The Panama Canal: a brief history

Reproduced from Smits, K. (2013). Cross Culture Work: Practices of Collaboration in the Panama Canal Expansion Program. Delft: Next Generation Infrastructures Foundation by courtesy of Karen Smits

Panama. Bordering with Costa Rica and Colombia, Panama connects Central America with South America (see Picture 1). Due to the geographic location of the Isthmus of Panama, the country has long been coveted as a place where the Atlantic and Pacific oceans should meet, and, with the Panama Canal, they finally do.

Before starting this blog series about cross-cultural collaboration in projects, for which I will use examples from the Panama Canal Expansion Program, I’d like to give you a brief insight into the history of the waterway.

 Picture 1: Think Panama - Source: Flickr

Picture 1: Think Panama - Source: Flickr

History of the Panama Canal

In 1513, when Vasco Nuñez de Balboa discovered the Southern Sea (later known as the Pacific Ocean) and realized how close this ocean is to the Atlantic Ocean, the history of the Panama Canal began. From that moment onwards there had been talks about a shortcut through Central America, but it required certain advances in engineering, among other things, to actually construct this alternate route.

Three hundred years later discussions about where a canal ought to go developed into a choice between Nicaragua and Panama. While the debate continued, Colombia allowed a group of entrepreneurs from the United States of America to build a railroad across their province Panama. After their experiences in Panama, however, the railroad builders argued for another location for the canal as, for them,

“Panama was the worst place possible to send men to build anything” [1]

Despite these experiences, an international congress that convened in Paris in May 1879 voted for a sea level canal in Panama. Known as ‘The Great Engineer’, the world-famous Suez Canal engineer Ferdinand de Lesseps took command of the initiative to build a sea level canal in Panama.

The French Attempt

The work in Panama was an immensely larger and more baffling task than Lesseps had performed at the Suez Canal [1]. Different than in Egypt, the climate in Panama was not only hot but with humidity reaching 98 percent at times, suffocating. While digging at Suez had been through a flat level dessert, in Panama the workers encountered mostly hard rock and clay.

Another important difference between Egypt and Panama was the rainfall, in Suez it rained about nine inches a year, while rainfall in Panama was measured in feet ; ten feet or more on the Caribbean slope and five to six feet in Panama City [1]. Due to the heavy rainfall, digging proved to be much more difficult in Panama, and the threat of diseases was very high. Panama appeared to be the most difficult place to construct a canal: the canal builders had to deal with thick jungles full of snakes, mosquitoes that carried malaria or yellow fever, deep swamps, and a heavy mountain range [2].

De Lesseps and his crew spent eight and a half years fighting against the jungle, a battle they lost. An earthquake, fires, floods, the continuous epidemic of yellow fever, a huge amount of corruption and, on top of this, insufficient funds and unfortunate engineering decisions converged into a tragic ending of the French attempt [1-3]. In 1889, De Lessep’s venture fell: more than a billion francs -about US$287 million- had been spent, accidents and diseases had claimed twenty thousand lives and the project organization Compangie Universelle du Canal Interocéanique de Panama went bankrupt [1, 3].

A lesson learned from the French undertaking was that the construction of a canal went beyond the capacity of any purely private enterprise, it had to be a national undertaking, and the United States of America appeared to be the one nation ready to mount such and effort [1].

The American Victory

When Theodore Roosevelt became the President of the United States of Americain 1901, he was determined that a canal was the vital, indispensable path to a global future for the United States [1, 4]. For both commercial as well as military vessels it would significantly improve shipping time, lower shipping costs, and avoid passing through the often-dangerous weather at the tip of South America.

Furthermore, a two-ocean navy would not be necessary when the two coasts would be connected. A canal would demonstrate American power to the world and enhance the nation’s identity as a supreme authority [3]. Despite intensive lobbying and heavy discussions about where this canal had to be built, in Nicaragua or Panama, President Roosevelt finally decided it had to be Panama [1, 3].

There was just one obstacle: Panama was a small province of Colombia and the Colombian constitution prohibited any sovereignty to give away any part of the country, which is exactly what Roosevelt had in mind. He was lucky though. A group of Panamanian elites had plotted a revolution for years, and they were eager to receive United States’ protection to support Panama’s independence [3]. On November 3rd, 1903, a coup gave birth to the Republic of Panama.

Soon after this bloodless revolution Panama and the United States signed the Hay-Bunau-Varilla treaty. This agreement evoked a whirlwind of controversy as it gave astonishing rights to the United States, while it eliminated any independence of the Republic of Panama [1, 3]. The treaty granted the United States effective sovereignty over the ‘Canal Zone’, a ten-mile wide swath that stretched clear across the isthmus and cut the country in two. It gave the United States the right to purchase or control any land or building regarded necessary for the construction of the canal and allowed the United States to intervene anywhere in the republic to restore public order “in case the Republic of Panama should not be, in the judgment of the United States, able to maintain such order” [3]. Later, this treaty became a contentious diplomatic issue between Panama and the United States.

