Guatemala, the most populated Central American country, has historically been the most economically powerful nation in the region, though that power rested with a select elite and U.S. business interests. United States policy in Central America has consisted of defending and promoting American trade and security. In Guatemala, the United States enjoyed considerable influence through informal interests that until 1954 made military intervention un-necessary. The United States held sway over the economy through its dominance in trade and commerce, made possible by authoritarian and dictatorial regimes. The U.S. United Fruit Company (UFCO) was the single largest landowner. Through its banana monopoly, UFCO controlled the railroad, harbors, and steamships vital to national commerce. To the detriment of most Guatemalans, the company prospered by accommodating dictators who kept exploited laborers under control and satisfied the United States' desire for order and stability.
In 1944, a middle-class, student-supported revolution put an abrupt end to dictator Jorge Ubico. This brought about a period of reforms and democratization, including the 1944 elections, the freest the country had seen, and, in 1952, far-reaching land reforms. The banana company vigorously objected to the expropriation of its unused lands. Predictably, UFCO and the U.S. government claimed communists, not maldistribution of national resources, were causing Guatemalan social and political problems. In 1954, the United States organized, funded, and directed a coup to topple the constitutionally elected Jacobo Arbenz Guzman government. The United States wanted to discourage nationalists from challenging American interests, especially in its own "backyard." Although the United States justified its covert intervention on Cold War grounds, close ties between UFCO and the administration of President Dwight Eisenhower provided additional incentive.
The military's return to power lasted more than thirty years and was supported by U.S. funding, which exceeded that of any other Central American country between 1954 and 1970. John F. Kennedy's Alliance for Progress attempted to force Guatemalan reform, but U.S. plans favored big business, caused a growing disparity between rich and poor, and perpetuated Guatemalan dependence. Despite U.S. aid and failed attempts at reform, worsening social conditions and political repression fostered growing rebellion. Beginning in the late 1960s, the U.S. trained Guatemalan military brutally and often indiscriminately repressed the political opposition, the death toll reaching more than fifty thousand by 1976. Attempting to promote human rights, President Jimmy Carter's administration ceased military aid, but Guatemalan military leaders found other suppliers in western Europe and Israel. The Ronald Reagan administration revived the Cold War and was willing to forgive the abuses of authoritarianism, but Congress blocked arms shipments until a civilian headed the Guatemalan government. In 1985, the Guatemalan military selected its civilian figurehead. Congress resumed military aid and increased economic assistance, but after thirty years of warfare, the rebels still operated throughout most of the country.