Central America: Panama Canal

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The idea of making a passageway across Panama dates back to 1534, when Spain considered the possibility of building a canal. In 1850 the Colombian government (Panama was part of Colombia until 1903) gave the French, who were interested in a passageway to the Pacific Ocean, permission to create a canal. However, it was not until January 20, 1882 that the French company under the direction of Ferdinand Lesseps actually began to dig a sea-level canal across Panama.

The United States was also interested in building an interoceanic canal. In 1887 a U.S. regiment was sent to survey Nicaragua as a possible site for the canal. The Maritime Canal Company was asked in 1889 to build a canal either in Nicaragua or Panama. Nicaragua was chosen for the canal site and construction was begun. Construction continued until 1893 when the Maritime Canal Company lost all of its funding as a result of a stock panic in the United States. At that time, all work on the canal in Nicaragua stopped. The United States, however, did not lose interest in constructing a canal. Four years later in 1897 and again in 1899, Congress appointed a Canal Commission to research the issue of locating a site for an interoceanic canal. Both Canal Commissions recommended Nicaragua for the site to build the canal.

In the meantime, the French were having problems excavating a canal in Panama. Malaria was claiming thousands of lives, and the project was suffering financial set-backs. In 1889 Lesseps' company was liquidated in order to repay investors. A second company, Compagnie Nouvelle du Canal de Panama, was formed in 1894 to complete the canal. However, the new company, was also unable to accomplish the task of building the canal. In order to recover some of the money that was invested in the canal project, the French began looking for someone who would buy their equipment and the rights to build the canal in Panama. The price of $100 million dollars was set.

Two primary stock holders of the French holding company, William Cromwell and Lieut.-Colonel Philippe Bunan-Varilla, took on the task of finding a buyer. Bunan-Varilla who was the Chief Engineer of the French Panama Canal Company believed that the United States was the only country with enough resources to make the purchase and finish the canal.

However, based on the recommendations of both Canal Commissions, the United States still favored building a canal in Nicaragua because it would be less expensive. While the United States continued the process of debate and ratification necessary for any legislative action, Cromwell and Bunan-Varilla mounted an effort to convince U.S. Representatives and Senators that Panama was a better site than Nicaragua for the canal.

First, they got the French company to lower the asking price from $100 to $40 million making the cost of the Panama site equal to the Nicaragua site. Then, using their own personal funds, they began a publicity campaign to influence the U.S. decision. They purchased space in newspapers and magazines, they had pamphlets printed, and they even gave public lectures all pointing out the merits of Panama as a canal site. During their campaign Cromwell and Bunan-Varilla also focused on the potential risk associated with the United States building its canal in Nicaragua because the site chosen was within twenty miles of a large volcano. On the day scheduled for the Senate vote, each Senator received from Cromwell and Bunan-Varilla a Nicaraguan stamp with a picture of the volcano on it.

Cromwell and Bunan-Varilla's efforts paid off. In 1902, a legislative bill, selecting Panama as the canal site, passed the Senate and the House of Representatives and was signed by President Teddy Roosevelt. Only one hurdle remained--the Colombian government.

The United States proposed the Hay-Herran Treaty to the Colombian government. The terms of this treaty included the United States giving the Colombian government $10 million initially plus $250,000 annually for the duration of a 100-year lease of a six-mile-wide strip of land on either side of the canal. The Colombian government refused the offer. President Roosevelt's reaction to the refusal was "We were dealing with a government of irresponsible bandits. I was prepared to. . .at once occupy the Isthmus anyhow, and proceed to dig the canal. But I deemed it likely that there would be a revolution in Panama soon." In fact there had been numerous anti-Colombian governments insurrections over the years.

Bunan-Varilla was determined to overcome this last hurdle so he organized a Panamanian rebellion for independence from Colombia. He describes U.S. involvement in the revolution by saying, "In preparing the revolution I avoided anything that could be interpreted as a connivance between Washington and the insurgents. If President Roosevelt went with the high speed which was indispensable for final success, after the revolution became a fact, it was because I had carefully respected his independence. Evidently the quickness of his actions exposed him to the most poisonous arrows. . ."

To protect "American lives in Panama," President Roosevelt sent the U.S. battleship Nashville to Panama. The battleship prevented the Colombian military from sailing to Panama and an invasion through the dense Panamanian jungle was impossible. The rebellion was successful and Panama declared its independence from Colombia. Bunan-Varilla was made the American ambassador for Panama as compensation for his financial assistance to the rebels. He and U.S. Senator John Hay drafted a treaty between Panama and the United States, which was ratified by the Panamanian government in 1903 and by the United States in 1904.

The Panama Canal Treaty of 1903 gave the United States ownership of a path extending five miles on each side of the proposed canal. Essentially, the United States could treat this land as if it were U.S. territory. In return, Panama received $10 million per year. Unlike the Hay-Herrán Treaty, this treaty did not set a time at which the agreement would end.

In 1914 after only 10 years of work, the construction of the Panama Canal was completed.