During this time, a group of Salvadoran oligarchs formed a trading company to expand coffee exports. In 1905, La Empresa Cafetera de El Salvador won a contract with the US government to export Salvadoran coffee to the Philippines due to the struggling Filipino coffee industry. Merchant ships left Acajutla, El Salvador, and made the arduous journey across the Pacific Ocean to the port in Davao City, in the Philippines. Due to the strategic location of the Talaud Islands in providing a final stop before their destination, the Salvadoran merchant ships often stayed on these islands during emergency stops or to let the crew relax. Because of these stops, a small but significant population of Salvadoran sailors were often seen inhabiting the islands.
By 1910, the coffee exports to the American-controlled Philippines were quite profitable, but the issue of the disputed islands meant that many merchant ships were taxed twice, by both American and Dutch customs. In 1911 the oligarchs who owned the ships pleaded to the then-president of El Salvador Manuel Enrique Araujo to find a solution to the dispute to make the exports profitable again. In July 1912, Araujo proposed a radical idea to both America and the Netherlands: Give the islands to El Salvador. Araujo justified his position by claiming that, as a neutral third party, El Salvador would not tax or bar any American or Dutch ships in the islands, and that given the islands held no economic or strategic importance to any other nation, El Salvador could be the only one to benefit from them. Finally, the only inhabitants of the islands were natives and the aforementioned Salvadoran sailors, with no significant populations of American, Dutch, or Filipino citizens.
Initially, both nations refused the deal as absurd and continued with court proceedings. The Coffee Oligarchs had a plan, however. They would offer support to two major companies in Central America, United and Standard Fruit, and in return for this support, the American companies would lobby the American Congress to support the deal. The plan succeeded, and with American support behind the deal, the Netherlands relented and accepted it.
On January 16, 1913, the United States and the Netherlands held a ceremony to transfer the disputed territories of the Talaud Islands and Miangas over to El Salvador, thus becoming the only Latin American nation to hold an overseas colony.