When Wilson used missionary diplomacy elsewhere, it led to the same legacy of failure and ill will as in Mexico. In Nicaragua, Wilson inherited from the Taft administration a military intervention and an extensive effort at dollar diplomacy. Taft broke relations in 1909 with Nicaraguan President José Zelaya and encouraged the latter's enemies to revolt when he menaced the nearby Central American nations, threatened the ouster of United States financial interests, and mortgaged his country to European interests. When his successor, Adolfo Díaz, faced a revolt in 1912, Taft sent in U.S. marines, who were still there when Wilson became president. In 1911 the two countries signed the Knox-Castrillo Convention, providing for a large loan from United States bankers to re-fund the Nicaraguan debt and U.S. administration of the customs services. The U.S. Senate rejected this plan, but a new treaty signed early in 1913 gave the United States an option on a canal route, naval base rights on the Gulf of Fonseca, and leases on the Corn Islands in the Caribbean, in return for a payment of $3 million. Bryan favored this glaring example of dollar diplomacy and persuaded President Wilson to accept it.
The Senate demurred, partly because of an amendment (patterned after the 1901 Platt Amendment for Cuba) allowing the United States to intervene to maintain internal order. Bryan then suggested to Wilson that the United States should be a "modern example of the Good Samaritan"—the government should make direct loans to Latin American nations by issuing bonds at 3 percent and lending the proceeds at 4.5 percent, with the profit used for debt retirement. Wilson rejected the proposal, leaving private loans as the only alternative. In October 1913, the U.S. firms of Brown Brothers and J. and W. Seligman, by buying stock in the Pacific Railroad and the National Bank of Nicaragua, purchasing Treasury bills, and lending money to the railroad, provided Nicaragua with more than $2.5 million. Bryan consulted Wilson before approving this formal act of dollar diplomacy.
In August 1914, the United States and Nicaragua signed the Bryan-Chamorro Treaty, a restatement of the 1913 proposals without Platt Amendment provisions. Because of questions about the role of U.S. business interests in Nicaragua, charges that the United States was dealing with a puppet regime, and protests from several Central American countries, the Senate delayed approval of the treaty until February 1916. El Salvador, Honduras, and Costa Rica, by raising critical questions about U.S. motives, exposed the bankruptcy of missionary diplomacy. Costa Rica argued that the canal concession violated its rights in the area; El Salvador and Honduras claimed that establishment of a naval base would violate their equal rights in the Gulf of Fonseca. In 1916, Costa Rica and El Salvador brought charges against Nicaragua in the Central American Court of Justice. Both the United States and Nicaragua argued that the court had no jurisdiction and refused to accept its decisions in favor of Costa Rica and El Salvador. This reaction made it clear that the court, which the United States had helped to establish in 1907, was useful only when it did not tread on the toes of the United States. Impotent to enforce its decisions, the court soon ceased to exist.
After ratification of the Bryan-Chamorro Treaty, the United States moved to control Nicaraguan politics and finance. Political and economic pressures and a naval demonstration helped to ensure the election of the conservative Emiliano Chamorro as president in 1916. The United States also dictated the disbursement of the $3 million Bryan-Chamorro fund, handed over after adoption of the Financial Plan of 1917. The plan limited the monthly budget of Nicaragua, provided for a high commission dominated by U.S. citizens to monitor government spending, and established a schedule for payment of the Nicaraguan debt to British bondholders and U.S. bankers. Another financial plan in 1920 increased the government's monthly allowance, but the presence of U.S. marines and continued financial and political control tainted this progress.