 Picture 2: National Museum of American History - Source: Flickr

Picture 2: National Museum of American History - Source: Flickr

The Panama Canal construction project attracted people from all over the world. It promised the return of prosperity surpassing the French era and there was no doubt it would be completed [1].

Labor agents targeted the Caribbean islands for workers and attracted at least twenty thousand Barbadians and an almost equal amount of West Indians to travel to Panama and sign a contract with the government of the United States [3]. Although the project drew mostly migrants from this region, thousands of others from Mexico, Costa Rica, Colombia, Peru, India, China and Europe also packed their suitcases for the Canal Zone. Even higher numbers of people from the United States were attracted by the prestigious job for the federal government, the adventure and good payment.

Under supervision of army doctor Colonel William Gorgas doctors and sanitary inspectors fought yellow fever and malaria; all streets in Panama were cleaned, pools were drained and waterways oiled to get rid of the disease-carrying mosquitos [2]. As conditions in the isthmus improved, after 1906, more American women packed their bags for Panama so they might work as nurses, secretaries or provide a home for their husbands [3]. Acting as a global magnet, the canal project drew families away from their home countries and set in motion extensive changes concerning migration, labor supply and the allocation of economic wealth and social status.

The construction of the Panama Canal officially took ten years, from May 1904 to August 1914, and overlapped with the tenure of three chief engineers. The first engineer, named John Wallace, only stayed on for the first chaotic year in the isthmus. John Stevens, the second engineer, played a key contribution by pleading for a lock rather than a sea-level canal. He remained on the job for two years. The final engineer, George Washington Goethals, oversaw most of the construction of the Panama Canal and stayed on the job until completion of the project [1-3].

With newer and bigger machinery, like the steam shovel, an enormous international workforce and a solution to fight malaria and yellow fever, the United States constructed the Panama Canal with its three locks (one 1-chamber and one 2-chamber lock at the Pacific side and one 3-chamber lock at the Atlantic side): Gatún, Pedro Miguel and Miraflores, each named after the village where it was built [5]. The design and construction of the locks was the most spectacular aspect of the project [3]. An artificial lake, Gatun Lake, was created so that ships could pass the canal at 26 meters above sea level, through the narrow Gaillard Cut.

The costs of the project had been more than four times what constructing Suez Canal had cost and were enormous for those days; no other construction effort in the history of the United States paid such a price in dollar or in human life [1]. This project took more than 5.000 human lives and totaled $352.000.000 in expenditures, which, taken together with the French expenditure summed up to a cost of $639.000.000 [1]. Six months ahead of schedule, and with a final price that was actually $23.000.000 below what was estimated in 1907, the construction of the Panama Canal was finished [1].

In 1914, nearly 34 years after the first shovel hit the ground, its gates opened for the first vessels to pass [1-3]. This moment was a symbol to Americans, and to the rest of the world, letting them know that the United States had firmly established itself as the most powerful nation on earth.

Ownership of the Canal

After August 15, 1914, when the canal was officially inaugurated with the passage of steamship Ancón (see picture 3), the supervision of the waterway remained under American administration. The opening ceremony celebrated America’s triumph and the capstone project characterizing Panama. It also signaled the beginning of an almost 100-year relationship between Panama and the United States, ranging from intervention and repression to reconciliation and cooperation [6]. Although Panamanians initially embraced the canal construction and hoped to benefit from the American effort, their resentment grew over the years as the promised fruits of the alliance proved sour [3].

 Picture 3: William Friar - Source: Flickr

Picture 3: William Friar - Source: Flickr

In the decades after the opening of the waterway, tensions between Panama and the United States were often stormy and colored by deep conflicts and violence. Fostered by racial differences, notions of honor, respectability and civilization, the relationship between the countries and their citizens was highly problematic [3]. Frequently, the United States sent troops into the country to suppress protests and, on the other side, the Panamanian police aggressively stood up against canal employees [6]. These frictions illustrated the complex and tense relationship between Panamanians and Americans.

Elite Panamanians perceived the presence of the United States and the canal as necessary, expecting it to be a path to modernity and civilization, yet instead of welfare, the project brought Americans who behaved disorderly and uncivilized [3]. More and more Panamanians claimed a revision of the original terms of the Hay-Bunau-Varilla treaty, and the steady growth of dissatisfaction and frustration, as it reached its limit, was made known in numerous uprisings and demonstrations [3, 6, 7].

