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By 1904, the Dominican Republic was deeply in debt. The Santo Domingo Improvement Company, owned privately by US citizens, had held a concession, the control of the customs revenue of the Dominican Republic, from 1893-1901 when the concession was abrogated by the DR government. Company officials appealed to the State Department. By a 1903 agreement, State Dept had arranged a protocol with the DR that the Company was to be given compensation of four and one-half million dollars. The protocol was never submitted the Senate but it does indicate that the State Department had begun to interest itself in the Dominican Republic before 1904.
In 1903, the foreign minister of the DR became interested in the neutralization of DR waters and the establishment of free ports at SamanŠ and Manzanillo in the interests of Germany. The US protested. In October, 1903 the Belgian government suggested a joint action with the US and France for intervention at the customs houses to insure payments of the DRís debt. A new Dominican president in January, 1904, Carlos F. Morales Languasco, wanted US assistance; he had come to power through a golpe de estado and his position was tenuous. The International Court of Justice at the Hague ruled that the creditor countries could intervene against Cipriano Castro of Venezuela to collect debts. In May, Roosevelt made a speech in which he claims the US had a duty to intervene in the case of chronic wrong doing on the part of American nations. In July, an arbitration decision said the US could take over customs houses to collect private debts. Foreign creditor nations were pressuring the debt collection issue. The US became determined that only it would collect the $32 million that the Dominicans owed to the citizens France, Belgium, Spain, Germany, Italy, and the United States for it did not want foreign warships prowling the Caribbean. In 1904, President Theodore Roosevelt took over an important customshouse in support of the outrageous claims of the San Domingo Improvement Company. He also issued the "Roosevelt Corollary" to the Monroe Doctrine, which declared that chronic wrongdoing by these countries (i.e., failure to make debt payments or acting as the US did not want them to act) would cause the US to act as a policeman. After a show of force by the US, the DR invited the US in. An agreement was signed in 1905 for the US to take over the customs houses and use 55% of the revenues to pay the outstanding debts. When the US Senate would not accept this agreement, Roosevelt issued an executive top achieve the goal. The two nations formalized this arrangement with a treaty in 1907.