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Historical Study
December 1975
Bureau of Public Affairs
Historical Office
TREATY RIGHTS ACQUIRED BY THE UNITED STATES
TO CONSTRUCT THE PANAMA CANAL
Early Interest in a Canal
Construction of the Panama Canal, completed
in 1914 and based on treaty rights obtained in
1903, concluded a project which had been in
^various stages of planning for more than 4 cenjries. Interest in a passageway connecting the
Atlantic and Pacific Oceans dated back to the age
of exploration. Failure to find a natural waterway
through the American continents focused attention
on the narrow isthmus connecting North and
South America and led explorers, such as Ceron
and Cortez, to propose construction of a passage
across the isthmus. Charles V took an active interest in the proposal, and, by the middle of the
16th century, four routes had been marked out as
practicable: Darien, Panama, Nicaragua, and
Tehuantepec. The scope of the undertaking was
daunting, however, and little more than planning
was done until the 19th century.
The United States began to take an interest in
the construction of an artificial waterway early in
the 19th century, after the surveys and reports of
Alexander von Humboldt revived interest in the
This paper [Research Memorandum No.
1145] was prepared at the request of Ambassador
Ellsworth Bunker's office. It is based upon secondworks and published official documents. The
esearch and writing were done by Louis J. Smith
under the direction of Mary P. Chapman, Chief of
the Area Studies Branch.
idea. In 1825, Secretary of State Henry Clay
weighed a suggestion made by the Central American Republic that the United States cooperate in
the construction of a Nicaraguan canal.1 In 1826,
Clay instructed American representatives to the
Panama Congress that a Central American canal
was a proper subject for discussion, and he added
that the enterprise "should not be left to the separate and unassisted efforts of any one power" nor
the benefits "exclusively appropriated to any one
nation, but should be extended to all parts of the
globe upon the payment of a just compensation or
reasonable tolls."2
The Treaty of 1846 with New Granada
Nothing came of the first indications of
American interest in a Central American canal,,but
interest in the project continued and grew throughout the 19th century. In 1835, the Senate passed a
resolution encouraging private American enterprise
to undertake the construction of a canal under
government protection, and in 1839 President Van
Buren's confidential agent, John F. Stevens, surveyed the prospects for a canal and reported in
favor of the Nicaraguan route, which he estimated
would cost $35 million.3 The cost was prohibitive,
but in December 1846 Benjamin Bidlack, the
American Charge d'Affaires in Bogota, laid the
basis for an American canal by negotiating with
1 See footnotes at end of article.
Foreign Minister Manuel Mallarino of New
Granada, Colombia, a treaty by which the United
States guaranteed the neutrality of the isthmus of
Panama and, as a concomitant, also guaranteed
New Granadan sovereignty over the isthmus. In return, the United States was granted the right of
free passage across the isthmus.4 Bidlack acted
without instructions, but the Senate ratified the
treaty without amendments. The purpose of the
treaty was commercial, and President Polk anticipated that Britain and France would subscribe to
the pledge of neutrality.
The Clayton-Bulwer Treaty of 1850
Britain, under Palmcrston's strong hand, had
no desire to encourage American designs on Central America. The American interest in Panama and
the war between the United States and Mexico
impressed upon Palmerston the threat of American
imperialism, and he moved to solidify British interests in Nicaragua along one of the proposed
canal routes. Britain had a long-established protecS ^ tive relationship with the native people who
populated the Mosquito coast of Nicaragua. Acting
through the Mosquito king, Palmerston ordered
Nicaragua to withdraw from the mouth of the San
Juan River by January 1, 1848, or be expelled by
force. Nicaragua turned to the United States for
support. President Polk sent Elijah Hise to Central
America to encourage opposition to the British
demands, and Hise, acting without instructions,
concluded a convention with Nicaragua in June
1849 which granted to the United States the exclusive right to build, fortify, and protect a canal or
railroad across Nicaragua. In return, the United
States was to guarantee the territorial integrity of
Nicaragua. 5
The convention negotiated by Hise was unacceptable to Washington, and it conflicted sharply
with British pretensions. The new Taylor administration dispatched E. G. Squier to replace Hise
with more guarded instructions. Squier negotiated
a more modest treaty which recognized Nicaragua's
sovereignty over the canal route and guaranteed
the neutrality of any canal constructed by U.S.
