Zelaya was of Nicaragua's Liberal party and enacted a number of progressive programs, including improved public education, railroads, and established steam ship lines.

In 1894, he took control of the Mosquito Coast by military force; it had long been the subject of dispute, and was home to a native settlement claimed as a protectorate by the British Empire.

Zelaya's aggressive attitude paid off, and the United Kingdom, which probably did not wish to go to war over this distant land, recognized Nicaraguan seizure of the area.

Both the United Kingdom and US wanted the control of this route, which connected the Caribbean Sea to the Pacific Coast across the San Juan River and Lake Nicaragua.

This threatened to blow up into a full scale Central American war which would endanger the United States Panamanian canal and give European nations, such as Germany, an excuse to intervene to protect the collection of their bank's payments in the region or if failing that then demand a land concession.

After the loan was pending on the Paris stock exchange, the U.S. further isolated Nicaragua by pointing out any money Zelaya would receive "would be without doubt spent to purchase munitions to oppress his neighbors" and in "hostility to peace and progress in Central America."

The US State Department also demanded that all investments in Central America would also need be approved by the U.S. as a means to protect U.S. interests, peace and liberal institutions.

"[7] Costa Rican officials considered the United States a more serious threat to Central American peace and harmony than attacks from Zelaya's Nicaragua.

Liberal returned in Civil and a Democratic way to Costa Rica with the popular and progressive Government of Alfredo González Flores (1914–1917), overthrow by the short Dictatorship (1917–1919) of Federico Tinoco Granados, during World War I.

At the start of December, United States Marines landed in Nicaragua's Bluefields port, to create a neutral zone to protect foreign lives and property but which also acted as a base of operations for the anti-Zelayan rebels.

During this time, through free trade and loans, the U.S. influenced the expanding prosperity and development of the country.His son, named after the King of Spain, was pianist Don Alfonso Zelaya.