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[[File:Franz_Xaver_Winterhalter_Napoleon_III.jpg|thumbnail|left|300px|Franz Xaver Winterhalter, French Emperor Napoleon III]] In 1862, French Emperor Napoleon III maneuvered to establish a French client state in Mexico, and eventually installed Maximilian of Habsburg, Archduke of Austria, as Emperor of Mexico. Stiff Mexican resistance caused Napoleon III to order French withdrawal in 1867, a decision strongly encouraged by a United States recovered from its Civil War weakness in foreign affairs. Earlier, during the Civil War, U.S. Secretary of State William Henry Seward followed a more cautious policy that attempted to keep relations with France harmonious and prevent French willingness to assist the Confederacy. Consequently, Maximilian’s government rebuffed Confederate diplomatic overtures.
In 1857, Mexico became embroiled in a civil war that pitted the forces of Liberal reformist Benito Juárez against Conservatives led by Félix Zuloaga. Conservatives exerted control from Mexico City, and the Liberals from Veracruz. The United States recognized the Juárez government in 1859, and in January of 1861, Liberal forces captured Mexico City, greatly strengthening Juárez’s position and legitimacy. However, continued instability had coincided with growing foreign debt that was increasingly difficult for the Mexican government to pay. Secretary of State Seward offered a plan that would provide mining concessions in exchange for American loans. In the event that the debts were not repaid, Mexico would agree to the cession of Baja California and other Mexican states. The terms of the loan were onerous to the Mexican government, but U.S. diplomat Thomas Corwin successfully negotiated a treaty with Mexican representative Manuel Maria Zamacona. Ultimately, though, the U.S. Congress rejected the treaty on grounds that it would drain money from Civil War expenditures.
