Venezuela had long granted concessions to foreign investors - Germans, English, Italians and others - in order to develop her mines, timber and railroads, but unsettled conditions in the country frequently resulted in the non-fulfillment of the obligations which had been entered into. Germany, for example, claimed that the government of Venezuela had guaranteed dividends on the stock of a railroad built by German subjects and had failed to live up to the contract. Having in mind the possible use of force to compel Venezuela to carry out her alleged obligations, Germany consulted our state department to discover whether our adherence to the Monroe Doctrine would lead us to oppose the contemplated action. The attitude of President Roosevelt in 1901 was that there was no connection between the Monroe Doctrine and the commercial relations of the South American republics, except that punishment of those nations must not take the form of the acquisition of territory. In 1902 Germany, Great Britain and Italy proceeded to blockade some of the ports of Venezuela, and the latter thereupon agreed to submit her case to arbitration. Apparently, however, Germany was unwilling to relinquish the advantage which the blockade seemed to promise, and in the meantime Roosevelt became fearful that the result of the blockade might be the more or less permanent occupation of part of Venezuela. He therefore told the German ambassador that unless the Emperor agreed to arbitration within ten days, the United States would send a fleet to Venezuela and end the danger which Roosevelt feared. The pressure quickly produced the desired results, and during the summer of 1903 many of the claims were referred to commissions. The three blockading powers believed themselves entitled to preferential treatment in the settlement of their claims, over the non-blockading nations, while the latter held that all of Venezuela's creditors should be treated on an equality. This portion of the controversy was referred to the Hague tribunal, which subsequently decided in favor of the contention raised by Germany, Great Britain and Italy, and eventually all the claims were greatly scaled down and ordered paid.[4]

The Venezuela case made evident the possibility that European creditors of backward South American nations might use their claims as a reason for getting temporary control over harbors or other parts of these countries. There was also ground for the fear that temporary control might become permanent possession. Hence in the Santo Domingo case, the United States adopted a new policy. The debts of Santo Domingo were far beyond its power to pay; its foreign creditors were insistent. An arrangement was accordingly made by which the United States took over the administration of the custom houses, turned over forty-five per cent. of the income to the Dominican government for current expenses, and used the remainder to pay foreign claims. The plan worked so well that its main features were continued and imitated in the protectorates over Haiti (1915) and Nicaragua (1916).

The progress which has been made in composing the jarring relations among the American states is due in part to the Pan American Union and to the Pan American Conferences. The Union is an organization of twenty-one American republics which devotes itself to the improvement of the commercial and political relations of its member states. The first Pan American Conference, held at Washington in 1889, has already been mentioned.[5] At the second, at Mexico City in 1901, the American republics which had not already done so agreed to the conventions signed at The Hague in 1899. At the third conference at Rio de Janeiro in 1906 and the fourth in Buenos Aires in 1910, its field of effort was further broadened, and in the latter year a recommendation was passed that the Pan American states bind themselves to submit to arbitration all claims for pecuniary damages.

President Wilson continued unbroken the policy of protectorates which President Roosevelt had initiated in the case of San Domingo. His statements of general policy were conciliatory and evidently designed to allay suspicion, and he constantly expressed the view that the American states were cooperating equals. And having asserted that the United States had no designs upon territory, and nothing to seek except the lasting interests of the peoples of the two continents, he gave practical evidence of his purposes by urging that all unite to guarantee one another their independence and territorial integrity, that disputes be settled by investigation and arbitration, and that no state allow revolutionary expeditions against its neighbors to be fitted out on its territory.[6]

American relations with Great Britain between 1896 and 1914 were such as to lend themselves to amicable settlement. The question of the boundary between Alaska and Canada, to be sure, contained some of the elements of trouble. The treaty of 1825, between Russia and Great Britain, had established the boundary between Alaska and Canada in terms that were somewhat ambiguous, the most important provision being that the line from the 56th degree of north latitude to the 141st degree of west longitude should follow the windings of the coast, but should be drawn not more than ten marine leagues inland. The coast at this point is extremely irregular, and the few important towns of the region are at the heads of the bays. With the discovery of gold in the Klondike region in 1897 and the consequent rush of population to the coast settlements, the question of jurisdiction became important.