Following the riots in 1964, Panama gained sympathy from around the world for more authority over the canal, which became a turning point in the relations between the United States and Panama [3]. Negotiations between the two countries took until 1977, when a new treaty about the Panama Canal was signed. Agreed by Panama’s President Omar Torrijos and U.S. President Jimmy Carter, new treaties promised an end to the United States controlling the waterway, declared the permanent right of the United States to defend the neutrality of the canal, but prohibited the United States from interference in internal affairs in the Republic of Panama [3, 6, 8]. Particularly, the first treaty mandated the elimination of the Canal Zone as of October 1, 1979, and agreed that the United States would run the administration of the canal until December 31, 1999 [3, 6].

Significant changes were implemented: a new organization, the Panama Canal Commission, was established, with a board of five American and four Panamanians members, and as of 1990, a Panamanian would fill the position of Administrator. Furthermore, the treaty called for more skilled Panamanians, as they would gradually play a greater role in the organization, and it prescribed that Panama would receive a higher amount of canal revenue [6]. The second treaty set out the Canal’s permanent neutrality and both countries’ right to defend it [6, 7]. Hence, much of what constituted the special relationship between the United States and Panama no longer existed after 1999, and for the first time in 158 years (since the construction of the railroad), the American military was absent in Panama [9].

At the end of the 1980s, after nine years of dictatorship under military governor Manuel Noriega and despite the agreements, the United States invaded Panama. President George H.W. Bush had realized he could not control Noriega, which seemed problematic now that, following the Torrijos-Carter Treaties, the countries were moving towards a joint administration of the canal [3]. After large and bloody attacks on Panama City, Noriega surrendered on January 3, 1990 [6]. Immediately after the invasion, President Bush declared that he aimed at safeguarding the American citizens in Panama, combating drug trafficking, protecting the integrity of the treaties and the Panama Canal, as the waterway was still under protection of the United States [3, 6].

Panama’s road to recovery began. By means of close cooperation and extensive planning among American and Panamanian members of the Panama Canal Commission, working as one team with one mission, the countries worked towards a “seamless transition” of the canal [9]. In the years towards the transition date, strong criticism regarding Panama’s capability to run the organization of the canal was put forward in American media. Indicating doubt about the local ability it was said that the Panamanians would “dance on the canal’s waters during carnival” and were “never able to run the organization successfully” (Fieldnotes, July 2009).

Disregarding such critiques, the United States and Panama intensively collaborated to handover the canal to Panama. At the end of this process, more than seventy percent of all professionals and managers were Panamanian, as the government of Panama had made provisions for some Americans and other foreign nationals to stay employed with the canal [9]. The canal’s Administrator has been a Panamanian since 1990 and he continued in this role under the new Panama Canal Authority (ACP).

On December 31, 1999, ownership of the Panama Canal was officially transferred from the United States to Panama. A festive public ceremony was held at the Administration Building to mark the start of a new era for the waterway. From this date onwards, the ACP became exclusively in charge of the operation, administration, management, maintenance, protection and innovation of the Panama Canal.

The autonomous agency of the government of Panama oversees the Canal’s activities and services related to legal and constitutional regulations in force so that the Canal may operate in a secure, continued, efficient and profitable manner [8]. Meanwhile, the United States remains in close relation with Panama. Their collaboration is nowadays characterized by extensive counter-narcotic cooperation, support to promote Panama’s economic, political and social development, and plans for a bilateral free trade agreement [10].


  1. 1.    McCullough, D., The Path Between the Seas: The Creation of the Panama Canal, 1870-19141977, New York: Simon and Schuster.
  2. 2.    Parker, M., Panama Fever: The epic story of the building of the Panama Canal2009, New York: Anchor Books.
  3. 3.    Greene, J., The Canal Builders: Making American's empire at the Panama Canal2009, New York: Penguin Books.
  4. 4.    Ives, S., TV Documentary on the Panama Canal, in American Experience2010, PBS: USA.
  5. 5.    Del R. Martínez, M., Canal locks: boat lifters, in The Panama Post2009: Panama.
  6. 6.    Harding, R.C., The history of Panama2006, Westport: Greenwood Press.
  7. 7.    Llacer, F.J.M., Panama Canal Management. Marine Policy, 2005. 29: p. 25-37.
  8. 8.    ACP. Autoridad del Canal de Panamá. 2009March 2009]; Available from:
  9. 9.    Gillespie Jr., C.A., et al., Panama Canal Transition: The Final Implementation, 1999, The Atlantic Counsil of the United States: Washington, D.C.
  10. 10.    Sullivan, M.P., Panama: Political and Economic Conditions and U.S. Relations, 2011, Congressional Research Service.

Author: Karen Smits / Publisher: SCMO

Nicolas de Loisy

Advisory specialized in logistics, transportation, and supply chain management.