After being elected to office, Arbenz Guzmán attempted to nationalize the United Fruit Company (UFC), an US-based corporation which controlled much of the counry's agricultural land. According to international law, fair compensation must be given for nationalized foreign holdings. A compensation on $600,000 was calculated, based on the underestimated land values UFC had declared in order to avoid taxes, which however the company, and USA's government, didn't find sufficient. In the frenzy of McCarthyism and Red Scare in the US, Arbenz was deemed a dangerous Socialist.
Arbenz was also, falsely, believed to be a Communist. In 1952 the Communist Guatemalan Labor Party was legalized; and before Arbenz was deposed, Communists had gained considerable influence over important peasant organizations, labor unions, and the governing political party.
In order to protect its interest in the country, the UFC and its banking supporters convinced the CIA to sponsor a coup d'état, toppling the government and forcing Arbenz Guzmán to flee. He initially sought exile in Cuba, and died in Mexico in 1971.