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The Sorry Echoes of Overseas Sleaze
United Fruit Co. in Guatemala. Aramco in Saudi Arabia. Blackwater and Halliburton in Iraq. We are familiar with a few private American companies that have played at foreign policy in our recent history. One of the first and ultimately most influential, however, is also the least known.
In December 1892, a group of Wall Street businessmen arrived by ship in the Dominican Republic. Calling themselves the “San Domingo Improvement Company,” they had bought all of the country’s foreign debt from a European financial company. Now the men came to Santo Domingo on a delicate mission coming to terms with Ulises Heureaux, the Caribbean republic’s fearsome dictator.
Early signs weren’t good. On paper, the company controlled the republic’s custom houses, which were the source of almost all Dominican government revenue and served to guarantee the debt. But the finance minister told the Americans that his government considered their purchase of the foreign debt “null and void.”
After the first meetings with Heureaux, the company’s lawyer wrote with astonishment that the Dominican president was “one of the most remarkable men I have ever met.” Heureaux had come to power through “a series of atrocious massacres and revolutions,” but now governed “with a very enlightened purpose.” When it came to bare-knuckled negotiation over the company’s contracts, the lawyer marveled that not even a “first-class New York lawyer” could have “seen through our own schemes & given us more trouble, than did this remarkable man.”
On the surface, the company’s venture had nothing to do with U.S. foreign policy. But the firm’s president, Smith M. Weed, was a prominent New York Democrat with connections all the way to the White House. Weed and his partners had consulted the State Department before buying the Dominican debt. After a meeting in Washington, the company’s lawyer reported happily that the “Government is now committed to support the claims of our company energetically and promptly.”
The Improvement Co.’s very name trumpeted a commitment to progress. Together, the company and Heureaux completed a railroad that opened some of the republic’s interior to export agriculture, but at an astronomical cost (much of the money found its way into Heureaux’s pocket). The company also pushed the dictator to put his nation on the gold standard. They even brought to Santo Domingo an economics professor from the newly founded University of Chicago to promote hard money.
Then problems arose. Heureaux changed grazing laws to benefit local and foreign farmers at the expense of landless peasants, who duly rose up in rebellion. Heureaux suspended the law and put down the uprising, but by 1897, it was clear that genuine modernization had failed to transform the nation’s economy.
So Heureaux and the American financiers settled on fraud as a way to stay afloat.
Dominican bonds issued after the arrival of the Improvement Co. had been sold across Europe, but after the country defaulted on interest payments in 1897, blocs of outraged bondholders formed pressure groups in Brussels, Paris, London and elsewhere. To keep the depreciated bonds from losing all their value, the Improvement Co.’s wholly-owned local bank, the National Bank of Santo Domingo, flooded the country with worthless bills and “silver” coins of dubious value. For the long-suffering Dominican people, this was the last straw. In July 1899, Heureaux was shot and killed by the son of a businessman whom he had executed years earlier.
Heureaux was gone, but the company remained. U.S. officials stood by the Improvement Co., pressuring the new Dominican government to pay $4.5 million to liquidate the company’s assets. That sum represented almost a whole year’s revenue for the impoverished nation.
By 1905, President Theodore Roosevelt had had enough. He elbowed aside the Improvement Co. and put U.S. officials in charge of Dominican customs houses. American and European creditors would get paid back, and no longer would a private company handle American foreign policy.
The intervention helped give rise to the “Roosevelt Corollary” to the Monroe Doctrine, which committed the U.S. to intervene wherever “wrongdoing or impotence” kept Latin American nations from fulfilling their international obligations. This was, unfortunately, a key step in the long and sorry set of U.S. interventions in Latin America through the 20th century. Few Americans, though, knew at the time that the disreputable actions of a Wall Street firm had led to a landmark in U.S. foreign policy.
Today, American officials are once again concerned about Dominican ports — not as a source of revenue for the Caribbean nation, but as a departure point for drugs coming into the United States. And once again, an influential Democrat — New Jersey Senator Robert Menendez — has allegedly used his influence on behalf of a private company — this time, a Dominican company that specializes in port security. His case is now under review by the Senate Ethics Committee.
History, it’s said, repeats itself. In the turbulent history between the U.S. and Latin America, it’s worth recounting the trouble that ensues when corporate greed takes precedence over good neighborliness.
Cyrus Veeser is an associate professor of history at Bentley University.
This article first appeared in Bloomberg News.
College Factual, an online portal designed to assist students in selecting a college, has released its top colleges for a degree in finance ranking and Bentley University stands at #4 overall in the U.S.