Foreign investors, particularly from Great Britain, owned many of the new railroads, ranches, plantations, and mines in Latin America. Foreign banks financed large-scale commercial agriculture.
Central governments allowed foreign capital to enter their countries without much regulation in the hope that foreigners would develop the economy by establishing new businesses there. However, investors usually sent profits from these businesses and interest payments from loans back to their own countries.
Foreign banks lent funds for public improvements. Some of this money went to strengthening armies and navies, making it easier to suppress internal rebellions. However, revolutions sometimes toppled governments that had borrowed money, and new governments would refuse to pay the old debts or pay for foreign property. In addition, most of the development was concentrated in the hands of a few people in cities, so distribution of wealth was uneven, leading to further instability. Unpaid loans led to intervention by foreign powers.
European banking and business leaders persuaded their governments to pressure Latin American governments for payment. Sometimes ships and troops were sent to compel payment. For example, to secure repayment of a debt that the Mexican government under Juarez had refused to pay, France attacked Mexico, set up a government in Mexico City, and made a Habsburg prince, Maximilian, emperor from 1864 to 1867.
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