A History of the Panama Canal

The Panama Canal is an artificial waterway that stretches 51-miles across Panama, connecting the Caribbean Sea with the Pacific Ocean. Cutting across the narrowest point of the Isthmus of Panama, it has long served as a vital conduit for maritime trade.

However, the history of the Panama Canal is one tainted by scandal, setbacks, and massive loss of life. This article covers the canal’s extensive history, charting the myriad challenges that beset this grand technological marvel.

The geology of the Isthmus

The Isthmus of Panama - historically known as the Isthmus of Darien - is a narrow strip of land between the Caribbean Sea and the Pacific Ocean.

The Isthmus formed where the Cocos Plate subducted beneath the Caribbean Plate, generating a chain of volcanic islands. Over time, uplift and immense sediment influx from both continents filled the gaps between these islands.

The Isthmus emerged from the ocean around three million years ago, severing marine connections between the Atlantic and Pacific, rerouting ocean currents, and giving birth to the Gulf Stream.

This closure reshaped global climates by warming northwestern Europe, and triggered a surge in marine biodiversity on both sides, and enabled the exchange of terrestrial flora and fauna during the Great American Biotic Interchange.

First concepts in the 16th-18th centuries

The prospect of terraforming the Isthmus of Panama existed long before the passage itself. Spanish conquistador, Vasco Núñez de Balboa, first envisioned the idea in 1513, when he discovered that just a small stretch of land split the Atlantic and Pacific oceans. Yet he took no action to see his dream come true.

Later in 1534, Holy Roman Emperor, Charles V - who was also Charles I of Spain - ordered a survey for a route through the Americas to ease travel between Spain and Peru and gain a military advantage over the Portuguese. Yet upon completion of the survey, the governor believed such a feat was impossible.

Over the years, other attempts to establish a trade link were considered, such as the ill-fated Darien scheme. Launched by the Kingdom of Scotland in 1698, the plan was to create an overland trade route. However, inhospitable conditions caused too great a risk, and the plan was abandoned in 1700.

Renewed interest in the 19th century

The dream faded for over a century, until it was revived in the early 19th century. In 1811, German naturalist, Alexander von Humboldt, published an essay on the geography of the Spanish colonies in Central America.

In “Essai Politique Sur Le Royaume De La Nouvelle Espagne” (translated in English as “Political Essay on the Kingdom of New Spain Containing Researches Relative to the Geography of Mexico”), Humboldt considered five potential routes, including Panama, for a canal across Central America. However, he favoured a route across Nicaragua due to an overestimation of the size of Panama’s mountain range.

Because of his prestige as a scientist, Humboldt’s essay provided a great deal of influence throughout the 19th century. In 1819, the Spanish government authorised the construction of a canal, and the creation of a company to build it.

During the late 18th, and early 19th centuries, numerous canals were built around the world. Interest in an inter-oceanic canal grew in the United States due to the success of the Erie Canal in New York, and the collapse of the Spanish Empire in Latin America.

In 1826, US officials started negotiations with Gran Colombia (Colombia, Venezuela, Ecuador, and Panama) to build a canal, though the offer was declined due to a fear of domination by the US.

The UK made an attempt to develop a canal across the Isthmus of Panama in 1843, though plans quickly deteriorated. Described as a wholly British endeavour, the plans for the canal led to the capture of the town of San Juan de Nicaragua by British gunboat in 1848.

A diplomatic crisis between the British and US was averted in 1850, when the Clayton–Bulwer Treaty bound the two nations to joint control of any canal built in Nicaragua, or anywhere in Central America.

In 1846, the Mallarino–Bidlack Treaty was negotiated between the US and New Granada, which granted the United States transit rights, and military intervention rights in the Isthmus.

In 1848, the discovery of gold in California significantly renewed interest in a canal route between the Atlantic and Pacific oceans. American businessman, William Henry Aspinwall - along with Gardiner G. Howland, and Henry Chauncey - founded the Pacific Mail Steamship Company, which forged a route from New York City to Panama, and Panama to California, with overland portage through Panama itself.

