Expanding the Panama Canal

May 16, 2006

The Panama Canal

Dr. Frank J. Collazo

Teddy Roosevelt Achievement: In foreign affairs, Roosevelt argued that it was best to “Speak softly and carry a big stick.” He advocated a diplomatic policy, in other words, that remained open to compromise, but that was ultimately backed by military force. He bolstered the U.S. Army and the U.S. Navy, and used the threat of force to zealously defend American interests in Alaska, Asia, and Latin America. Determined to create a canal joining the Atlantic and Pacific oceans in Latin America, Roosevelt supported a revolution in Colombia in 1903 to obtain the necessary land. Colombia ceded the territory to Panama, and Roosevelt immediately directed construction of the Panama Canal, which became United States property. Roosevelt asserted American dominance in global affairs through many other initiatives, including his successful mediation of the Russo-Japanese War in 1905.

United States President Theodore Roosevelt wanted to build a canal across Panama to facilitate shipping of goods and to allow ships to move swiftly from the Atlantic Ocean to the Pacific Ocean in case of military threat. The canal was completed in 1914.

The most notable event in foreign affairs during Roosevelt’s first administration involved the settling of the question of a canal across the Isthmus of Panama. Roosevelt had long feared that another power would successfully build a canal in Central America and would thus control that vital artery. A US-held canal would boost US and world trade, as well as allow ships to move swiftly between the Atlantic and Pacific oceans in case of military emergency. The Spooner Act of 1902 settled the question of a route, giving preference to Panama (then part of Colombia). The Colombian senate refused to ratify the treaty, wanting more than the $10 million offered as an initial payment.

Roosevelt was furious. He had no respect for the Colombian politicians and little faith that Panamanians felt a strong loyalty to them. He therefore did not discourage native groups and foreign businessmen when they began a revolt against Colombia on November 3, 1903. Three days later the United States recognized the new Panamanian government. United States ships prevented Colombian troops from suppressing the uprising, and the new Panamanian government received the money by signing a treaty granting the United States building and supplementary rights to a 16-km (10-mi) strip of land. Plans to build the canal started immediately.

Roosevelt believed this achievement was historic. He followed every detail of the building of the canal, visited it in 1906, and defended his actions at all times, although the United States later paid compensation to Colombia for its loss. Starting in the 1930s Gaillard Cut was widened to improve navigation, and in the 1990s it was expanded again. Madden Dam was built in the 1930s to control the flow of water into Gatún Lake and generate electricity. In 1962 a high-level bridge was built over the Pacific entrance to the canal. Known as the Bridge of the Americas or Thatcher Ferry Bridge, this structure carries the Pan American Highway into Panama City.

For much of its history, the canal and the surrounding Panama Canal Zone were run as a colony of the United States. The US Department of the Army administered the canal, the Panama Railroad, and many businesses run by the railroad company. It also built 14 military bases in the area. The governor of the canal region was appointed by the secretary of the Army and was usually a retired general from the Corps of Engineers who had served in Panama. United States civilian employees supervised canal operations, while Panamanians and West Indians formed the labor force.

In 1950 the US government reorganized management of the area into two agencies: the Panama Canal Company, which ran the canal’s commercial operations and the railroad, and the Canal Zone government, which handled courts, police, and other functions. The governor headed both agencies. A separate military structure controlled the military bases in the Canal Zone and operated independently of the civilian authorities.

The U.S. control of the area caused decades of conflict with Panamanians, who felt excluded from the economic benefits of the canal and from territory they regarded as rightfully belonging to Panama. Before negotiating the 1977 treaties, the United States and Panama modified the 1903 treaty twice. In 1936 they signed an agreement by which the United States raised Panama’s annual payment from the canal and prevented shipments of untaxed goods from the Canal Zone into Panama, which Panamanian merchants regarded as unfair competition. The United States also gave up the rights to intervene militarily in Panama and to take over more land for canal operations. In 1955 another treaty raised the annuity again, made Panamanians who worked in the Canal Zone subject to Panamanian taxes, and promised to end a wage system that paid American employees at a higher rate than Panamanians.

