The British and Americans agreed that neither power should dominate Central America or any future Nicaraguan canal. Instead, they foresaw a neutral canal where both nations could enjoy the flow of commerce without troubling one another. The British could have their British Honduras, now Belize, but no more. So they agreed in the Clayton-Bulwer Treaty.
To hear the Americans tell it, Britain’s expanding into islands in the Bay of Honduras violated that understanding. They had Belize and should settle for that. To the British, the Bay Islands formed no more than an extension of Belize, to which the United States had already consented by accepting the presence of British Honduras. Furthermore, the Americans had it wrong regardless as the treaty looked forward, coming fully into effect only when someone set to building the Nicaragua canal.
Here London proved the equal of any dissembling American diplomat. The British had, at absolute minimum, expanded British Honduras by establishing their control over the Bay Islands. Though the British had past dealings with and attempted settlements upon the islands, they went to the United Provinces of Central America on that nation’s independence. The Hondurans inherited the islands on their independence. They protested when British settlers came squatting, but had no means to evict them at the time. When those settlers asked for British protection, the British obliged and then set up the crown colony. All of this looks, in the broad strokes, very like the kind of thing that the Americans wanted to do to Cuba and had done, over a longer time, to Mexican Texas.
Matters might have remained in that state, a cause of some tension but otherwise an interesting footnote at best. But Cornelius Vanderbilt’s Accessory Transit Company ran the steamers over the Nicaragua route, linking the American East to the new American Far West. Vanderbilt went off to Europe and with him safely gone, two unscrupulous businessmen stole the company out from under him. When he returned, Vanderbilt resolved to ruin the men and threw his cash behind a route across the isthmus of Panama.
Meanwhile, in Greytown at the eastern end of the Nicaragua route, the Accessory Transit Company took charge of some land by the harbor. The free port’s officials wanted that land turned into a quarantine station. The company refused. The officials might have made off with some company property during the dispute. With things heating up, an American agent with close ties to the Company, Joseph W. Fabens, sent off dispatches to Washington about how out of control things had become. Along the way, a Company captain brutally murdered a black pilot.
You can get away with a lot in a free port, but blatant murder asked too much latitude of Greytown’s government. They sent a man to arrest the captain. Here the American captain’s story comes together with another American in extreme southeastern Nicaragua, Arkansan Solon Borland. A former senator who physically attacked Henry S. Foote back in 1850, Borland had a radical pedigree a bit too hot for Arkansas. He resigned in 1853 and ended up posted to Managua as the American minister. There he won friends and influenced people by lobbying for the United States to take up the Honduran side in the Bay Islands dispute and giving a public speech about how he hoped to see Nicaragua soon annexed to the United States. He’d have done better to wait a year until William Walker (parts 1, 2, 3, 4, 5) ran the nation.
Passing through Greytown in May of 1854, Borland stepped up with gun in hand to stop the arrest. Instead he got arrested. Protesting his arrest got Borland a broken bottle tossed in his face by the unfriendly crowd. His diplomatic immunity got Borland freed and he returned to Washington to tell his story. If this kind of thing had happened in Cuba, a war might very well have erupted. But the Mosquito Coast lived in a legal limbo, Greytown especially. No one could plausibly blame Nicaragua, or even the United Kingdom, for the act of an unruly mob in a fairly lawless town of five hundred outside the reach of both. That said, someone had to pay. The mob assaulted and injured an American diplomat. Even calm old William L. Marcy would not take that sitting down.