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Acquisition of the Panama Canal

2001 Donald J. Mabry

Long before the turn of the century, the United States was determined to build a trans-isthmian canal to foster its international trade and to assert US superiority in the Caribbean; the ease with which Spain was muscled out of the Caribbean in 1898 gave notice to all rivals that United States power must now be taken seriously. Gone were the days when it could only protest the incursions of Europeans or, occasionally, block their efforts. Under the 1848 free transit treaty, the United States intervened in Panama nine times at the request of Colombia,(1) but none of these actions sped the construction of the canal. Sole US control of a trans-isthmian canal was blocked by the Clayton-Bulwer Treaty (1850) it had signed with Britain. The Senate refused to ratify the McLane-Ocampo Treaty (1859) with Mexico which would have circumvented Clayton-Bulwer by granting transit rights across Mexico to the United States. By 1880, however, President Rutherford B. Hayes announced a policy of exclusive US control of a canal, a view echoed the next year by President Garfield, whose secretary of state unsuccessfully fought for a revision of the Clayton-Bulwer Treaty. Such assertions only signified a change in policy for Washington did not block the efforts of the French-owned Panama Canal Company in the 1880s nor aid the private US company which started construction of a Nicaraguan canal in 1887 only to fail from under capitalization by 1893.

After the failure of the French company, the United States moved to overcome the next major obstacle, the treaty commitment to Great Britain. Washington bellicosity in the Venezuelan boundary controversy, British problems in the Eastern Hemisphere, and the German-British naval arms race at the turn of the century induced the British government to begin transferring its forces to other parts of the world.

Throughout the war with Spain in 1898, the British maintained a friendly neutrality towards the United States. Thus encouraged, Congress created the Walker Commission to investigate the engineering problems of the rival routes, principally either through Nicaragua or Colombia. On December 5, 1898, President McKinley in a message to Congress, stressed the need for an inter-oceanic waterway; the long voyage of the USS Oregon to the Caribbean during the Spanish-American War had emphasized the difficulty of fighting a two-ocean war with a one-ocean navy. By January, 1899, the first draft of the Hay-Paunceforte treaty between the United States and Great Britain had been completed.. It was signed the following 5th of February, having been delayed by the unsuccessful British attempt to tie an Alaskan boundary question to it. The proposed treaty did not supersede Clayton-Bulwer, for it only allowed the United States to build the canal but not under its sole control.

The expansionists of 1898, including Theodore Roosevelt, Henry Cabot Lodge, and Alfred Thayer Mahan, opposed it because they thought the US gained little and that the superior British fleet would have the advantage. The Senate refused to ratify it. The Secretary of State almost gave up but the British agreed to renegotiate. By November, 1901, the two had signed the second Hay-Paunceforte treaty which implicitly conceded the right of the United States to build, control, and fortify an isthmian canal but with the proviso that all nations would have equal access in peacetime. Ratifications were exchanged on February 21, 1902.

Once the British agreement was achieved, the United States decided on the canal route. The Walker Commission favored the Nicaraguan route, traditionally the US choice. This route used a lake and the San Juan River; dam construction would be easier; excavation could proceed more rapidly if enough labor were available; health conditions would be better; and more economic development in the area would probably take place. Moreover, Nicaragua was closer to the United States, thus shortening the distance ships would have to travel. The cost was estimated at $190 million less than the route through Colombia's Panama province. In anticipation of these findings, the United States signed agreements with Nicaragua and Costa Rica (the San Juan River was part of its border)(2) in 1900 to negotiate further if the United States acquired control of the territory needed for the canal. In January, 1902, the House of Representatives passed a bill authorizing the construction of the Nicaraguan canal.

At this point representatives of the French New Panama Canal Company stepped into the course of events and reversed the decision in favor of the Panamanian route. The Panama route had its advantages: shorter actual length, the existence of a railroad and harbors which would cut building time by one year, an adequate labor force, the necessity of fewer locks and curves, the existing French company works, the experience of former employees, the necessity of dealing with only one country, and a lower estimated construction cost.(3)

The Walker Commission had found the Panamanian route more expensive because the French company wanted $109 million for its concession rights and existing works. Fearing that all would be lost if they did not act quickly, Phillipe Bunau-Varilla, chief engineer and a principal company stockholder, and William Nelson Cromwell, US counsel for the company, had the purchase price dropped to $40 million, making the Panama route cheaper. Since there was some question as to whether the French company could legally sell its rights, they produced evidence that said they could.(4) Cromwell then drew upon his Republican Party connections and got Senator Mark Hanna to champion the Panama cause in the Senate. This Panama lobby managed to convince the majority of the Senate that the Panama route would be faster, cheaper, and safer; the Spooner Amendment of June 28, 1902 authorized President Roosevelt (who also favored the Panama route) to buy the French company's rights for no more than $40 million and to negotiate the necessary treaty with Colombia within a reasonable length of time.

