The Roosevelt Corollary of the Monroe Doctrine—so called because it was assumed to follow as a necessary consequence of the doctrine—was to serve, whether expressly mentioned or not, as the theoretical basis for the subsequent establishment of protectorates in the Caribbean. The United States now assumed the role of international policeman—kindly to the law-abiding but apt to lay a stern hand upon little nations that fell into disorder or defaulted on their obligations, since disorder or default, if allowed to continue, might invite intervention from outside the hemisphere. The first application of the new doctrine was in the Dominican Republic.
The government of the Dominican Republic, or Santo Domingo, after that state won its independence from Haiti in 1844, had been a dictatorship generously tempered by revolution. Revolutions were costly, and by 1904 the Dominican debt had grown to a figure—some $32 million—which the national revenues, as administered by native collectors of taxes and customs, were incapable of servicing. The foreign debt was widely distributed. Portions of it were held in France, Belgium, Italy, and Germany. The largest single creditor, representing both American and British capital, was the U.S.-based San Domingo Improvement Company. From time to time, the Dominican government pledged the customs duties at various ports as security for its debts, and the pledges sometimes conflicted. Intervention by the United States on the company's behalf resulted, in 1903 and 1904, in the San Domingo Improvement Company being placed in charge of the collection of customs at Puerto Plata and Monte Cristi on the north coast. This action brought protests from the European creditors, who claimed that those same revenues had previously been pledged to them. An international scramble for control of the Dominican customhouses threatened, with the possible development of a situation resembling the one in Venezuela that had alarmed Roosevelt a scant two years earlier.
It was under these circumstances that Roosevelt formulated his famous corollary, which was without doubt intended as a forecast of coming events. With the encouragement of Thomas C. Dawson, U.S. minister to the Dominican Republic, President Morales invited the United States to take charge of the nation's customhouses and administer the collection of import duties for the purpose of satisfying the creditors of the republic and providing its government with revenue. An executive agreement to this effect was signed on 20 January 1905, but this attempt of Roosevelt to bypass the Senate excited so much criticism that Dawson was instructed to put the agreement into the form of a treaty, subject to ratification in the constitutional manner. The treaty was duly signed and its approval urged upon the Senate by President Roosevelt with reasoning based, like his corollary message, upon the Monroe Doctrine.
Democratic opposition prevented action upon the treaty, but the president, with characteristic determination, put the essence of the arrangement into effect by a new executive agreement, referred to as a modus vivendi, signed 1 April 1905. The Dominican government agreed to appoint as receiver of customs a citizen of the United States nominated by the U.S. president. As in the proposed treaty, 45 percent of the receipts were to be turned over to the Dominican government; the remainder, less costs of collection, was to be deposited in a New York bank, to be apportioned among the creditors of the republic if the Senate approved the treaty, or returned to the Dominican government if the treaty was finally rejected.
The modus vivendi remained operative for more than two years. During that period the creditors of the Dominican government agreed to a downward adjustment of the debt from over $30 million to $17 million. A new $20 million bond issue was floated in the United States, and the proceeds were applied to the paying off of the adjusted debt and to the execution of needful public works on the island. In February 1907 a new treaty was signed, which the Senate promptly approved through the switch of a few Democratic votes to its support. The treaty, proclaimed 25 July 1907, perpetuated the arrangement under the modus vivendi, with minor modifications. A general receiver of Dominican customs, named by the president of the United States, was to have full control of the collection of customs duties until the $20 million bond issue was liquidated.
The Dominican receivership, under the modus vivendi and the subsequent treaty, produced results. For some four years after the conclusion of the treaty, the republic experienced the unaccustomed blessings of financial solvency and political stability. Then began a new series of revolutionary disturbances that led to a more drastic form of intervention by the United States.