Around the turn of the twentieth century, Latin American nations began defaulting on massive loans from European powers such as Germany and England. Many of these “Banana Republics,” including Venezuela and the Dominican Republic, had borrowed heavily and had no way or intention of repaying their debts. This issue came to the forefront in 1903, when German warships sank two Venezuelan vessels and bombarded a Venezuelan town. Their intention was to intimidate Venezuela into paying its debts, but they inadvertently threatened Roosevelt and America’s sense of security as well.

Roosevelt was intent on keeping European nations out of the Americas. He feared that if he allowed Germany and England into the Hemisphere to collect debts, they might decide to set up permanent bases, which would have been a violation of the Monroe Doctrine of 1823. Also, the U.S. did not want the European powers to “extort” Latin American countries, thereby bankrupting them. In order to prevent their presence, Roosevelt devised the Roosevelt Corollary to the Monroe Doctrine, which instituted a policy of “preventive intervention.”

In this clever maneuver, Roosevelt stated that the U.S. would now function as “the policeman of the Caribbean.” Under this arrangement, the U.S. took over the management of tariff collections in 1905. This meant that whenever a Latin American nation was overdue on a debt to a European power, the U.S. would intervene. America would pay off the foreign debt, and then take responsibility for collection, thereby guaranteeing the European loan. The Europeans quickly agreed to this arrangement, as it ensured the prompt payment of the debt, but they were skeptical of America’s motivation. Many people in America, Europe, and Latin America viewed this as yet another imperial move by the United States. Anti-imperialists believed that America was removing the traditional imperialists who were taking advantage of the Banana Republics, for no other reason than to take their place.

The U.S. experienced a number of advantages by assuming control of these customshouses. Corruption and embezzlement were rampant in many of these Latin American countries. The U.S. ran the customshouses fairly and equitably and helped ensure that corruption was minimized. In the short run, several of these Latin American countries began managing their money more efficiently and achieving financial security for the first time. Countries such as the Dominican Republic and Venezuela were able to manage their resources more effectively and were beginning to emerge as viable trading partners. However, over time as the U.S. began to return control to local governments, many returned to their corrupt and inefficient ways, which ended this short era of relative prosperity.

Despite the success of the Roosevelt Corollary, there were also several drawbacks. Essentially this was a perversion of the Monroe Doctrine, which was considered a sacred document in American politics. It also set another negative precedent for U.S. involvement in Latin America. This new policy was used for years as justification for military and political intervention throughout the region. For many decades, the U.S. performed military landings in Central America and stationed Marines in Nicaragua and other countries in semi-permanent bases. Also, Roosevelt’s “cowboy diplomacy” strained relations not only with Latin American nations, but with the rest of the world as well. The Roosevelt Corollary helped give notice that the U.S. was emerging as a significant world power that could not be ignored.

Copyright 2006 The Regents of the University of California and Monterey Institute for Technology and Education