The Republic of Panama Ruled by Torrijos and Noriega: By degrees, the junta's Colonel (later General) Omar Torrijos Herrera emerged as the leader of Panama. The constitution was again changed to strengthen and enlarge his powers. In 1972 a new national assembly, whose members were selected by Torrijos, gave him full executive powers and allowed him to rule as a dictator. Torrijos, behind a facade of popular government, transformed the appearance of Panama City through spectacular public works programs. The cost of these programs, however, plunged the country into heavy debt, and by 1977 an economic crisis loomed. Meanwhile, the dictatorship appointed and dismissed puppet presidents at will. In mid-1978 Torrijos obtained U.S. approval for the Panama Canal treaties, and this apparent triumph seemed to promise economic respite.

On July 31, 1981, Torrijos was killed in a plane crash, and two colonels took command of the National Guard. In March 1982 Colonel Rubén D. Paredes became commander of the guard. When he resigned in September 1983 to pursue the presidency, control of the military and the country went to Colonel Manuel Antonio Noriega, former head of intelligence and a one time operative of the U.S. Central Intelligence Agency.

Noriega renamed the National Guard the Panama Defense Force (PDF) and consolidated the dictatorship of Torrijos. He increased the size of the armed forces, harassed and intimidated journalists at newspapers and broadcasting stations, and created paramilitary regiments to brutalize and assassinate his opponents and to act as his bodyguards. The military took control of customhouses, post offices, the Colón Free Zone, and other state-run enterprises. Also ominous was Noriega's reported involvement in the narcotics traffic in collusion with Colombian drug cartels.

In 1984 Noriega permitted the first presidential elections in 16 years. Arias was the apparent winner, but after many delays in the vote count and suspected tampering, Nicolás Ardito Barletta, Noriega's candidate, became another puppet president. Eleven months later, Noriega allegedly deposed Barletta and replaced him with the first vice president, Eric Arturo Delvalle. By the spring of 1987 the second in command of the PDF, Roberto Díaz Herrera, had publicly accused Noriega of drug-related activities, murdering opponents, and rigging elections. In February 1988 Delvalle attempted to dismiss Noriega, who was being publicly condemned by factions within and outside the country for his oppressive measures. In the United States, Noriega was indicted in the same month on counts of drug trafficking and racketeering. Delvalle's action resulted in his own dismissal, by orders of the Noriega-dominated National Assembly, and he was forced to take refuge on a U.S. military base from where he continued to claim that he was the legal president.

US President Ronald Reagan refused to recognize Delvalle's successor, and in March 1988 he imposed sanctions, including the elimination of preferential trade for Panama and the withholding of canal fees. On March 16 an attempted military coup failed to overthrow Noriega, and paramilitary groups intensified their terrorist tactics against antigovernment demonstrators.

Relinquishing Control of the Panama Canal under President Jimmy Carter: But these concessions did not end tensions between the United States and Panamanians, who staged demonstrations and protests in the late 1950s and 1960s. Anti-American riots in 1964 caused the two countries to suspend diplomatic relations briefly. After they were restored, the United States and Panama began negotiating new treaties, a process that lasted more than 12 years. In 1977 U.S. president Jimmy Carter and the Panamanian leader, General Omar Torrijos Herrera, signed treaties that gave control of the canal and all its operations to Panama in 1999. The agreements were ratified by Panama immediately and by the United States the following year.

The treaties went into effect in 1979. More than 60 percent of the U.S.-held Panama Canal Zone was returned to Panama. The Panama Canal Commission was established to run the canal during the transition to Panamanian control, and Panama took over operation of ship repairs, piers, and railroad operations. In 1994 the government of Panama created an agency, the Interoceanic Regional Authority, to administer the non-canal facilities of the former zone. The Panama Canal Authority, a public corporation, took possession of the canal from the Panama Canal Commission on December 14, 1999. That day the United States transferred the canal to Panama at a ceremony attended by Panamanian president Mireya Moscoso de Gruber and former U.S. president Jimmy Carter.

Invasion of Panama: Noriega provoked the invasion. In the presidential election of May 1989, Guillermo Endara Galimany and his two vice presidents won by a wide margin, but their supporters then suffered brutal physical assaults by Noriega's forces, an event widely reported by the international press. Noriega canceled the election results. This only exacerbated popular and international discontent with the dictatorship, but Noriega remained impervious to criticism. On September 1, 1989, he installed a classmate as president, but his desire to remain in power seemed to intensify in October after he foiled another coup attempt. On December 15, 1989, Noriega sought and was given by the legislature the title of chief executive officer of the government. The Noriega-led assembly declared that a state of war with the United States existed. The next day Panamanian soldiers killed an unarmed U.S. Marine officer dressed in civilian clothes.

