The idea of connecting the Pacific and Atlantic oceans appeared almost immediately after the discovery of America.
Central America, where modern Panama is located, was the best place for this — there were the shortest distances between the oceans. In the 19th century, when the Spanish Empire was losing colonies in Latin America, many countries took advantage of this. America built a railway across the Isthmus of Panama. This road became key for the USA, because it was the shortest route between the west and east coasts.
The journey from California to New York by steamship with a land transfer through Panama took about 40 days. But the overland route still could not satisfy the needs of trade. A water canal was much more efficient. In the 19th century, many countries began to build such canals — and they became commercially successful.
Panama City train station, mid-19th century.
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The first to attempt to build the Panama Canal was the Frenchman Ferdinand de Lesseps.
He was a diplomat and entrepreneur, but most importantly, he was the director of the construction of the Suez Canal in Egypt. De Lesseps wanted to build the Panama Canal similar to the Suez Canal, but the geographical conditions were completely different. Tropical forests, droughts, rainy seasons, malaria and yellow fever — all this hindered the construction. In 1889, the project went bankrupt. The land on which the canal was built was sold to the United States.
Construction of the Panama Canal.
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When countries in Latin America began to gain independence from the Spanish Empire, the present-day territories of Panama became part of Colombia. It was with Colombia that the United States began negotiations on the construction of the canal. The agreement was signed in 1903: the United States was to receive a 100-year lease of land for construction. But the Colombian Senate refused to ratify it.
Then the lead engineer of the project, whose name was Philippe Bueno-Varilla, met in New York with one of the leaders of the Panamanian separatists who advocated the independence of Panama. He promised him financial and political support and became his representative — in fact, Panamaʼs ambassador to the United States. In November 1903, Panama declared independence. America immediately supported it and sent its warships there, which blocked the routes by which the Colombian military could arrive in Panama.
French engineer Philippe Bunau-Varilla.
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While the struggle for independence continued in Panama, Bunau-Varilla, on behalf of the Panamanian authorities, concluded an agreement with the US government to build the Panama Canal.
The Panama Canal opened in 1914. It was one of the largest engineering projects in the United States at the time.
During construction, the French mistakes were taken into account, the design was changed, a lot of new housing for workers was built, and much attention was paid to sanitary conditions.
The Panama Canal Zone, controlled by the Americans, 1968.
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The Americans controlled the canal and the area around it for almost 100 years. They had their own police, courts, and local authorities. They built several military bases on the territory. De facto, it was the US territory, which the people of Panama were unhappy with. They repeatedly organized protests against the Americans.
The biggest conflict occurred in 1964 over flags: the American governor, local Americans, and local Panamanians argued about where the flags of the two countries could be flown. The arguments escalated into protests, the protests into local clashes with the police, and then into large-scale anti-American actions (for example, Panamanians set fire to the offices of American companies).
Clashes between Panamanians and police in the Canal Zone, during which the Panamanian flag was torn, 1968.
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In 1977, the United States and Panama renegotiated how to manage the zone and the canal.
The US President Jimmy Carter signed two treaties with the Panamanian government, giving Panama full control of the canal in 1999, after they had previously jointly managed it. The United States also retained the right to defend the canal against any threat that would interfere with the neutrality of ships of all nations.
Panama remains a strategic ally of the United States in the region. The Panama Canal is important for trade between the East and West coasts of America, as well as with Southeast Asia. For the United States, it is also the fastest and easiest route by which to transfer warships from the Atlantic to the Pacific and vice versa.
The US President Jimmy Carter signs agreements with Panama, the US military begins handing over control of the canal to Panamanian authorities, 1977.
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China has been investing heavily in the region in recent years.
Strategic cooperation with it was initiated by the President of Panama from 2014 to 2019 Juan Carlos Varela. Panama became the first Latin American country to join Xi Jinpingʼs economic initiative "One Belt, One Road". China has financed the construction of a new railway and a new bridge across the Panama Canal. In 2017, Panama severed diplomatic relations with Taiwan and established them with China.
Also, two of the five major ports in the Panama Canal Zone are owned by Hong Kong companies. When in 2016 the first container ship to pass through the expanded locks of the canal was a ship from China, the Americans deliberately drove one of their warships there — so that it would be in the Chinese field of vision. In the end, the Americans forced the Panamanian authorities to abandon some of the Chinese projects, but Chinaʼs influence still grew significantly. China even wanted to build a large embassy on the banks of the Panama Canal, but under the US pressure, the Panamanian authorities blocked this initiative.
Chinese President Xi Jinping visits the Panama Canal, 2018.
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The US President-elect Donald Trump has claimed that Panama has given control of the canal to the Chinese military and is charging American ships too high a fee for transit. He says Panamanian authorities must reduce prices or he will demand that the Panama Canal be returned to the US control. Panamanian President José Raúl Mulino has denied his claims, saying that all countries pay the same amount for transit through the canal.
The Panama Canal currently handles about 6% of world trade. It handles nearly 60% of container ships between Asia and the East Coast of the United States. In recent years, transit fees have actually risen. This is because Panama sometimes restricts traffic through the canal due to droughts. Ships have to wait longer in line and pay more to pass through. In November 2023, a ship carrying liquefied natural gas paid a record $4 million for transit.
Donald Trumpʼs allies say that the increase in prices for passage through the Panama Canal will hit the United States the hardest because it is they who use it the most. Experts believe that Trumpʼs public threats to take control of the canal are necessary in order to achieve lower prices.
Protests in Panama against Trump after his statements about wanting to regain control of the canal, December 2024.
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