Until the early twentieth century, the United States had played only a very limited role in internal Honduran political clashes. Because there was not a resident United States minister in Tegucigalpa, the minister to Guatemala had been accredited for that position. The presence of the United States in the Caribbean increased following the Spanish-American War (1898), however. The decision to build a canal through Panama and expanded commercial activities led to a more active role for the United States government, as well as for United States companies.

By 1907 the United States looked with considerable disfavor on the role Zelaya of Nicaragua was playing in regional affairs. When the Nicaraguan army entered Honduras in 1907 to overthrow Bonilla, the United States government, believing that Zelaya wanted to dominate the entire region, landed marines at Puerto Cortés to protect the North American bananas trade. Other United States naval units prevented a Nicaraguan attack on Bonilla's last position at Amapala in the Golfo de Fonseca. After negotiations conducted by the United States naval commander, Manuel Bonilla sought refuge on the U.S.S. Chicago, and the fighting came to an end. The United States chargé d'affaires in Tegucigalpa took an active role in arranging a final peace settlement, with which Zelaya was less than happy. The settlement provided for the installation of a compromise regime, headed by General Miguel Dávila, in Tegucigalpa. Dávila was a liberal but was distrusted by Zelaya, who made a secret arrangement with El Salvador to oust him from office. This plan failed to reach fruition, but the United States, alarmed by the threat of renewed conflict in Central America, called the five Central American presidents to a conference in Washington in November.

The Central American Peace Conference of 1907 made a major effort to reduce the level of conflict within the region. A Honduran proposal to reestablish the political union of the Central American states failed to achieve acceptance, but several other measures were adopted. The five presidents signed the General Treaty of Peace and Amity of 1907 pledging themselves to establish the Permanent Central American Court of Justice, which would resolve future disputes. The treaty also committed the five countries to restrict the activities of exiles from neighboring states and provided the basis for legal extraditions. Of special interest was a United States-sponsored clause that provided for the permanent neutrality of Honduras in any future Central American conflicts. Another convention adopted by all five states committed the signers to withhold recognition from governments that seized power by revolutionary means. The United States and Mexico, which had acted as cosponsors of the conference, indicated informally that they would also deny recognition to such governments. From the point of view of the United States Department of State, these agreements represented a major step toward stabilizing Central America in general and Honduras in particular.

The first test of the new treaty involv 1000 ved Honduras. In 1908 opponents of President Dávila, ÍÍÍÍÍÍÍÍprobably supported by Guatemala and El Salvador, invaded the country. Nicaragua supported the Honduran president, and war seemed imminent. Perhaps motivated by the possibility of United States intervention, however, the parties agreed to submit the dispute to the new Central American court. The court ultimately rejected the Honduran and Nicaraguan complaints, but in the meantime the revolt collapsed, thus briefly restoring peace to Honduras.

Along with fighting off efforts to overthrow him, President Dávila made some attempts to modernize Honduras. He invited a Chilean officer to establish a regular military academy, which failed to survive beyond his time in office. Like his predecessor, Dávila encouraged the activities of the banana companies. The companies, however, were less than totally happy with him, viewing his administration as ineffective. In addition, rivalry among the companies became a factor in Honduran politics. In 1910 Dávila's administration granted the Vaccaro brothers a generous rail concession that included a provision prohibiting any rival line within twenty kilometers. This concession angered Samuel Zemurray of the newly formed Cuyamel Fruit Company. Zemurray had encouraged and even helped finance the 1908 invasion and was to continue to make trouble for the Dávila administration.

Despite the failure of the 1908 uprising, the United States remained concerned over Honduran instability. The administration of William Howard Taft saw the huge Honduran debt, over US$120 million, as a contributing factor to this instability and began efforts to refinance the largely British debt with provisions for a United States customs receivership or some similar arrangement. Negotiations were arranged between Honduran representatives and New York bankers, headed by J.P. Morgan. By the end of 1909, an agreement had been reached providing for a reduction in the debt and the issuance of new 5 percent bonds: the bankers would control the Honduran railroad, and the United States government would guarantee continued Honduran independence and would take control of customer revenue.

