Rufino Barrios, who was eventually killed in 1885 while fighting to re-establish a unified Central America, was succeeded by a string of short-lived but like-minded presidents. The next to hold power for any time was Manuel Estrada Cabrera, a stern authoritarian who restricted union organization and supported the interests of big business. He ruled from 1898 until he was overthrown in 1920, by which time he was on the verge of insanity.

Meanwhile, a new and exceptionally powerful player was becoming involved in the country's affairs – the United Fruit Company, which would assert its influence over much of Central America until the 1960s. The company, which got its start in Costa Rica, moved into Guatemala in 1901, when it bought a small tract of land on which to grow bananas. Three years later, it was awarded a contract to complete the railway from Guatemala City to Puerto Barrios, and in 1912 ownership of the Pacific railway network also fell to the company, giving it a virtual transport monopoly. Large-scale banana cultivation really took off, and by 1934 United Fruit controlled a massive amount of land, exporting around 3.5 million bunches of bananas annually and reaping vast profits. In 1941 some 25,000 Guatemalans were employed in the banana industry.

The power of the United Fruit Company was by no means restricted to agriculture, and its influence was so pervasive that the company earned itself the nickname El Pulpo, "the octopus". Control of the transport network brought with it control of the coffee trade: by 1930, 28 percent of the country's coffee output was handled by the company's Caribbean port, Puerto Barrios. During the 1930s it cost as much to ship coffee from Guatemala to New Orleans as it did from Río de Janeiro to New Orleans.

Against this background the power of the Guatemalan government was severely limited, with the influence of the United States increasing alongside that of the United Fruit Company. In 1919, Guatemala faced a financial crisis and Cabrera was ousted by a coup the following year, replaced by the moderate Carlos Herrera, whose reforms threatened to terminate United Fruit Company contracts. As a result, Herrera lasted little more than a year, ousted by General José María Orellano in December 1921. Orellano had no qualms about repressive measures – his minister of war, Jorge Ubico, killed some 290 opponents in 1926, the year in which Orellano died of a heart attack. Orellano's death prompted a bitter power struggle between Ubico, a fierce radical, and Lazaro Chacón, who won the day and was elected as the new liberal president. In the next few years, indigenous farmers began to express their anger at the United Fruit Company monopoly, while the company demanded the renewal of long-standing contracts, squeezing Chacón from both sides. His rule came to an end in 1930, when he suffered a stroke.

The way was now clear for Jorge Ubico, a charismatic leader who was well connected with the ruling and land-owning elite. Ubico had risen fast through the ranks of local government as jefe político in Alta Verapaz and Retalhuleu, earning a reputation for efficiency and honesty. As president, however, he inherited financial disaster. Guatemala had been badly hit by the Depression, accumulating debts of some US$5 million: in response Ubico fought hard to expand the export market for Guatemalan produce, managing to sign trade agreements that exempted local coffee and bananas from import duties in the United States. But increased trade with the great American power was only possible at the expense of traditional links with Europe.

Within Guatemala, Ubico steadfastly supported the United Fruit Company and the interests of US business. This relationship was of such importance that by 1940 ninety percent of all Guatemalan exports were being sold to the United States. Trade and diplomacy drew Guatemala ever closer to the US, a relationship exemplified when Ubico, against his will, was forced to bow to US pressure to expel German landowners in the run-up to World War II.

Internally, Ubico embarked on a radical programme of reform, including a sweeping drive against corruption and a massive road-building effort, which bought him great popularity in the provinces. Despite his liberal pretensions, however, Ubico sided firmly with big business when the chips were down, always offering his assistance to the United Fruit Company and the landowning elite. The system of debt peonage was replaced by the vagrancy law, under which all landless peasants were forced to work 150 days a year – in fincas or on public-works schemes like road building – and additional draconian legal measures ensured that landowners in effect were given total authority over their workforce. Not surprisingly, sporadic local protests and revolts against landowners continued in the late 1930s and early 1940s.

Internal security was another obsession that was to dominate Ubico's years in office, as he became increasingly paranoid. He maintained that he was a reincarnation of Napoleon and was fascinated by all aspects of the military: he operated a network of spies and informers whom he regularly used to unleash waves of repression, particularly in the run-up to elections. In 1934, when he discovered an assassination plan, three hundred people were killed in just two days. To prevent any further opposition he registered all printing presses in the country and made discipline the cornerstone of state education.

But while Ubico tightened his grip on every aspect of government, the rumblings of opposition grew louder. In 1944 discontent erupted in student violence, and Ubico was finally forced to resign after fourteen years of tyrannical rule. Power was transferred to Juan Frederico Ponce Vaides, who attempted to continue in the same style, but by the end of the year he also faced open revolt. The pair of them were driven into exile.