Aspinwall’s route provided one of the fastest connections between San Francisco, California, and the East Coast cities, and nearly all the gold that was shipped out of California went via this route.

In 1850, Aspinwall expanded his operations with the founding of the Panama Railroad Company, which sought to build a railroad across the Isthmus of Panama, from Limón Bay to Panama City. Though initially estimated to take two years to build, it eventually opened in 1855 at a cost of $8 million - six times that estimated.

However, the railroad came at the expense of great loss of life. Workers succumbed to diseases, including cholera, smallpox, dysentery, and malaria, with the number of fatalities estimated between six and twelve thousand.

The overland link became a vital piece of Western Hemisphere infrastructure, clearing dense forests along the path that would eventually become home to the canal route; the goal of an all-water route remained.

In 1855, Manx-born engineer, William Kennish, surveyed the Isthmus of Panama for the United States, and issued a report on the proposed Panama Canal, entitled “The Practicability and Importance of a Ship Canal to Connect the Atlantic and Pacific Oceans”.

Based on Kennish’s findings, and Humboldt’s essay, US President Grant established an Interoceanic Canal Commission in 1870 to investigate possible routes across Central America.

Despite the findings of Commander Thomas Oliver Selfridge Jr - who made three expeditions to the region in 1870 and 1873, and believed there to be no suitable locations for interoceanic travel - the commission ultimately favoured Humboldt’s preference of a Nicaragua route.

The French project

During this time, the construction of the Suez Canal had moved forward with gumption. The driving force behind the construction was French entrepreneur, Ferdinand de Lesseps, who - spurred by the successful completion of the Suez Canal project - was considering other large projects.

De Lesseps was encouraged by members of French society, who hoped another great engineering project would rebuild public confidence in France following the humiliating defeat in the Franco-Prussian War.

In 1875, de Lesseps was contacted by the “Societe Civile Internationale du Canal Interoceanique de Darien” (“Türr Syndicate”) about the possibility of building an interoceanic canal across Panama.

At de Lesseps’ behest, the Türr Syndicate gained permission to conduct explorations in the Darién-Atrato region and survey the route. Despite difficult terrain and myriad illnesses, the expedition returned to de Lesseps in Paris, proposing the construction of a canal involving locks, and a 9-mile-long tunnel. De Lesseps rejected the report, stating he would only accept recommendations of a sea-level canal along the route.

A second expedition focused on the route established by the Panama Railroad. Expedition leads Bonaparte-Wyse and Lt Armand Reclus obtained the rights from the Colombian government to build and exploit a canal for 99 years. This was known as the Wyse Concession of 1878.

Upon returning to Paris, Bonaparte-Wyse and Reclus submitted their report to de Lesseps, who in turn convened an international congress in May 1879 to legitimise his plan for a sea-level canal through Panama.

The Congrès International d'Etudes du Canal Interocéanique (or “International Congress for Study of an Interoceanic Canal”) consisted of 136 delegates from 26 countries, 42 of whom were engineers. Influenced by de Lesseps’ persuasive nature, 74 voted in favour, while just 8 opposed. 38 committee members were absent, and 16 abstained.

In actuality, only 19 engineers approved the plan, with only one of those - Adolphe Godin de Lépinay - having actually visited Central America. The Americans abstained due to their own plans in Nicaragua, and all five delegates from the French Society of Engineers refused. Among their number was Gustave Eiffel, of Eiffel Tower fame.

Godin de Lépinay proposed a plan to build a dam across the Chargres River in Gatún, near the Atlantic, and another on the Rio Grande near the Pacific to create an artificial lake accessed by locks. However, the other delegates did not seriously consider his plan, and it was ultimately dropped.

The engineering congress estimated the project would come at a cost of $214 million, and take eight years to complete. However, de Lesseps reduced the estimated cost down to just $120 million - with no apparent justification - and stated it would take just six years to complete.