The genius of the Panama lobby had given the French company a stay of execution. Bunau-Varilla, who would soon reveal other talents, helped turn the tide in the Senate by attacking the Nicaraguan route because that country had active volcanoes. When the pro-Nicaraguan faction minimized the danger of their route, Bunau-Varilla placed a Nicaraguan stamp showing a volcanic eruption on each Senatorial desk. The problem after the Spooner Amendment was to get a satisfactory treaty from Colombia before the "reasonable length of time" expired; otherwise, the canal would be built through Nicaragua.

Negotiations with Colombia did not go smoothly. Colombians had a vested interest in having the canal pass through their Panamanian province but several factors complicated their approach to the negotiations. Panama was a distant province, reachable only be sea, and its separatist tendencies might be encouraged by a foreign presence. The devastating Colombian civil war of 1899-1902 had just ended. Colombian politicians were reluctant to make decisions which might reopen festering wounds. Further, since the United States wanted complete control over the canal and the canal zone, even sovereignty, any Colombian government yielding too much to a foreign country faced possible rebellion. Colombia recognized that this resource should be exploited to its maximum financial advantage. The French concession was to expire in 1904; if no canal agreement wore reached before then, Colombia would be able to obtain additional revenue (since the French company refused to split the $40 million). On the other hand, if Colombia waited until 1904, the canal might be built through Nicaragua. Colombian diplomats tried to obtain better terms from the United States without avail. The Spooner Amendment limited the price and going back to Congress threatened the Panama route. Negotiations appeared stalemated.

The United States government, aided by Cromwell and Bunau-Varilla, unsuccessfully pressured Colombia to agree to Washington's demands. When the Colombian ambassador refused and left Washington, the Colombian chargé d'affaires, Tomás Herrán, yielded and, on January 22, 1903, signed the Hay-Herrán treaty, which had been drafted by Hay, Cromwell, and Bunau-Varilla. By this treaty, Colombia would recognize the right of the French company to sell its concession and the United States would receive the exclusive right to a ten kilometer wide zone through which it could construct and fortify a canal, the right to maintain order, including the use of armed force with Colombia's consent, and the right to supervise public health. In return, Colombia would receive a lump sum of $10 million plus an annuity of $250,000. The United States ratified this treaty in March and sent it to Colombia where it became a hot political issue.

Critics of the Colombia government charged that the nation should receive more compensation from the United States and some from the French company. During the summer of 1903, Washington seat indiscreet and threatening notes to Colombia in an attempt to force ratification. When the Colombian president released these notes to the Colombian senate in August, that chamber unanimously rejected the treaty. The Colombian congress adjourned on October 31st without taking further action.

Whatever the reason for its actions, the Colombian congress had not realized the determination of the pro-Panama canal group or Roosevelt. The Spooner Amendment seemed to require that the canal now be built through Nicaragua since the Hay-Herrán treaty had been rejected, but President Roosevelt was now committed to the Panamanian route and angry. He loudly denounced the Colombians as "homicidal corruptionists" and "monkeys"(5) and seriously considered building the canal without Colombian permission. He even obtained a lengthy opinion which "justified" such an action under the Now Granada treaty.(6)

Roosevelt never used this device, however, because he found a way to make it unnecessary.

Historians agree that the New Panama Canal Company and its New York subsidiary, the Panama Railroad Company, actively plotted and executed the revolution. The key figures in this group were Cromwell, Bunau-Varilla, and Dr. Manuel Amador of Panama. There was also active participation by Panamanian nationalists who wanted to run their own affairs, especially after Colombia's action threatened their future prosperity. Without these groups, there would have been no revolution. They organized the demonstrations and propaganda, bribed army officers, and prevented the transport of Colombian troops from Colón, where they landed from their ship, to Panama City, where the revolution was staged. The role of the Roosevelt government is not as clear. Bunau-Varilla went to see Roosevelt, Hay, and other officials and discussed the possibility of a revolution in Panama. He apparently failed to obtain the assurance of aid he undoubtedly sought; all parties at least assert that this was so. He realized, however, that the impatient Roosevelt wanted to build the canal through Panama and would welcome a Panamanian revolution. Whether Roosevelt or his advisors told the Frenchman that US warships would be sent to Panamanian waters with order to "maintain free and uninterrupted transit" or whether Bunau-Varilla deduced the probability of its occurrence and the date of arrival from the general conversation and the published sailing notices is not known. We do know that Bunau-Varilla assured the Panamanians that the ships would be there and that he sent Dr. Amador back to Panama with $100,000 and instructions for the revolution. In exchange for his services, Bunau-Varilla was to be appointed the first Panamanian minister to Washington.

As everyone knew would be the case, American intervention determined the fate of the revolution. Colombia sent troops to Colon and managed to land 400 men before the USS Nashville arrived on the afternoon of November 3rd. This small army was probably sufficient to prevent the revolution, but it never reached Panama City, nor did the U.S. Navy allow any more soldiers to land. The problem of the Colombian army was solved by Colonel J. R. Shaler, Super indent of the Panama Railroad Company, when he managed to send the officers across the isthmus with the promise that the rest of the army would follow when he found more railroad cars. In Panama City, the liberal use of bribes neutralized key commanders. That afternoon, independence was declared. Colombian feeble attempts that day and afterwards to reverse the revolution were stymied by the United States. On November 6, the U.S. recognized Panamanian independence. Colombia promised to give the United States a better treaty if it could have its territory back, but the U.S. refused.