Retaliation by the USA: Retaliation by the United States was quick and decisive. On December 17, U.S. President George Bush ordered troops to Panama, with the subsequently announced aims of seizing Noriega to face drug charges in the United States, protecting American lives and property, and restoring Panamanian liberties. The initial attack took place in darkness on the morning of December 20 and was focused primarily on Noriega's headquarters in Panama City. US forces quickly overcame most organized resistance, but in the following days numerous Panamanian soldiers and civilians looted shops in Panama City and Colón, and some 2,000 U.S. reinforcements were flown in to help establish order. The number of Panamanians killed in the operation was estimated at 200–300 combatants (soldiers and paramilitaries) and some 300 civilians; 23 U.S. soldiers also were killed. Hundreds from both nations were wounded.

On the first day of the invasion, Endara and his two vice presidents were sworn in to head the government of Panama. Noriega took refuge in the Vatican nunciature (embassy) in Panama, until he surrendered to U.S. authorities on January 3, 1990, and was then transported to Miami, Florida. There he stood trial, was convicted on a host of charges, and was sentenced to a US prison. In Panama and also France, Noriega was charged with various crimes, including murder, but no enduring efforts were made to have him extradited.

Transitions to Democracy and Sovereignty: The new Endara government began as a broad coalition, but it soon broke up with the expulsion of the largest party, the Christian Democrats (Partido Demócrata Cristiano; PDC), led by Vice President Ricardo Arias Calderón. This left the administration without a legislative majority and allowed the remnants of Noriega's Revolutionary Democratic Party (Partido Revolucionario Democrático; PRD) to hold the balance of power. As a result, accomplishments were meager at best. The administration succeeded in abolishing the PDF and replacing it with a new national police known as the Public Force, and it amended the constitution to prohibit the creation of a regular military. The amendment was ratified in October 1994.

The 1994 presidential and legislative elections produced a former cabinet member, the PRD distanced itself from Noriega, and Pérez Balladares won by a plurality.

The Pérez Balladares administration worked to maintain relations with the United States and to reform the economy. It privatized several government enterprises, including the telephone system, reduced trade barriers, and encouraged private investment. In addition, it reduced unemployment and crime rates and began an ambitious program of highway construction. But Pérez Balladares had difficulties regarding the reversion of US military bases and the canal to Panama at the end of 1999. Contracts in these areas were controversial, with charges of corruption and of excessive Chinese influence.

Relations with the United States deteriorated when the two nations failed to establish a new drug interdiction headquarters, which would have kept some US troops in Panama. The spread of conflict across the border from Colombia also raised concerns about the ability of a demilitarized Panama to control its land, sea, and air frontiers. In 1998 a referendum was defeated that would have allowed Pérez Balladares to seek reelection. Mireya Moscoso Rodriguez, widow of Arnulfo Arias, and to the Arnulfista Party's successful campaign in the 1999 elections. Taking office in September 1999, Panama's first woman president pledged nonpartisan administration of the canal, continued prohibition against regular military forces, and greater attention to the needs of the poor, especially in rural areas.

Treaty Relations with the United States: Throughout the years of Panama's independent existence, treaty relations with the United States have been subjected to several major changes. By the protocol of 1936, the United States yielded its right to seize additional land for its administration or defense of the canal. At the same time, the United States was pressured to pay a higher annuity for the canal because of the worldwide economic depression of the 1930s and the United States departure from the gold standard. In 1953 the annuity was again raised and U.S. landholdings decreased, opening the door for Panamanians to build roads across the isthmus and to manage sanitation. Panamanian security forces began patrolling the canal's dams and watersheds in the 1940s.

In 1958 the U.S. Congress appropriated funds for a bridge across the canal, and an instrument of transfer was signed that conveyed to Panama real estate with a value of about $25 million. In 1958–59 there were serious disorders and demands to fly the Panamanian flag in the Canal Zone, leading U.S. President Dwight D. Eisenhower to declare that titular sovereignty over the zone resided with Panama; he also ordered that flags of both nations be displayed at specified places in the zone.

In January 1964, US and Panamanian schoolboys engaged in a scuffle over flying their national flags at Balboa High School, which was inside the Canal Zone. Several thousand people turned the melee into a riot that killed more than 20 people and brought injuries to scores of others. Panama blamed the Americans, severed relations, and demanded reparations. The United States, in turn, rejected the accusations and charged Panama with inciting the riot. An International Commission of Jurists later upheld (with a minor exception) the US contentions.