Despite the lack of engineering prowess among those who voted in favour, de Lesseps’ project was given permission to proceed, and in 1880, the Compagnie Universelle du Canal Interocéanique de Panama was founded.

Construction began on the 1st January 1881, though it was far from smooth sailing.

The proposed canal would have a uniform depth of 9 metres, with a bottom width of 22 metres, and a water-level width of approximately 27.5 metres. The excavation estimate was 120,000,000 cubic metres.

Though de Lesseps was able to raise considerable funds in France due to his success of the Suez Canal project, it was clear that de Lesseps was no engineer.

The construction of the Suez Canal presented few challenges due to the flat, sandy desert it was dug through. Though the new canal needed only to be 40% the length of the Suez, the terrain of Panama provided a far greater challenge.

Tropical rainforest, debilitating climate, and tough, mountainous terrain presented difficulties de Lesseps hadn’t factored in. At 100 metres above sea level, the mountainous spine meant that excavation consisted of a variety of unstable rock. Rivers crossing the canal needed to be dammed or diverted, which ultimately caused problems, and were later found to be impracticable.

A large labour force - made predominantly of Afro-Caribbean workers from the West Indies - was assembled, numbering 40,000 in 1888. Death and disease were rampant. Malaria and yellow fever decimated the workforce. Public health measures were ineffective, as the role of mosquitoes as disease vectors was at that time unknown.

Leadership struggled. Engineering control was at first shared between Lt Armand Reclus (acting as general agent of the canal company) and Gaston Blanchet (head of subcontractor Couvreux, Hersent). However, by the end of 1882, both Reclus and Couvreux, Hersent had withdrawn, leaving de Lesseps’ company responsible for the work.

De Lesseps himself visited the site only a few times, downplaying the dire conditions in an effort to avoid recruitment problems, but the high mortality rate made it nearly impossible to maintain an experienced workforce.

Between 1882 and 1889, the project saw myriad engineers appointed to head of operations, including one man, Philippe Bunau-Varilla, who had arrived mere months before as a junior engineer. Yellow fever, stress, and mismanagement swept through project leaders faster than the workers could churn through the earth.

Inevitably - and in spite of de Lesseps’ continued insistence and efforts to keep investments flowing - the company went bankrupt on 15th May 1889. Approximately $287 million had been spent (equivalent to $10 billion today), 22,000 lives were claimed through disease, accidents, and overwork, and 800,000 investors lost their savings.

In France, the aftermath was catastrophic. The collapse of the Compagnie Universelle du Canal Interocéanique de Panama led to scandal. Inquiries found 104 legislators had been involved in alleged corruption, leading to the prosecution of individuals including Gustave Eiffel.

Both de Lesseps and his son, Charles, were found guilty of misappropriation of funds, and sentenced to five years’ imprisonment, though this sentence was later overturned, and de Lesseps was never imprisoned.

Though the French effort was doomed from the beginning, it was not a futile attempt. The company had dredged a channel from Panama Bay to the port at Balboa, and it was determined that nearly 60 million cubic metres of material had been excavated.

In an effort to recoup expenses for stockholders, the Compagnie Nouvelle du Canal de Panama (New Panama Canal Company) was formed in 1894. Bonaparte-Wyse was sent back to Bogotá, where he was able to get the Wyse Concession extended.

The New Panama Canal Company sought a buyer for the operation with an asking price of $109 million, while maintaining minimal operations to preserve the concession

The US acquisition

While the French persevered with their canal efforts, the US were struggling too. Per President Grant’s recommendations, the US Army Corps of Engineers surveyed possibilities in Nicaragua, but the Maritime Canal Company collapsed financially in 1893.

In 1897, President William McKinley tasked a commission to recommend the best route through Nicaragua, but William Nelson Cromwell successfully lobbied to consider alternatives.

