Part 4 - Debt and Lackeys Shackle Nicaragua to the US' Will
The U.S. agent assessed the political situation and reported that if elections were held, Zelaya's liberals would certainly win. To avoid an unwanted liberal victory, the U.S. pushed Estrada to agree on a constituent assembly to get himself elected, approve a first short-term U.S. loan, among other concessions. As political rivalries within the conservative-liberal coalition surfaced, the Minister of War General Luis Mena forced Estrada to resign, replacing him with his vice president, Adolfo Diaz.
Nicaraguan and U.S. representatives then signed a treaty on June 6, 1911, which included U.S. Government and private bank approval for the post of customs collector. In a second, short-term loan agreement, the collector general was nominated by a consortium of private banks and approved by Knox. As part of the deal, the newly appointed president Diaz handed control of the Nicaraguan national rail company and the central banking system to U.S. private firms. Although the treaty was rejected three times by the U.S. Senate as many legislations opposed the William Taft Administration's connections with large corporations, Nicaragua’s government proceeded to comply with the stipulations.
As history would have it, only US$1.5 million was obtained by Nicaragua from the US$15 million due to the non-ratification of the treaty, but truly only US$100,000 reached Nicaragua and to the pockets of private bankers to form the National Bank. The rest of the money stayed in New York's banking system while the collateral for the loans came from Nicaragua’s customs revenues, railways, and shipping industry.
By mid-1912, Minister of War Luis Mena persuaded the constituent assembly to name him successor to Diaz when the president’s term expired in 1913. Diaz then asked the U.S. government to intervene to “secure” the property of U.S. citizens. When the U.S. refused to recognize the decision, Mena began a revolt to seize power.
In August 1912, a force of around 2,700 United States marines once again landed at the ports of Corinto and Bluefields; Mena fled the country. This gave way to the U.S. occupation which lasted almost continually until 1933. Although reduced to 100 in 1913, the contingent stayed as a reminder of the willingness of the U.S. to use force and quickly intervene to preserve its interests in the country. With U.S. tutelage, conservative governments ruled until 1925 without any major mishaps, especially as the country assumed a quasi-protectorate status under the 1916 Bryan–Chamorro Treaty. This was a revised version of the 1914 Castillo-Knox Treaty, which gave the U.S. the right to intervene in Nicaragua to protect its interests.
The modified version omitted the intervention clause but gave the U.S. exclusive rights to build an interoceanic canal across Nicaragua. As the Panama Canal was inaugurated in 1913, the Nicaraguan agreement served to impede any potential foreign countries, mainly Germany or Japan, to building another canal in Central America. Also for 99 years, Nicaragua leased the Corn Islands to the U.S. and gave them the right to establish, operate and maintain a naval base anywhere in the Gulf of Fonseca; both concessions would be subject exclusively to the laws and U.S. sovereignty.