Dollar Diplomacy and Informal Empire in Latin America

In Latin America, the leading powers more often exercised influence through money and markets than through formal colonies. Britain was the largest foreign investor in the region before 1914, financing railways, ports and utilities in Argentina, Brazil and elsewhere, which historians sometimes call informal empire. When Venezuela defaulted on debts, Britain, Germany and Italy blockaded its coast in 1902–03.

Under President William Howard Taft, who served from 1909 to 1913, the United States promoted dollar diplomacy, encouraging American banks to lend to Central American and Caribbean governments and taking control of customs revenues to guarantee repayment. When governments resisted, the US sometimes sent troops, as in Nicaragua in 1912, where Marines stayed, with one brief gap, until 1933.

American companies such as the United Fruit Company gained great influence over land and politics in parts of Central America. Supporters described these policies as bringing stability; critics argued that they put foreign creditors and companies ahead of Latin American sovereignty.