" citizens.6 Squier's agreement did not sit much
f
better with the British, and an involved dispute and
attendant negotiations ensued. The up-shot was the
Clayton-Bulwer treaty signed in Washington on
April 19, 1850. By the terms of the treaty, neither
Britain nor the United States was to control or
fortify a Nicaraguan canal, neither was to take
possession of, fortify, colonize, or exercise dominion over any part of Central America, and both
were to guard the safety and neutrality of the
proposed canal, wherever it was constructed in
Central America. 7
The Clayton-Bulwer treaty had the effect,
while it remained in force, of prohibiting the
development of a canal under American control.
Irritation with the restraints imposed by the
Clayton-Bulwer agreement mounted as the nation
grew in strength and confidence during the years
following the American Civil War. The opening of
the Suez Canal in 1869 and the development of the
American west lent impetus to the desire for an
American effort to link the Atlantic and the
Pacific. In 1878, a French company which
included Ferdinand de Lesseps, the principal architect of the Suez Canal, obtained a concession from
Colombia to build a canal across the isthmus of
Panama. The French company pledged that the
canal would be kept free from political influence,
but Secretary of State Evarts protested:
Our Pacific coast is so situated that, with our
railroad connections, time (in case of war) would
always be allowed to prepare for its defense. But with
a canal through the isthmus the same advantage
would be given to a hostile fleet which would be
given to friendly commerce; its line of operations and
the time in which warlike demonstration could be
made, would be enormously shortened. All the treaties of neutrality in the world might fail to be a safeguard in a time of great conflict.°
*
President Hayes added, in a message submitted to
the Senate on March 8, 1880, that:
The policy of this country is a canal under
American control. The United States cannot consent
to the surrender of this control to any European
power or to any combination of European powers.9
The American view was that an interoceanic canal
would be virtually a part of the coastline of the
United States.
Efforts to renegotiate the Clayton-Bulwer
treaty to bring it into line with the American point
of view failed, and in 1884 Secretary of State
elinghuysen decided, in frustration, to ignore it.
tie negotiated a convention with Nicaragua which
granted the United States the exclusive right to
build and control a canal, and, despite the obvious
conflict with the Clayton-Bulwer agreement, the
Frelinghuysen-Zavala treaty was only narrowly
rejected by the Senate.*0 A group of American
capitalists decided in 1887 to push ahead with the
Nicaragua project in any event, and in 1889 Congress incorporated the enterprise as the Maritime
Canal Company of Nicaragua. At that point, the
French effort in Panama collapsed, defeated by
graft, corruption, and disease, and 3 years later the
American effort in Nicaragua suffered a similar
fate. The failures made it clear that the interoceanic canal would not be completed by private
enterprise.
The need for a canal remained, however, and
from the American point of view the need was
underlined by the Spanish-American war. It took
the U.S. cruiser Oregon 90 days to sail from the
Pacific coast of the United States to its Atlantic
s~-battle station, and the value of a canal was driven
:>me. The United States emerged from the war as
a. naval power with two-ocean responsibilities. The
McKinley administration determined to push for
the construction of an American canal, but the
agreement with Britain still stood in the way.
