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Clayton-Bulwer Treaty, banana cultivation, Panama Railroad, British Honduras, Central American countries

England, by this time, had replaced Spain as the dominant external force in the region. The British settlement at Belize had grown from a buccaneering and logging camp in the 17th century to become the principal port of Central America’s foreign trade. British influence extended along the Caribbean coast as far as Panama, and in 1862, Belize officially became a British colony (British Honduras). United States interest, however, rivaled British interest after 1849, for the isthmus offered the quickest routes to the gold mines of California. The Clayton-Bulwer Treaty of 1850 resolved some areas of this Anglo-American conflict, but in 1855 William Walker, a U.S. soldier of fortune, invaded Nicaragua with an army of followers. A united Central American conservative army drove him out with British assistance in 1857. Meanwhile, the completion of the Panama Railroad in 1855 caused Central American commerce to shift away from Belize to the more accessible Pacific coast ports, and British influence receded thereafter.

After 1870 liberal dictatorships arose which, in the name of order and progress, promoted the development of coffee as the region’s main export; at the expense of a more diversified agriculture, banana cultivation, mostly controlled by foreign interests, also became important. After 1900, the U.S.-based United Fruit Company was a major force in Central America’s economy. Developing railroads, shipping, and other subsidiary interests, the company was known as the “Octopus” among resentful Central Americans. U.S. investment and government became the dominant force on the isthmus, beginning with the establishment of Panamanian independence in 1903. The United States helped form the Central American Court of Justice, but U.S. military occupation of Nicaragua from 1912 to 1933 undermined its effectiveness.

Economic growth in the 20th century produced new middle classes that began to challenge the continued rule of traditional elites. Beginning in Costa Rica, reformist and revolutionary parties had emerged in every country by the middle of the century.

The second half of the 20th century has seen persistent poverty, political instability and social injustice in many of the Central American republics still undergoing modernization. In Nicaragua, the Sandinista guerrilla movement overthrew the Somoza dynasty in 1978 and 1979. The United States then became involved in a major effort to support the counter-revolutionary (“contra”) forces against the leftist Sandinista government, leading to many deaths and great suffering on both sides. El Salvador’s people and economy were ravaged by civil war through the 1980s. Guatemala witnessed 36 years of fighting between alleged left-wing groups and a repressive military. Thousands of people were killed and hundreds of thousands migrated to escape this conflict, which ended with the signing of a peace agreement in December 1996. Political repression and corruption in Panama prompted the United States to intervene in 1989 to remove Panamanian leader Manuel Noriega, who was allegedly connected to Colombian drug cartels.

One of the most significant problems confronting all Central American countries is the difficulty of bringing about significant socioeconomic development without affecting the democratic rights of their populations. Given its geostrategic significance (especially because of the Panama Canal and U.S. military bases, which reverted to Panamanian control in 1999), Central America is inevitably a key zone for U.S. foreign policy. In the past, political stability has often been allowed to outweigh democratic and human rights. With the formation of new hemisphere-wide trading blocks, Central America may find itself once again left behind in the competitive Latin American struggle to achieve true development.

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