Wilson first tested his Latin American policy in Mexico. In February 1913, Mexico entered a new stage in the epic revolution that had begun in 1910 against the dictator Porfirio Díaz. Francisco Madero, the leader of the rebels, was a moderate revolutionist who eventually aroused the ire of radicals like Emiliano Zapata, who demanded redistribution of land to peasants, as well as Francisco (Pancho) Villa, Pascual Orozco, and Felix Díaz, nephew of the deposed dictator.
President William Howard Taft, although unenthusiastic, had recognized Madero as president of Mexico in November 1911. Ambassador Henry Lane Wilson, concerned about threats to U.S. business interests in Mexico, maintained cool relations with the Madero government. In the "Pact of the Embassy" (19 February 1913), Ambassador Wilson joined with Victoriano Huerta, Madero's top general, and Felix Díaz in a plan to replace Madero: Huerta as provisional president, and Díaz as a candidate in a later presidential election. Huerta assumed the presidency after pressuring Madero and Vice President José Maria Pino Suárez to resign. Apparently some of Huerta's men assassinated Madero and Pino Suárez, although they had been assured of safe conduct on 22 February. Taft left the problem of recognizing Huerta to the incoming Wilson administration. Wilson believed that Huerta had gained power by undemocratic and unconstitutional means, and the Madero–Pino Suárez murders shocked him. Furthermore, the president had deep suspicions about Ambassador Wilson, who flooded Washington with dispatches lauding Huerta and asserting that the new Mexican leader would cooperate with United States interests. President Wilson, however, applied the tough tests of constitutional legitimacy to the Mexican regime.
The president sent a friend, the journalist William Bayard Hale, to Mexico in June 1913 to get firsthand information. Hale was unenthusiastic about Huerta, describing him as "an ape-like old man" who "may almost be said to subsist on alcohol." With Hale's views in mind, President Wilson continued to shun the new Mexican government, even though Ambassador Wilson virtually insisted that Huerta be recognized. Acting on the president's orders, Bryan recalled Wilson and accepted his resignation.
In August 1913, Wilson sent another personal representative, John Lind, to Mexico. Previously both a representative and governor of Minnesota, Lind had no diplomatic experience. His instructions put forth terms for a Mexican settlement: an immediate cease-fire, an early and free election, a promise from Huerta not to be a candidate, and pledges that all Mexican factions would respect the election results. Huerta flatly rejected these proposals, as well as a subsequent offer of a large private loan if he would agree to an election in which he was not a candidate. On 27 August, Wilson told a joint session of Congress that the United States would wait patiently until the Mexican civil strife had run its course, meanwhile embargoing arms sales to all sides. Unfortunately, Wilson did not consistently adhere to this policy of "watchful waiting."
In the fall of 1913, Venustiano Carranza, Huerta's main opponent, announced that his Constitutionalist Party would boycott the presidential election scheduled for 26 October. When Huerta arrested more than 100 opposition deputies in the Mexican congress, Wilson announced that the United States would ignore the election results. After an inconclusive election, Mexico's congress reappointed Huerta provisional president until balloting scheduled for July 1914. Wilson now abandoned "watchful waiting." As Secretary Bryan wrote to United States diplomats in Latin America, President Wilson considered that "it is his immediate duty to require Huerta's retirement," and that the United States would "proceed to employ such means as may be necessary to secure this result." At this point, Wilson sympathized with the Carranza group. The president's struggle with Huerta had become personal as well as national.
Wilson, feeling that Great Britain's role was crucial, put special pressure on London to repudiate Huerta. Although the British fleet depended somewhat on Mexican oil, Britain's problems in Europe dictated rapprochement with the United States. Britain withdrew recognition of Huerta in mid-1914, after negotiations with the United States that included a satisfactory settlement of the controversy over a U.S. law providing discriminatory tolls on the Panama Canal.
In February 1914, in a further attempt to strengthen Carranza and the Constitutionalists, Wilson lifted the embargo on arms to Mexico, but Huerta continued to hold out. A new crisis developed on 9 April 1914, when Mexican authorities mistakenly arrested eight U.S. sailors at Tampico. Within an hour, Huerta's commanding general in the port released the men and apologized to Rear Admiral Henry T. Mayo, the commander of the U.S. squadron at Tampico. Mayo gave Huerta twenty-four hours to make a more formal apology, punish the arresting officer, and fire a twenty-one-gun salute. Wilson backed Mayo and ordered an increase in U.S. forces in Mexican waters. Congress gave him permission to take punitive action against Mexico. These acts presumably were on behalf of constitutionality and democracy.