Determined to see the project completed, McKinley directed US Secretary of State, John Hay, to negotiate a new treaty with the UK, aiming to replace the problematic Clayton–Bulwer Treaty.

McKinley established the Isthmian Canal Commission in 1899 to determine the most feasible and practicable route in Central America to build a canal. Though they considered ownership of de Lesseps’ failed project, they were dejected by the steep asking price of $109 million, and opted to move forward with Nicaragua.

In an effort to save the deal, Philippe Bunau-Varilla - chief engineer of the New Panama Canal Company, and co-lobbyist with Cromwell - quickly had the Compagnie Nouvelle formally offer their assets for $40 million. This was the estimated value acceptable by the US to the commission.

President Theodore Roosevelt, swayed by engineer George S. Morison’s technical arguments for Panama, pushed the commission to unanimously recommend the Panama route in January 1902.

With Senator Mark Hanna’s persuasive arguments in Congress - which included maps highlighting volcanoes in Nicaragua versus Panama - and lobbying by Cromwell and Bunau-Varilla, US Congress authorised the purchase of French rights for $40 million in the Spooner Act on 28th June 1902.

Since Panama was part of Colombia, the US began negotiations with the country to obtain the necessary rights. On 22nd January 1903, the Hay–Herrán Treaty was signed by US Secretary of State, John Hay, and Colombian Chargé Tomás Herrán, which proposed a renewable lease in perpetuity for $10 million, and an annual payment.

However, the Colombian Senate deemed the compensation insufficient, and a threat to sovereignty. In August 1903, they unanimously rejected the treaty.

Frustrated with the rejection, and conflicting messages from Colombia, President Roosevelt actively supported the secession movement of Panama from Colombia, led by José Agustín Arango and Manuel Amador Guerrero.

Roosevelt believed that the Panamanian people would be more amenable to working with the US, though he warned Amador to avoid violence, as the US would not recognise independence gained through bloodshed.

With US warships - including the USS Nashville - dispatched to Panama under the pretext of the 1846 Mallarino–Bidlack Treaty, which required the US to preserve peaceful use of the Panama Railroad, Panama’s independence was swiftly proclaimed on 3rd November 1903.

The US recognised the new nation, and on the 6th November 1903, Philippe Bunau-Varilla, acting as Panama's ambassador to the US, signed the Hay–Bunau-Varilla Treaty.

In 1904, the US officially purchased the French equipment and excavations for $40 million and paid the new country of Panama $10 million and an annual payment of $250,000.

Construction recommences

The US formally took control of French property on the 4th May 1904.

In an effort to avoid the pitfalls that had befallen the French efforts years earlier, the Isthmian Canal Commission (ICC) was established to oversee construction and govern the Panama Control Zone, over which the US exercised sovereignty.

The ICC reported directly to future President William Howard Taft - presently acting as Secretary of War. John Findley Wallace was appointed chief engineer in May 1904, but resigned in June 1905 due to overwhelming challenges and ICC bureaucracy.

With Wallace’s departure, the ICC brought in John Frank Stevens as the new chief engineer in July 1905. Stevens focused on building and rebuilding the necessary infrastructure needed for thousands of incoming workers, then turned his efforts to recruiting labour, and upgrading the Panama Railway.

Additionally, Colonel William C. Gorgas was appointed chief sanitation officer in 1904, with the task of controlling the infectious diseases that had plagued the French construction efforts. Gorgas focused on eradicating mosquitoes in the canal zone, an approach adopted in Havana to eliminate yellow fever.

Within two years, mosquito-spread diseases were nearly eliminated. Yet regardless of the monumental effort, over 5,600 workers died from disease and accidents during the US construction phase.

Despite the recommencement of work, indecision around whether the canal should be a lock, or a sea-level construction remained. Under President Roosevelt’s command, a team of engineers investigated the merits of both, and determined that - much as the French had attempted - a sea-level canal was the correct option.

