In the early twentieth century, debt repayment emerged as a significant U.S. foreign policy issue when dictatorships in several Caribbean republics—regimes that had managed to live on loans granted by European banking and speculative interests—demonstrated an incapacity or plain unwillingness to pay that brought threats of armed intervention from European powers. The classic instance was that of Venezuela, whose reckless behavior had aroused the anger and contempt of the great powers, including the United States. In 1902 the British and German governments, joined nominally by Italy, blockaded Venezuela and seized the country's customs, the revenues from which would then be utilized toward redemption of the debts. This method, which proved effective but also aroused American susceptibilities over the Monroe Doctrine (1823), soon brought from the administration of Theodore Roosevelt (1901–1909) an important policy shift, namely, that the United States would henceforth be responsible for the behavior of the Latin American republics toward Europe. In due course, then, the United States assumed fiscal supervision over several Caribbean countries.
The principal recipients of American "protection" were Cuba, Panama, the Dominican Republic, Nicaragua, and Haiti. The special relations of the United States to these republics were embodied in treaties, no two of which were exactly alike. To only one such state—the Republic of Panama—did the United States actually promise "protection," in the declaration that "the United States guarantees and will maintain the independence of the Republic of Panama." Other treaties, such as those with Cuba and Haiti, contained engagements on the part of the "protected" states not to impair their independence or cede any of their territory to a third party; and the same two treaties permitted intervention by the United States for the maintenance of independence or of orderly government. Since careless public finance was likely to lead to foreign intervention and possible loss of independence, a number of the treaties—those with Cuba, Haiti, and the Dominican Republic—contained restrictions upon, or gave the United States supervision over, financial policy.
American investments existed in all the countries of this Caribbean semicircle of protectorates. These no doubt benefited from the increased stability and financial responsibility induced by governmental policy. In the Dominican Republic, Haiti, and Nicaragua that policy resulted in a transfer of the ownership of government obligations from European to American bankers. Yet in none of the five republics save Cuba were American financial interests especially large or important. The dominant motive was clearly political and strategic rather than economic. The acquisition of the Canal Zone and the building of the Panama Canal made the isthmian area a crucial concern in the American defense system.