Before these plans could be implemented, the United States consul at Veracruz reported the imminent arrival of the German steamer Ypiranga with a cargo of guns and ammunition for Huerta's forces. Wilson decided to seize the customhouse at Veracruz and impound the cargo. When this occurred on 21 April, the Mexicans resisted, precipitating a battle in which 126 Mexicans were killed and 200 were wounded. Huerta severed diplomatic relations after U.S. forces occupied the city.
The bloodshed appalled President Wilson, who had not expected Mexican resistance. Thus, he welcomed the offer of Argentina, Brazil, and Chile to mediate; and Huerta also accepted. Wilson intended to use the mediation conference, which began in Niagara Falls, Canada, on 20 May 1914, to get rid of Huerta and bring the Constitutionalists to power. But Carranza, who had denounced the U.S. aggression at Veracruz, instructed his delegation, which never really participated in the conference, to refuse a cease-fire and to deny the right of the mediators to discuss the Mexican situation. The conference adjourned on 2 July without positive results. But the United States intervention and heightened conflict with his enemies forced Huerta to resign on 15 July. Venustiano Carranza soon entered Mexico City. Although earlier an advocate of Carranza, Wilson now rejected him and initiated negotiations with his chief rival in northern Mexico, Pancho Villa, who then had a favorable image in the United States. Carranza, who retained the support of Alvaro Obregón and other leading generals, refused to give in to Villa. As the months passed, Wilson's policy became more threatening; but Carranza insisted that he would fight until victory over his opponents.
At this juncture, Wilson proposed a meeting of the United States and six Latin American nations (Argentina, Brazil, Chile, Bolivia, Uruguay, and Guatemala), anticipating joint intervention to remove Carranza; but by the time the conference convened at Washington in August 1915, Wilson had changed his mind. Secretary of State Robert Lansing, worried about German activity in the hemisphere, thought it necessary to improve relations with Mexico in the face of this external threat. Although the conferees offered to act as mediators in Mexico, Wilson ignored them and extended de facto recognition to Carranza on 19 October 1915.
Even if Wilson wished to concentrate on problems other than Mexico, Pancho Villa was unwilling to let him. Unable to defeat Carranza with his army, Villa apparently decided to provoke U.S. intervention as an alternative way to achieve his goal. On 10 January 1916, Villa forces murdered sixteen U.S. mining engineers and technicians in Chihuahua. On 7 March, the U.S. Congress responded with a resolution advocating armed intervention. Two days later, Villa raided the border town of Columbus, New Mexico, killing seventeen Americans. Wilson immediately ordered troops into Mexico. General John J. Pershing's force never caught Villa but clashed with Carranza's army. Unsuccessful in his efforts to extort concessions from Carranza, and embroiled in a serious crisis with Germany, Wilson withdrew the troops from Mexico in February 1917.
Mexican-American relations followed a less spectacular course for the rest of Wilson's presidency. The Mexican constitution of 1917 contained several provisions threatening to foreign concessionaires, but Wilson extended de jure recognition to Carranza in August 1917, after assurances that such interests would be respected. A potentially serious dispute developed in 1918, after Mexico decreed taxes on oil property, rents, royalties, and production based on contracts effective before 1 May 1917. United States oil companies refused to register their land titles, arguing that to do so would be recognition of Mexican claims to subsurface deposits. Carranza ignored State Department protests, but he did not enforce the decrees until June 1919, when Mexican troops moved into the oil fields to halt unapproved drilling operations. Secretary of State Lansing, backed by the Association for the Protection of American Rights in Mexico, urged Wilson to be more aggressive. But in January 1920, Wilson wisely rejected Lansing's recommendations, and the oil producers arranged a satisfactory modus vivendi with Carranza. After Obregón ousted Carranza in May 1920, a Senate subcommittee recommended that the United States delay recognition until U.S. citizens gained exemption from certain articles of the Mexican constitution. Wilson and Secretary of State Bainbridge Colby favored this approach, but negotiations failed and the United States did not recognize Obregón until 1923.