Faced with huge debts and an empty treasury, Juarez announced a two-year moratorium on payment of the foreign debt,  primarily owed to France, Spain and England. French Emperor Napoleon III sent an army to Veracruz in late 1861, hoping to cash in on Mexico's indebtedness. French soldiers marched on Puebla, but were repelled by a ragtag Mexican army, adding a new national holiday to the calendar on May 5, (Cinco de Mayo).

It was a short-lived celebration, however. A year later the French were able to take both Puebla and Mexico City. Austrian Archduke Ferdinand Maximilian of Hapsburg was sent to be the French emperor in  Mexico. This was a period of great elegance; Maximilian converted the  Chapultepec fortress into his castle and ordered construction of the wide,  European-style boulevard Paseo de la Reforma, which leads across town from the base of the castle. Historians generally agree that Maximilian and his wife,  Charlotte, known here as Carlota, were well-meaning rulers. But in trying to  satisfy Mexico's opposing liberal and conservative factions, Maximilian  alienated both and was executed by firing squad in 1866.

In 1867, Juarez was elected to a third term. Among his major accomplishments was the reorganisation of the educational  system, making primary school attendance free and obligatory.