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There are two theories on why the CIA authorized covert operations in 1954. Some accused the Eisenhower Administration of operating at the behest of American business interests in the country, namely the United Fruit Company. Under President Ubico, the UFCO enjoyed a favored status. Ubico had long welcomed H.R. Grace and Company, the Pan American highway -- anything American. This openness established Guatemala as the principle destination for business in Central America. UFCO had become one of his closest allies, and their huge estates were hundreds of square miles and employed around 40,000 Guatemalans. All this land was a gift in exchange for investments in railroads, and communications, for which they kept the controlling shares of. So deeply entwined with every major industry in Guatemala, it earned the name El Pulpo, the octopus. With this monopoly and cozy relationship with government, UFCO could determine prices, taxes and how they treated their workers without government interference.
By World War II, comprador (leaders easily bought by companies) dictators had fallen in Venezuela, Cuba and El Salvador as the depression had ruined their economies. In 1944, the growing turmoil culminated when a soldier shot a schoolteacher. Strikes and boycotts forced the aged Ubico to step down and allow the generals to take over. Free elections brought Juan Jose Arevalo to the presidency. While still essentially conservative the regime did allow more freedoms than the previous ones and enjoyed high popularity with the people. Most expected a member of Arevalo's Partido Accion Revolucionaria to succeed him in 1951. The race would be between military heroes, Arana versus Jacabo Arbenz Guzman (known as Arbenz).
So sure was Arana of assuming power, he began to hasten the process. In July of 1941, with the backing of landowners, he demanded that Arevalo step down from office and bequeath power to him. Arevalo requested more time, while his preferred successor, Arbenz, began his bid for power. Arevalo attempted to arrest Arana on a remote finca, where he allegedly resisted and was shot. Uprisings occurred from Aranistas but were easily quelled by the army. This led Arbenz to an uncontested electoral victory.
The Berlin Crisis, the fall of China, and the Soviet acquistion of nuclear weapons in 1948 and 1949 had made leaders wary of Soviet encroachment in the Western Hemisphere. Analyzing Arevalo's term, Americans began to detect sins of Communism. Guatemala had long been a refuge for Communists in Latin America because of its openness. The number of homegrown Communists, however, appears to have been small, though some held high positions in the labor movement. Arevalo had been instructed to be on the lookout for Communist activity, a command he ignored. American officials found this "unusual for a Latin leader" (Cullather 15). "We would have been concerned about any tendency toward excessive nationalism" one official told the NSC.
United Fruit regarded any infringement on the privileges it held with Ubico to be a to be a direct assault. Though the company still enjoyed relatively liberal economics and a cordial relationship with Arevalo, it became threatened about the regime's pro-labor ideals. New regulations on all businesses of 500 or more employees led the US embassy to declare the regime as deliberately targeting the banana giant. "If they handle an American company rough, its our business" said one State Department official. Edward L. Bertnays petitioned Congress to accept the new restrictions as proof of Communism.
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