However, in 1906, Stevens convinced Roosevelt and Congress that a sea-level canal was impractical due to the Chagres river’s flooding, and advocated for a lock system to raise and lower ships from a large reservoir 26 metres above sea level.

Construction of this reservoir resulted in both the largest dam (Gatún Dam) and the largest human-made lake (Gatún Lake) in the world at the time - a plan strikingly similar to that proposed by Godin de Lépinay in 1879.

In 1907, Stevens resigned from his position, replaced by Major George Washington Goethals under appointment by Roosevelt. The West Point-trained leader and civil engineer had experience in canals - unlike Stevens - and divided engineering and excavation into three divisions: Atlantic, Central, and Pacific.

The Atlantic division was responsible for the construction of a massive breakwater at the entrance to Bahía Limón, the Gatún locks, the Gatún Dam, and a 3.5-mile approach channel.

The Pacific division was responsible for the three-mile breakwater in Panama Bay, the approach channel to the locks, and the Miraflores and Pedro Miguel locks, along with their associated dams and reservoirs.

Finally, the Central division had the difficult task of excavating the Culebra Cut through the divide to connect Gatún Lake to the Panama Canal locks. This eight-mile divide suffered frequent landslides, and proved to be the project’s greatest challenge.

Despite challenging working conditions, difficult terrain, and persistent sicknesses, work continued for many years under Goethals’ supervision.

On the 10th October 1913, President Woodrow Wilson triggered an explosion from the White House, which destroyed the Gamboa Dike to flood the Culebra Cut, in turn joining the Atlantic and Pacific oceans.

With the canal flooded, the French crane boat, Alexandre La Valley was the first to traverse the entire length of the canal on 7th January 1914, finally realising a dream 400 years in the making.

And on the 1st April 1914, construction of the Panama Canal was officially completed. The SS Cristobal was the first ship to transit ocean-to-ocean on 3rd August 1914, before the canal officially opened on the 15th August 1914 with the transit of the SS Ancon.

In total, the US spent almost $500 million (approximately $16 billion today) to complete the project, making it the largest American engineering project to date. Though costly, the project cost approximately $23 million less than initial estimates in 1907.

Post construction and later developments

The Panama Canal was nothing short of a technological breakthrough. Saving 7,800 miles on a sea trip from New York to San Francisco, the canal removed the need for ships to navigate the Drake Passage and Cape Horn.

The opening of the canal caused a severe decline in traffic along Chilean ports, impacting the sheep farming business in Patagonia, and the economy of the Falkland Islands due to the shifted maritime trade routes.

Post construction, the canal, and the surrounding Panama Canal Zone were administered by the United States.

By the 1930s, the canal ran into an issue with its water supply, leading to the construction of the Madden Dam across the Chagres River above Gatún Lake. The dam was completed in 1935.

The Panama Canal proved a huge boon for the US during World War II, as it facilitated the partial restoration of the US Pacific Fleet. While beneficial to American military strategy, the canal’s width proved a challenge.

In 1939, a third set of locks large enough to accommodate the bigger warships built by the US was planned. Though significant excavation was carried out, these plans were scrapped after World War II.

Following the war, control of the Canal Zone became increasingly contentious. Panamanian students and nationalists viewed the US‐run enclave as a symbol of colonial privilege, and on 9th January 1964, tensions boiled over during what became known as Martyrs’ Day.

Clashes erupted when Panamanians attempted to raise their own flag in the Canal Zone, resulting in violent confrontations that left many dead or injured, and plunged US–Panamanian relations into crisis.

In 1974, formal talks resumed under mounting domestic and international pressure. Those negotiations led to the Torrijos–Carter Treaties, signed on 7th September 1977, by US President Jimmy Carter and Panamanian leader Omar Torrijos.

The accords recognised Panama’s full sovereignty over the Canal while granting the United States authority to operate and defend the waterway during a 20-year transition period, ensuring neutrality and uninterrupted transit for ships of all nations.