The terms proposed by the bankers met with considerable opposition in Honduras, further weakening the Dávila government. A treaty incorporating the key provisions was finally signed in January 1911 and submitted to the Honduran legislature by Dávila. However, that body, in a rare display of independence, rejected it by a vote of thirty-three to five.

An uprising in 1911 against Dávila interrupted efforts to deal with the debt problem. The United States stepped in to mediate the conflict, bringing both sides to a conference on one of its warships. The revolutionaries, headed by former president Manuel Bonilla, and the government agreed to a cease-fire and the installation of a provisional president who would be selected by the United States mediator, Thomas Dawson. Dawson selected Francisco Bertrand, who promised to hold early, free elections, and Dávila resigned. The 1912 elections were won by Manuel Bonilla, but he died after just over a year in office. Bertrand, who had been his vice president, returned to the presidency and in 1916 won election for a term that lasted until 1920.

The relative stability of the 1911-20 period was difficult to maintain. Revolutionary intrigues continued throughout the period, accompanied by constant rumors that one faction or another was being supported by one of the banana companies. Rivalry among these companies had escalated in 1910 when the United Fruit Company had entered Honduras. In 1913 United Fruit established the Tela Railroad Company and shortly thereafter a similar subsidiary, the Trujillo Railroad Company. The railroad companies were given huge land subsidies by the Honduran government for each kilometer of track they constructed. The government expected that in exchange for land the railroad companies would ultimately build a national rail system, providing the capital with its long-sought access to the Caribbean. The banana companie e8f s, however, had other ideas in mind. They used the railroads to open up new banana lands, rather than to reach existing cities. Through the resultant land subsidies, they soon came to control the overwhelming share of the best land along the Caribbean coast. Coastal cities such as La Ceiba, Tela, and Trujillo and towns further inland such as El Progreso and La Lima became virtual company towns, and the power of the companies often exceeded the authority wielded in the region by local governments.

For the next two decades, the United States government was involved in opposing Central American revolutions whether the revolutions were supported by foreign governments or by United States companies. During the 1912-21 period, warships were frequently dispatched to areas of revolutionary activity, both to protect United States interests and to exert a dampening effect on the revolutionaries. In 1917 the disputes among the companies threatened to involve Honduras in a war with Guatemala. The Cuyamel Fruit Company, supported by the Honduran government, had begun to extend its rail lines into disputed territory along the Guatemalan border. The Guatemalans, supported by the United Fruit Company, sent troops into the area, and it seemed for a time that war might break out. United States mediation ended the immediate threat, but the dispute smoldered until 1930 when a second United States mediation finally produced a settlement.

The development of the banana industry contributed to the beginnings of organized labor movements in Honduras and to the first major strikes in the nation's history. The first of these occurred in 1917 against the Cuyamel Fruit Company. The strike was suppressed by the Honduran military, but the following year additional labor disturbances occurred at the Standard Fruit Company's holding in La Ceiba. In 1920 a general strike hit the Caribbean coast. In response, a United States warship was dispatched to the area, and the Honduran government began arresting leaders. When Standard Fruit offered a new wage equivalent to US$1.75 per day, the strike ultimately collapsed. Labor troubles in the banana area, however, were far from ended.

World War I had a generally negative impact on Honduras. In 1914 banana prices began to fall, and, in addition, the war reduced the overall amount of agricultural exports. The United States entry into the war in 1917 diverted ships to the war effort, making imported goods, such as textiles scarce. The shortages of goods in turn led to inflation, and the decline in trade reduced government revenues from tariffs. The banana companies, however, continued to prosper Standard Fruit reported earnings of nearly US$2.5 million in 1917. Despite its problems, Honduras supported the United States war effort and declared war on Germany in 1918.

Data as of December 1993