The history of the city of San Carlos is inextricably linked to the colonial era and the necessity of controlling waterways. Its official founding date is 1666, when a military post was established on the strategically important point where Lake Nicaragua flows into the San Juan River. Initially, the settlement grew around the fortress built to protect the wealthy city of Granada and inland territories from pirates and foreign fleets entering the country from the Caribbean Sea. For a long time, the site was mentioned in chronicles specifically as a key defensive line rather than a civilian settlement.
The transformation of a military fortification into a full-fledged city was driven by the region's unique geography, as San Carlos became the natural gateway between the Atlantic and the country's Pacific region. Control over the river's source allowed for the regulation of all shipping, and the city became a mandatory stop on the famous "Transit Route," used for transporting goods and passengers, especially during the Gold Rush. Additionally, the settlement served as a link between isolated outposts on the river and the developed cities on the lake's shores.
The early economy was entirely focused on serving the garrison and river trade. The local population engaged in fishing, agriculture, and providing supplies to passing vessels, and city life moved to the rhythm of the river. The cultural environment was shaped by constant interaction between Spanish soldiers, local residents, and foreign travelers. This gave the city the distinct character of a port settlement, where traditions and news from various corners of the world intermingled.