On 31st December 1999, the Panama Canal Authority (Autoridad del Canal de Panamá, ACP) assumed full control. A crowd witnessed the lowering of the US flag and the hoisting of Panama’s banner, symbolising the end of nearly a century of foreign oversight.

Despite early doubts about operational continuity, Panamanian management was exemplary. The Canal became one of Panama’s principal revenue sources, sustaining national development, and remaining a linchpin of global commerce.

Challenges in the new millennium

By the early 2000s, it became clear that the original lock dimensions severely constrained vessel size and throughput. Global trade growth and the rise of Post-Panamax ships threatened Panama’s share of major east–west shipping lanes.

Studies estimated the Canal’s maximum sustainable capacity at roughly 340 million PC/UMS tons per year, a ceiling that risked being breached as cargo volumes continued to climb.

In April 2006, the ACP formally proposed a $5.25 billion expansion, placing the question before a national referendum on 22nd October 2006. With 80% approval, construction began in 2007 on two new lock complexes: Agua Clara on the Atlantic side and a counterpart southwest of Miraflores on the Pacific side. Both locks would run parallel to the existing chambers.

Each new lock chamber measures 427 metres long, 55 metres wide, and 18.3 metres deep, enabling transit of Neopanamax vessels carrying around 12,000 TEUs. The project also widened approach channels, deepened and expanded the Culebra Cut and Gatún Lake channels, and raised Gatún Lake’s maximum operating level to provide reliable water supply.

Innovative water-reuse basins (three per lock chamber) recycle 60% of the water used in each transit, cutting net consumption by 7% compared to the original locks. On 26th June 2016, the expanded Canal opened to commercial traffic, and the Chinese-owned container ship Cosco Shipping Panama became the first vessel to transit the new locks.

However, water supply remained the Canal’s most critical vulnerability. Dependence on Gatún Lake’s freshwater catchment made daily transits sensitive to drought, forcing reduced toll schedules and draft limits during dry seasons.

Deforestation in the watershed weakened the landscape’s natural ability to retain water, while increased shipping traffic accelerated the spread of invasive species and compounds air and water pollution in the region.

In response, the ACP endorsed the proposed Indio River Reservoir. This project was designed to upgrade water reserves for lock operations and provide drinking water to nearby communities. Yet the reservoir’s construction would displace thousands of residents, and raised social and ecological concerns.

Panama also faced mounting competition from alternative interoceanic routes. The proposed Nicaragua Canal remained dormant, the Colombian rail link across the Darien Gap was yet to secure funding, and melting Arctic ice made the Northwest Passage more navigable for a narrow seasonal window.

In southern Mexico, the Interoceanic Corridor of the Isthmus of Tehuantepec aimed to transport cargo coast-to-coast via rail, putting itself as a complementary, and potentially competitive, corridor to the Panama Canal.

In late 2024 and early 2025, President Donald Trump repeatedly threatened to “retake” the Canal, decrying “exorbitant” tolls and alleging Chinese influence in its operation.

His comments sparked protests in Panama City and drew swift international denunciation, with many governments affirming Panama’s sovereign rights and the Canal’s neutral status.

Responding to domestic pressure, a bipartisan group of US legislators introduced the Panama Canal Repurchase Act in January 2025. The bill would authorise the executive branch to enter negotiations aimed at reacquiring operational rights, an initiative that Panama’s government and Canal Authority dismissed as both unfounded and destabilising.

A story of bridging two oceans

From early Spanish explorations to the vision of de Lesseps and the colossal American endeavour, the story of the Panama Canal is one of human perseverance, engineering mastery, and geopolitical uncertainty.

Today, the canal remains a vital artery in the ever-shifting currents of world commerce and diplomacy. It continues to fuel national prosperity, serve as a gauge of international cooperation, and reflect the balance of sovereignty and strategic influence.

What the future holds for the canal is uncertain, yet its legacy of global connectivity endures, promising to shape the maritime world for generations to come.

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