On November 18th, the United States and Panama signed the Hay-Bunau-Varilla treaty which gave the United States more than it ordinarily could have expected to obtain. Bunau-Varilla, the instant Panamanian ambassador, acted without instructions and before the instructed Panamanian delegation reached Washington. The Panamanian government ratified the treaty but, under the circumstances, it had little choice. For a $10 million initial payment and a $250,000 annuity, the United States "acquired the perpetual right to control "as if it were sovereign,"(7) a ten-mile-wide strip of Panama bifurcating the country on which the United States could construct, control, and fortify a canal. In addition, the United States could take additional land outside the zone an needed for canal purposes. Finally, the United States was given the right to intervene in Colon and Panama City for health reasons or to maintain order. Since these two cities contained the vast majority of the nation's inhabitants, this provision made Panama a protectorate. In short, Panama had signed its own Platt Amendment.(8)

Roosevelt's role in this affair was arrogant and unnecessary. His contempt for Latins, his childish impetuosity, and egotistical desire to create a monument to himself before he left office, (his 1904 reelection was unforeseen) overrode decency and statesmanship. The United States could have negotiated a treaty more favorable to Colombia or built the Nicaraguan canal. Instead, Roosevelt took every action short of actually starting the Panamanian revolution or seizing the zone only because Bunau-Varilla and his cohorts did the actual dirty work. In 1909, Roosevelt boasted to Henry Cabot Lodge that "the vital work of getting Panama as an independent Republic...was done by me without the aid or advice of anyone...and without the knowledge of anyone" and, in 1911, to a university audience that "I took the Canal Zone." Although those self-aggrandizing statements of an egotist are not entirely accurate, they represent the essence of what occurred, Roosevelt's decision to obtain the Panamanian route on the terms he dictated decided the outcome.

Roosevelt asked Elihu Root, his Secretary of State, if he had successfully defended himself in the face of bitter denunciations in the press. Root replied "You certainly have, Mr. President. You have shown that you were accused of seduction and you have conclusively proved that you were guilt of rape."

Defenders of the acquisition of the Panamanian route agree with the above interpretation but see mitigating circumstances. They credit Bunau-Varilla and Cromwell with sufficient intelligence and determination to exploit what was an obvious situation. They also stress that Panamanians wanted independence and that aiding them was a noble act, that the world as well as the United States needed the canal, and that Colombian greed or short-sightedness could not be allowed to prevent the construction of the canal.(9) Some apologists note the political and economic benefits gained by Panama as won as the payment to Colombia which would have been unable to hold its remote province anyway. Another group, rarely vocal in recent years, simply asserts that great powers have always taken what they wanted from minor powers and nothing further need be said.


1. Panamá was a province of Colombia.

2. Costa Rica didn't like being ignored. It had some say in what happened in the San Juan River. The protocol with Costa Rica was necessary because President Cleveland's arbitral accord of 1888 forbade Nicaragua from making grants for canal purposes without consulting Costa Rica.

3. After the bankruptcy of the old company, the French government forced stockholders to create the new company. Its principal assets were its concession from Colombia, its partially constructed works, and the determination of its leaders to turn a profit.

4. The original 1878 concession had been extended in 1890 to require completion in 1904, but in 1900 the Colombian president used emergency powers to extend the concession for six more years in return for a cash payment. Some Colombians asserted this was an illegal act.

5. Roosevelt's comments would have been actionable, for they clearly constituted slander, but heads of state tend to get away with outrageous comments. Even given the racial bigotry of most Euro-Americans of his day, Roosevelt's comments were horrible. Surprisingly, perhaps, even today historians rarely, if ever, call him down on it.

6. Professor John Basset Moore, a former legal advisor and assistant secretary in the State Department, asserted that the US could twist the language of the 1848 treaty to grab the canal route and that, "once on the ground and clearly installed, this Government would find no difficulty in meeting questions as they arose." In other words, steal and the dare anyone to take it back.

7. US citizens, including Ronald Reagan, have ignored this provision of the treaty by claiming that the Canal Zone was US territory. Courts in the United States have consistently held that it was Panamanian territory and that the US only had the right of usufruct.

8. The Platt Amendment established Cuba as a US protectorate, allowing the US to interfere in Cuban domestics affairs at its whim.

9. Roosevelt also defended his actions in these terms. That a nation seeks the best possible remuneration or does not predict the irrational fury of a U.S. president is certainly not greed or short-sightedness. US efforts to pay as little as possible for canal rights was also greed. The defense that the canal would not have been built without the actions the U.S. took is no defense since Colombia did not refuse to grant construction rights and the Nicaraguan route was always available.

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