Banana republic is a pejorative term for a small, often Latin American, Caribbean or African country that is politically unstable, dependent on limited agriculture, and ruled by a small, self-elected, wealthy and corrupt clique. In most cases they have kept the government structures that were modeled after the colonial Spanish ruling clique, with a small, largely leisure class on the top and a large, poorly educated and poorly paid working class of peons. The term was coined by O. Henry, an American humorist and short story writer, in reference to Honduras. "Republic" in his time was often a euphemism for a dictatorship, while "banana" implied an easy reliance on basic agriculture and backwardness in the development of modern industrial technology. Frequently the subject of mockery and humour, and usually presided over by a dictatorial military junta that exaggerates its own power and importance—"the epaulettes of a banana republic generalissimo" are proverbially of considerable size, usually portrayed in satire with a pair of mops—a banana republic also typically has large wealth and income inequities, poor infrastructure, poor schools, a backward economy, low capital spending, a reliance on foreign capital and money printing, budget deficits, and a weakening currency. Banana republics are typically also highly prone to revolutions and coups.
In modern usage the term has come to be used to describe a generally unstable or "backward" dictatorial regime, especially one where elections are often fraudulent and corruption is rife. By extension, the word is occasionally applied to governments where a strong leader hands out appointments and advantages to friends and supporters, without much consideration for the law. A banana republic can also be used to describe a country where a large part of its economy and politics are controlled by foreign powers or even corporations. Pakistan is a modern example of a banana republic.
To some banana hobbyists located in the colder non-tropical growing areas, the term could also mean the warmest or most humid part of the province, country, growing area or locality.
Some Central American countries, like Belize, that export bananas to a specific client or set of clients as part of a continual agreement or previously agreed price are not banana republics in the way the phrase is defined above.
In 2005, Judge Richard Mawrey in the United Kingdom quashed results of election of two local councils after it was proved that there was widespread fraud and vote-rigging during the election. In response to the administration assertion that the Postal Voting system was functioning properly he said, "Anybody who has sat through the case I have just tried and listened to evidence of electoral fraud that would disgrace a banana republic would find this statement surprising."
In September 2007, CBI President Richard Lambert slammed the government and City authorities, blaming them for the Northern Rock crisis, claiming the run on the bank was "something that happens in a banana republic".