government, Firm Reach Tentative Accord to Save Some of Operation : United Brands Pullout Hits Costa Rica

United Brands, successor to a giant fruit company once synonymous with “Yankee imperialism” in Central America, is pulling out of its huge banana plantations in southwestern Costa Rica.

The move has already cost 2,000 jobs out of a work force of 3,000, brought the isolated area’s economy to a virtual standstill and left the Costa Rican government scrambling to find a way to sustain the region.

The government, after months of negotiations with the American firm, has reached a tentative agreement that will permit it to salvage at least some of the lost banana production.

Danilo Jimenez Veiga, minister of the presidency, said late last week that the tentative pact, if finally approved, would “buy time and social peace while we prepare new development projects” in the region.

Under the tentative agreement, Jimenez Veiga said, Costa Rica will buy about 2,900 acres of the 7,500 acres in United Brands’ Golfito division for $1.25 million, about a sixth of what the fruit company originally asked.

In addition, United Brands would buy up to 4 million boxes of bananas annually from the government once the 2,900 abandoned acres are back in production, a process that could take up to a year or more.

Jimenez Veiga said the price per 44-pound box had not yet been fixed, but would include a 70-cent export tax and a 40-cent surcharge for disease control.

The government said it would employ about 1,200 workers on the land it plans to buy from the fruit company, slightly more than a third of those formerly employed.

United Brands had been gradually reducing its operation on Costa Rica’s southwest coast for several years, citing weak demand, rising labor costs and increased competition.

Then, last November, it announced that it was pulling out altogether, leaving an area that had come to depend on it with virtually no other industry.

That followed a 57-day strike by banana workers that left the untilled plantations in ruins. What was left after the strike was further devastated by heavy rains and floods and an outbreak of sigatoka, a crippling plant disease.

United Fruit Co., which later became Standard Brands, began work on the Golfito division in 1936 and, by the 1950s, was shipping 16% of the world’s bananas from southwestern Costa Rica.

United Fruit had been active in Costa Rica since 1899. It was born in that year in a merger of Boston Fruit Co. and Tropical Fruit & Trading Co. It soon became known in Central America as “the octopus.”

But worldwide overproduction, tough competition from other Latin American countries and steadily increasing production costs gradually whittled away at the operation.

“The West Coast is now being supplied by Panama, Ecuador and Nicaragua, all of which land fruit in the United States at prices well below our costs,” said Richard Johnson, United Brands’ manager in Costa Rica.

“Ecuador bananas pay no export tax and the Ecuadorian government subsidizes maritime fuel costs for banana shipments,” Johnson said. “And now the Sandinistas are shipping out of Chinandega (Nicaragua) and landing bananas in Los Angeles at half of our Golfito price.”