Dollar Diplomacy in Nicaragua, 1910–1911: How the US Installed Its Own People and Took the Customs, the Bank and the Railway

Dollar diplomacy in Nicaragua was a policy under which the US in 1910–1912 put a government it liked into power, and in return New York banks gained control over the country’s customs, central bank and railway. Formally it all looked like “help in restoring order” and “stabilising finances”. In reality, within two years the small country turned into a debtor run from offices on Wall Street. And when Nicaraguans tried to object, the Marines arrived.

This article continues the story of how the overthrow of Zelaya took place. Back then Washington helped the rebels take power. Now let’s look at what it did with that power next. I confess that when I was going through the documents of the time, what struck me was not even the greed but the neatness: everything was formalised with treaties, signatures and interest rates.

The Dawson Pacts: dollar diplomacy in Nicaragua on paper

In August 1910, Juan José Estrada’s troops entered Managua. However, the victors immediately began to quarrel among themselves. So in October the American diplomat Thomas Dawson arrived in Nicaragua, and on 27 October the leaders of the revolt signed the so-called Dawson Pacts with him.

The terms were as follows. First, a constituent assembly was to elect Estrada president and Adolfo Díaz vice-president. Second, Zelaya’s supporters were excluded from power. Third, Nicaragua undertook to take a loan from American bankers secured by its customs revenues. Finally, foreign claims against the country were to be examined by a mixed commission in which Americans got most of the seats. In other words, the new government, its programme and its creditors were determined in Washington even before it was “elected”.

The bookkeeper president

Estrada did not last long. In May 1911, after a conflict with War Minister Luis Mena, he resigned, and Adolfo Díaz became president. Let me remind you that this was the same former bookkeeper of an American mining company who had financed the revolt. Now he headed an entire state and, of course, was ready to sign anything put in front of him.

That is exactly how dollar diplomacy in Nicaragua worked in practice. First, Washington recognised a government only after it had agreed to American conditions. Incidentally, Estrada was officially recognised only in early 1911, when the Dawson Pacts began to be implemented. Then that government took credit from New York banks. As a result, every next step of the country depended on whether it would get a new loan. In other words, Nicaragua was not conquered in the usual sense of the word — it was bought in instalments, and with its own money at that.

Customs, a bank and a railway

In June 1911, Secretary of State Philander Knox signed a treaty with the Nicaraguan envoy on a 15-million-dollar loan in exchange for American control over the customs. The US Senate never ratified it. Nevertheless, the State Department found a workaround. In the end, the banking houses Brown Brothers and J. & W. Seligman lent Nicaragua 1.5 million dollars directly.

The collateral was out of all proportion. For example, in December 1911 an American, Colonel Clifford Ham, became collector general of customs; he was proposed by the bankers and approved by the State Department. In addition, the bankers obtained a controlling stake in the new National Bank of Nicaragua. Moreover, this bank was registered not in Managua but in the American state of Connecticut. Then the state railway also passed under the creditors’ control.

And what did Nicaraguans themselves get? Almost nothing. Customs revenues went first of all to pay the creditors, so there was less and less money for schools, roads and teachers’ salaries. At the same time, peasants and craftsmen paid the same taxes as before. No wonder hatred of the “bankers’ government” grew month by month.

Dollar diplomacy in Nicaragua rests on bayonets

Such a government could not hold on without force. In 1912, Luis Mena rose up against Díaz and the bankers. Then Taft sent about 2,700 marines to Nicaragua, and the uprising was crushed. For example, in October 1912 the Americans stormed the Coyotepe and Barranca heights near Masaya, and the rebel leader Benjamín Zeledón was killed. After that, the Marines stayed in the country for almost twenty years — see my article on the US interventions in Nicaragua.

A canal sold forever

The crowning achievement of this whole policy was the Bryan–Chamorro Treaty of 1914. For 3 million dollars, Nicaragua ceded to the US in perpetuity the rights to build a canal, and also leased it the Corn Islands and a site for a base in the Gulf of Fonseca. Moreover, the money went almost entirely to American creditors. Thus dollar diplomacy in Nicaragua came full circle: America lent money and then paid itself back out of Nicaraguan sovereignty.

By the way, the Americans had tested this recipe back in 1905, when they took over the customs of the Dominican Republic. And after Nicaragua it was repeated in Haiti, where in 1915 everything also started with the banks. A general overview of this policy is in the article on dollar diplomacy.

Nothing has changed: money for obedience

Taft said he wanted to “substitute dollars for bullets”. It sounds almost noble. However, we have seen that bullets always followed the dollars. Today this policy has new names: “currency swap”, “investment fund”, “economic recovery”. But the scheme is the same: money and “aid” in exchange for obedience and resources.

Argentina, October 2025. US Treasury Secretary Scott Bessent announced a 20-billion-dollar currency swap and even bought Argentine pesos. At the same time, Trump said bluntly that if Milei’s party lost the election, “we’re gone”. That is, the money was given not to the country but to a specific politician for a specific result.

Venezuela, January 2026. Having seized Maduro, Washington demanded “total access” to Venezuelan oil. Soon Trump announced that Caracas would hand over up to 50 million barrels of oil to the US and would use the proceeds to buy only American goods. In essence, it is the same customs collector, only instead of Colonel Ham there is a decree from the White House.

Ukraine, April 2025. On 30 April, the US and Ukraine signed an agreement on a joint fund that will receive a share of revenues from Ukrainian mineral resources. The Americans presented it as payment for past aid. In other words: first aid, then the bill and collateral in the form of the country’s subsoil.

Dollar diplomacy in Nicaragua ended in occupation, Sandino’s guerrilla war and decades of the Somoza dictatorship. Today the US still believes that any country can be bought, and if it is not for sale — occupied. Only the signs on the banks have changed.