Once the United States established a dominant presence in Panama, financial factors continued
drawing the country deeper into Latin American affairs.
During the late 1800s, many Latin American countries borrowed large sums of money from
banks in Europe to develop industries and build railroads.
When it became clear that many Latin American nations would be unable to repay these loans,
President Theodore Roosevelt feared that European powers might begin to intervene in the Americas
in order to collect their debts.
Roosevelt was determined to make sure that this did not happen.
Roosevelt made it clear to Europe that he intended to enforce the Monroe Doctrine.
This 1823 declaration by President James Monroe had demanded that European countries stay
out of the Americas.
To clarify his stand on the issue, President Roosevelt borrowed from a West African proverb
that stated, “Speak softly, and carry a big stick.”
His enforcement of this policy became known as Big Stick Diplomacy.
Using the Monroe Doctrine as a basis, Roosevelt issued his Roosevelt Corollary to Congress
in 1904.
He argued that unrest and disorder in Latin America could force the US to “exercise
an international police power.”
Roosevelt described this style of foreign policy as taking “decisive action sufficiently
far in advance of any likely crisis”.
In other words, having and showcasing a powerful military could act as a deterrent, thus being
a useful way to ensure peace in the Western Hemisphere.
In a display of American military might, Roosevelt sent the US Navy’s “Great White Fleet”
on a circumnavigation of the world in the final two years of his presidency.
During the decade that followed the issuing of the Roosevelt Corollary, the policy was
carried out on several occasions.
William Howard Taft, Roosevelt’s successor, arranged for American bankers to help the
Central American nation of Nicaragua to repay their loans in 1911.
In exchange, US bankers gained control of Nicaragua’s railroad and banking system.
Two thousand US Marines were also sent to Nicaragua to put down a revolt of the citizens
who opposed their government’s actions.
American troops remained in Nicaragua until 1933.
Citing Nicaragua as an example of success, the Taft administration would continue the
policy of allowing the US government to back up loans from American banks to nations in
Latin America.
The policy became known as dollar diplomacy, and it provided yet another effective way
of keeping European powers out of Latin America and the Caribbean.
The Roosevelt Corollary gave the United States a basis to use force to protect their economic
interests anywhere in the Americas, while dollar diplomacy further tied the interests
of the US economy to its neighbors in the Western Hemisphere.