Negotiations between the United States and Panama during the first part of the Robles administration led to three new protocols, signed in June 1967. The first protocol abrogated the accord of 1903, reduced the size of the Canal Zone, and provided for joint operation of the canal. The second protocol continued the responsibility of the United States for the Canal Zone's defense, and the third protocol provided for a possible sea-level canal. These proposals were not ratified, because they aroused objections from many affected quarters.

In September 1970 Torrijos formally notified the United States of his rejection of the agreements of 1967, but seven months later he moved to resume negotiations. Panama succeeded to one of the two hemispheric seats on the Security Council of the United Nations, and its delegate in March 1973 introduced a resolution urging continued negotiation under the auspices of the United Nations. The United States vetoed the resolution. The Panamanians continued to press their cause in negotiations that resulted in a set of principles (1974) to serve as guidelines for a new treaty; one of these was that US control over the canal and zone would be limited in duration.

The U.S. Congress in 1974 and 1975 was hostile to the proposed ultimate transfer, but Torrijos was able to apply pressure in various ways. If there was not a peaceful settlement, he declared, then there would be violence; this produced in Congress the abhorrent spectre of “another Vietnam.” To further intimidate the opposition, Torrijos, with a considerable entourage, paid a visit to the Cuban leader Fidel Castro in January 1976.

The US presidential elections of 1976 delayed the treaty conversations, but after the election of Jimmy Carter progress was rapid. Agreement was announced in August 1977, and Carter and Torrijos signed the documents the next month. The treaty did not have popular support in the United States, but the Senate ratified it in March 1978. The new basic treaty provided for gradual transfer of the operations of the canal to Panamanians, the phasing out of U.S. military bases, and reversion of lands and waters used in the management of the canal. Similarly, Panama was to assume jurisdiction over the zone by degrees and take over most tasks related to its security. A second pact promised an open and neutral canal for all nations, both in times of peace and war.

The transfer was to be completed by December 31, 1999, but, in ratifying the treaties in March and April 1978 the Senate attached reservations that extended U.S. rights to defend the canal beyond that date and to maintain limited rights to intervene. Panama had approved the treaties in a national plebiscite in October 1977, and the signing ceremonies were observed on June 16, 1978, in Panama City.

The US Congress passed legislation to implement the treaties in September 1979, and the treaties went into effect on October 1. In the 1990s, after negotiations failed to permit a continued US military presence in Panama after the turnover date, the United States began a rapid withdrawal, returning to Panama vast tracts of territory. By late 1999 all U.S. troops were withdrawn. Symbolic transfer ceremonies were held on December 14, and on the last day of the year Panama assumed full control of the canal.

The Canal Zone was created under the Hay—Bunau-Varilla Treaty, signed in 1903 by the newly independent nation of Panama and the United States. The treaty gave the United States the right to build and operate the Panama Canal, to control the Canal Zone as if it were U.S. territory, and to annex more land if necessary for canal operations and defense. Because the agreement barred Panama from controlling a major section of its land and economy, it created tensions between the two countries for most of the 20th century.

The population of the Canal Zone varied, from a high of about 88,000 in 1945 to a low of 42,000 in 1959. Residents included U.S. civilian employees of the canal and U.S. military personnel and their families, stationed at the 14 U.S. military bases built in the zone. The rest of the population was composed mainly of black people of West Indian descent, whose families had come to work on canal construction in the early 1900s, and Panamanians of both Hispanic and West Indian background. The U.S. residents lived in relative luxury, receiving high pay and generous benefits, in prosperous, well-kept communities. In contrast, the Panamanians and West Indians held the most menial jobs, were paid only a fraction of what U.S. workers received, and lived in separate, inferior-quality communities.

The Canal Zone cut through the most populous and active region of Panama, making travel between the two halves difficult. It encompassed lands where Panama City and the port city of Colón would have expanded. Virtually self-contained, the zone contributed little to Panama’s economy except for wages paid to Panamanian workers and annual canal payments. In addition, many businesses operated within the zone, taking customers from Panamanian businesses. The zone had its own governor, appointed by the head of the U.S. Army, and U.S. laws applied there, including racial segregation laws in effect until the 1960s.