History, Independence and the Canal
In the late 1870s, French diplomat Ferdinand de Lesseps, who had built the Suez Canal in Egypt, called a conference in Paris to design and raise money for a Central American canal. Deciding on a sea-level canal in Panama, he began to raise money privately, and started work in 1882. But the project was dogged by equipment delays, tropical diseases, financial problems, and poor planning. The canal design turned out to be impossible to build with the technology available at the time. The enterprise went bankrupt in 1888 and was replaced with a holding company to protect the interests of investors. The project, however, had brought Panama a more diverse population, including many Caribbean blacks who came to work on it.
During the 1890s some U.S. leaders urged their government to take over the effort to build a Central American canal. The United States had for some time wanted a shorter sea route between the Atlantic and Pacific for trade and military purposes. It also stood to benefit from a canal more than any other country. Several land surveys were conducted, and some construction even began in Nicaragua. In 1902, however, a complex set of developments led the U.S. president and Congress to favor buying and rehabilitating the French route in Panama.
The United States negotiated a treaty with Colombia for rights to build the canal, but the Colombian senate refused to ratify it. Representatives of French and U.S. investors, the railroad, and the U.S. government then conspired with Panamanians to declare the isthmus independent from Colombia. President Theodore Roosevelt, who wanted to make the Panama Canal the centerpiece of his administration, made sure the conspiracy succeeded. When the Panamanians rebelled, U.S. troops prevented Colombian forces from moving in to suppress the revolt. The Republic of Panama became independent on November 3, 1903.
Two weeks later a treaty was signed giving the United States the rights to build a canal on terms that made Panama a virtual U.S. protectorate. The United States received a perpetual lease for a section of central Panama 16 km (10 mi) wide, stretching from ocean to ocean, for the canal. Within this zone, the United States would exercise complete control, as if it owned the land. It also was granted the right to military intervention in Panama to maintain order, and the right to take over more Panamanian land if necessary. In exchange, the United States guaranteed Panama's independence and paid $10 million, plus an annual payment of $250,000. On Panama's side, the treaty was negotiated and signed not by Panamanians but by Philippe Bunau-Varilla, a French citizen who represented the French canal company. The treaty terms were resented by Panamanian nationalists and became a source of continuing controversy in Panama's history.
From 1903 on, Panama had two governments, one for the republic and another for the canal zone. The republic was subordinate to the government of the U.S. zone in every way—financially, militarily, and administratively. Panama adopted a constitution and elected its first president, Manuel Amador Guerrero, in 1904. But in fact, the chief engineer of the canal construction works and then the governors of the canal zone oversaw affairs in Panama. They made sure that nothing impeded the maintenance, security, and operation of the canal.
Panama's independence was strictly limited: With no military, it was vulnerable to intervention by U.S. troops from the canal zone. It had limited resources and had to borrow money from banks, using the canal annuity as guarantee. Virtually all the country's trade and immigration came through the zone and was therefore subject to U.S. control. Panama depended on the zone for water, jobs, revenues, imports, transportation, and even security. Panama's relationship was both unequal and subservient to the United States.
Construction of the canal, from 1904 to 1914, brought more than 150,000 people to Panama. These immigrants changed the country's ethnic and cultural composition. They included a large number of black West Indian laborers, some European workers, and some Americans.
During Panama's early years, President Belisario Porras led efforts to build the nation, constructing roads, hospitals, schools, and other facilities. Porras, leader of the Liberal Party, achieved a working relationship with the U.S. authorities and dominated the country's government until the late 1920s. However, resentment of U.S. domination grew among some Panamanians.