Árbenz continued Arévalo's reform agenda and, in June 1952, his government enacted an agrarian reform program, similar to the 1862 Homestead Act in the U.S. The new law (decree 900) gave the government power to expropriate only uncultivated portions of large plantations. Estates of up to were exempted if at least two thirds of the land was cultivated; also exempt were lands that had a slope of more than 30 degrees (a significant exemption in mountainous Guatemala). The land was then allocated to individual families in the attempt to create a land-owning yeoman nation reminiscent of the U.S.'s own goals in the 1800s. Owners of expropriated land were compensated according to the worth of the land claimed in May 1952 tax assessments. Land was paid for in twenty-five year bonds with a 3 percent interest rate. Arbenz himself, a landowner through his wife, gave up of his own land in the land reform program.
Árbenz effective land reform program was promoted as a means of remedying the extremely unequal land distribution within the country. It is estimated that 2% of the country's population controlled 72% of all arable land in 1945, but only 12% of it was being utilized. That is the proportion found in U.S. Agriculture, but without the corresponding wage differential or economic diversity: in 1950s Guatemala, the per capita income of agricultural workers was under $100 per year and the economy of Guatemala was barely industrialized while the US economy was highly industrialized and diversified.
While Árbenz's proposed agenda was welcomed by impoverished peasants who made up the majority of Guatemala's population, it provoked the ire of the upper landowning classes, powerful U.S. corporate interests, and factions of the military, who accused Árbenz of bowing to Communist influence. This tension resulted in noticeable unrest in the country. Carlos Castillo, an army officer, rebelled at the Aurora airport in the early 1950s, was defeated and shot, surviving his injuries. Castillo then spent some time in a Guatemalan prison before escaping and going into exile in 1951.
This instability, combined with Árbenz's relative tolerance of Guatemalan Party of Labour (PGT) and other leftists influences, prompted the CIA to draw up a contingency plan entitled Operation PBFORTUNE in 1951. It outlined a method of ousting Árbenz if he were deemed a Communist threat in the hemisphere.
The United Fruit Company, a U.S.-based corporation, was also threatened by Árbenz's land reform initiative. United Fruit was Guatemala's largest landowner, with 85% of its holdings uncultivated, vulnerable to Árbenz's reform plans. In calculating its tax obligations, United Fruit had consistently (and drastically) undervalued the worth of its holdings. In its 1952 taxes, it claimed its land was only worth $3 per acre. When, in accordance with United Fruit's tax claims, the Árbenz government offered to compensate the company at the $3 rate, the company claimed the land's true value was $75/acre but refused to explain the precipitous jump in its own determination of the land's value.
United Fruit had several ties with the U.S. government. U.S. Secretary of State John Foster Dulles and his brother, CIA director Allen Dulles, had both worked for Sullivan & Cromwell, which had represented United Fruit's rail subsidiary. Eisenhower's trusted aide and undersecretary of State Walter Bedell Smith had equally close ties to the company and had once sought a management position there. All three were shareholders in the company. However, John Foster Dulles did insist that the problem of "communist infiltration in Guatemala" would "remain as it is today" even if "the United Fruit matter were settled".
In 1952, the Guatemalan Party of Labour was legalized; Communists subsequently gained considerable minority influence over important peasant organizations and labor unions, but not over the governing political party and won only four seats in the 58-seat governing body. The CIA, having drafted Operation PBFORTUNE, was already concerned about Árbenz's potential Communist ties. United Fruit had been lobbying the CIA to oust reform governments in Guatemala since Arévalo's time but it wasn't until the Eisenhower administration that it found an ear in the White House. In 1954, the Eisenhower administration was still flush with victory from its covert operation to topple the Mossadegh government in Iran the year before. On February 19, 1954, the CIA began Operation WASHTUB, a plan to plant a phony Soviet arms cache in Nicaragua to demonstrate Guatemalan ties to Moscow.
In May 1954, Czechoslovak weaponry arrived in Guatemala aboard the Swedish ship Alfhem. The U.S. claimed this as final proof of Árbenz's Soviet links. Supporters for Árbenz, however, note that the Guatemalans repeatedly attempted to buy weapons from Western Europe and only turned to the Czechoslovaks after failing to purchase arms elsewhere. The Czechoslovaks supplied, for cash down, obsolete and barely functional German WWII weaponry.
The direct contacts between the Soviet Union and the Árbenz Government consisted of one Soviet diplomat working out an exchange of bananas for agricultural machinery, which fell through because neither side had refrigerated ships - and United Fruit was unlikely to help. The only other evidence of contact the CIA found after the operation were two bills to the Guatemalan Communist Party from a Moscow bookstore, totalling $22.95.
The Árbenz government was convinced a U.S.-sponsored invasion was imminent: it had previously released detailed accounts of the CIA's Operation PBFORTUNE (called the White Papers) and perceived US actions at the OAS convention in Caracas that year as a lead-up to intervention. The administration ordered the CIA to sponsor a coup d'état, code-named Operation PBSUCCESS that toppled the government. Árbenz resigned on June 27, 1954 and was forced to flee, seeking refuge in the Mexican Embassy.
After the coup, Frank Wisner organised an operation called PBHISTORY to secure Árbenz Government documents. PBHISTORY aimed to prove Soviet control of Guatemala and, in so doing, hopefully provide actionable intelligence with regard to other Soviet connections and personnel in Latin America. Wisner sent two teams who, with the help of the Army and Castillo Armas's junta, gathered 150,000 documents. Ronald M. Schneider, an extra-Agency researcher who later examined the PBHISTORY documents, found no traces of Soviet control and substantial evidence that Guatemalan Communists acted alone, without support or guidance from outside the country.
In 1960, after the Cuban Revolution, Fidel Castro asked Árbenz to come to Cuba, which Arbenz readily agreed to. In 1965, his eldest and favorite daughter, a high fashion model, named Arabella, committed suicide, shooting herself in front of her boyfriend, the Matador Jaime Bravo, in Bogotá, Colombia. Árbenz was devastated by her death. He was allowed to return to Mexico to bury his daughter and, eventually, was allowed to stay in Mexico. On January 27, 1971, Árbenz died in his bathroom, either by drowning or scalding due to hot water. The circumstances under which Árbenz died are still suspect.
Guatemala to restore ex-leader's reputation ; In pact with descendants, president ousted in coup to receive hero treatment
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