CHAPTER 7

The fish that swallowed the whale

Convinced he was on the verge of solving the mystery, Steve immediately began planning an expedition into T1. The logistics were a nightmare. The Honduran government bureaucracy that controlled the permits was erratic and dysfunctional. The factionalized political environment meant that if one politician agreed to help, the opposition blocked it. But with gentle persistence and cultivation of both sides, along with some well-placed funds, Elkins finally did get the permits to explore T1. During this entire time, he had carefully kept the location secret from the Honduran government, fearing the information might lead to possible looting—a high-level diplomatic balancing act. He successfully lined up six figures in financing. Hoping to avoid weeks of brutal overland travel, he planned to go in by helicopter.

But all his plans came to an abrupt end on October 29, 1998, when Honduras was struck by Hurricane Mitch. Mitch dumped as much as three feet of rain in some areas, causing catastrophic floods and mudslides, leaving seven thousand dead, spreading disease, and triggering looting and civil unrest. The storm inflicted damage equal to about 70 percent of Honduras’s GDP, and it destroyed two-thirds of Honduras’s roads and bridges. The expedition had to be cancelled. There was little sense of when, if ever, it could be restarted.

The president at the time said the storm had set back the Honduran economy by half a century. Many years of chaos and collapse followed, in which the murder rate soared while investment and the judicial system crumbled. One Honduran businessman told a reporter for the Telegraph in 2013: “This country is turning into the perfect zombie apocalypse.”

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.

Under the presidency of Andrew Preston, United Fruit had grown to be the largest fruit and sugar company in the world. But Zemurray’s Cuyamel Fruit had also grown and was now powerful enough to engage it in debilitating price wars. In 1930, United Fruit solved the problem by buying Cuyamel Fruit, paying Zemurray $31 million in United Fruit stock and giving him a seat on the board. But the Great Depression hit United Fruit hard; after Preston’s death in 1924, the company had become bloated, lazy, and mismanaged. Over the next few years, Zemurray watched United Fruit’s stock decline by over 90 percent, shrinking his stake to $2 million. He tried to offer the board advice, but was rudely rebuffed. At that point the board was dominated by members of the Protestant elite of Boston, many—though not all—of whom were ugly anti-Semites; they did not like the Jewish immigrant they had been forced to admit to the board as part of the Cuyamel deal. In a fateful meeting in 1933, Zemurray tried once again to persuade the board to consider his ideas for saving the company; the chairman, an effete Boston Brahmin named Daniel Gould Wing, listened to Zemurray’s heavy shtetl accent with open disdain and then, to the chuckles of other board members, said: “Unfortunately, Mr. Zemurray, I can’t understand a word you say.”

Zemurray was not a man to be ignored or insulted. He had come to that particular meeting with a weapon of mass destruction: a bagful of proxies from other United Fruit shareholders that gave him majority control of the company and the authority to act as he saw fit. He left the room, fetched the bag, came back in, and flung it on the table, saying: “You’re fired. Can you understand that, Mr. Chairman?” He turned to the board and said: “You’ve been fucking up this business long enough. I’m going to straighten it out.”

After ousting the chairman, president, and most of the board, Zemurray took over the gigantic, bumbling company, roused it from its stupor, and swiftly returned it to profitability. This dramatic move caused the New York Times to call Zemurray the “fish that swallowed the whale.”

With full control of United Fruit, Zemurray continued to play a heavy hand in Honduran politics until he retreated from business in 1954 to pursue philanthropy full time. In the latter part of his life, perhaps to make up for his earlier questionable dealings, Zemurray donated lavishly to Central American causes, schools, and philanthropic ventures; he played a significant role in the founding of Israel; he endowed a female professorship at Harvard, which led to the appointment of the first woman full professor at that university; and he financed the progressive magazine the Nation. Zemurray was a remarkably brilliant, complex, and contradictory man.*

But, colorful as their history was, it must be said: Preston, Zemurray, and the fruit companies left a dark colonialist legacy that has hung like a miasma over Honduras ever since. The fruit companies’ effect on Honduras’s development was deeply pernicious. Though Honduras did eventually emerge from under their yoke, this legacy of instability and corporate bullying lives on in political dysfunction, underdeveloped national institutions, and cozy relationships among powerful families, business interests, government, and the military. This weakness magnified the disastrous effects of Hurricane Mitch. The country fell prey to narcotraffickers. Effective antidrug policies and raids in Colombia in the 1990s pushed much of the drug trade from that country into Honduras. Traffickers turned Honduras into the premier drug-smuggling transshipment point for cocaine between South America and the United States, and Mosquitia was at the heart of it. Crude airstrips were bulldozed out of the jungle and used for nighttime crash landings of drugs flown from Venezuela—the drugs being worth far more than the plane and the occasional death of a pilot. The murder rate soared while law enforcement and the judicial system crumbled. Violent gangs gained control of swaths of major cities, engaging in extortion and protection rackets and creating no-go zones for the military and police, except when the police themselves were involved in the activities, which was not uncommon. The unremitting gang violence caused thousands of desperate Honduran families to send their children northward, often alone, in search of safety in the United States.

There was no way Elkins could get permits or mount an expedition in this environment. The country looked hopeless. He gave up on the search for the White City, apparently for good. He told me then: “I’ve had enough. I’m done. Maybe this will be one mystery I can’t solve.”