The Hay-Pauncefote Treaties of 1900 and 1901
When American diplomats approached the
British Foreign Office at the turn of the century to
try again to renegotiate the Clayton-Bulwer treaty,
they fourid the British in a much more accommodating frame of mind. Mired in the Boer war and
faced with French animosity and German competition, the British were anxious to win American
goodwill. Accordingly, Foreign Secretary
Lansdowne agreed to a new treaty to supersede the
1850 agreement. After an unsuccessful effort to
include the Canada-Alaska boundary dispute in the
agreement, the British ambassador in Washington,
Lord Pauncefote, signed a treaty on February 5,
1900, which provided that the United States could
construct, own, and neutralize a canal across the
ithmus, but could not fortify it. The Senate was
not prepared to accept any further limitations,
however, and Secretary of State Hay was forced to
renegotiate the understanding. The second Hay-
Pauncefote treaty, signed on November 18, 1901,
eliminated the earlier restriction, and, although it
did not explicitly concede to the United States the
right to fortify a canal, the Senate was satisfied,
and the treaty was ratified in February 1902. 11
With the British restriction cleared away, the
remaining question was where to build the canal.
The shortest route was across the isthmus of
Panama, but that route was tainted by the French
scandal and complicated by the concession which
the French company still held. By contrast, there
was an established American interest in the Nicaraguan route, where an American company had
already made a beginning, and where the Nicaraguan Government welcomed American interest. In
1897, the Walker Commission was appointed to
study the proposed canal routes. The commission
recommended the Nicaraguan route in 1899, and
reconfirmed its recommendation in 1901. On May
2, 1900, the House of Representatives voted in
favor of the Nicaraguan route by a margin of 224
The Panama Canal Bill of 1902 (The "Spooner
Act")
The growing sentiment in favor of the Nicaraguan route roused the representatives of the
French company which held the Panama concession from Colombia to mount a remarkable
lobbying effort in Washington on behalf of the
Panamanian route. The French company had
offered to sell its concession for $109 million.
After the House voted in favor of the Nicaraguan
route, however, the new Panama Canal Company
dropped the asking price to $40 million. Phihppe
Bunau-Varilla, the former chief engineer of the
company, and William Cromwell, the American
legal representative of the company, set about the
task of trying to convince American officials that
the Panamanian route would be cheaper, quicker,
and less dangerous than the Nicaraguan route.
They succeeded in persuading a majority in the
Senate that a Panama, rather than a Nicaragua,
canal was in America's best interests. The Spooner
Act, which became law in June 1902, instructed
the President to secure a right-of-way across the
isthmus of Panama, but, if he failed to do so "within a reasonable time and upon reasonable terms,"
he was to turn to Nicaragua. 13
ne Hay-Herran Treaty of 1903
The Colombian Government, which was beset
with financial problems growing out of a civil war,
was willing to negotiate an understanding with the
United States, but saw no reason why the French
company should get $40 million which could well
go to Colombia since the French concession was
about to run out. The United States had the
Nicaraguan route to fall back upon in the negotiations and was in a good position to bargain.
President Roosevelt was anxious to "make the dirt
fly," however, and, at his instruction, SecretaryHay delivered an ultimatum on January 21, 1903,
to the Colombian negotiator, Thomas Herran:
I am commanded by the President to inform
you that the reasonable time provided in the statute
for the conclusion of the negotiations with Colombia
for the excavation of an Isthmian Canal has expired,
and he has authorized me to sign the treaty of which
I had the honor to give you a draft, with the modification that the sum of 5100,000, fixed therein as the
*v annual pavment, be increased to $250,000. I am not
1 A
authorized to consider or discuss any other change. 14
Herran signed the treaty on the following day. The
treaty would have given the United States a
100-year lease on a strip of land 10 kilometers
wide across the isthmus for an initial payment of
$10 million and an annuity of $250,000, but the
Colombian Senate rejected the agreement.
The Independence of Panama and the Hay-BunauVarilla Treaty of 1903
•
President Roosevelt was furious at what he
saw as Colombian greed, and he denounced the
Colombians in private as "inefficient bandits,"
"foolish and homicidal corruptionists," and
"contemptible little creatures." 15 Bunau-Varilla,
who had very good contacts in Washington, was
aware of Roosevelt's anger and frustration. He calculated that the United States would support a
^revolution in Panama if it would facilitate the contraction of an American canal. Roosevelt later
denied that either he or his government conspired
to encourage a Panamanian revolt, but Bunau-
Varilla was able to tell the Panamanian patriots
who had long been anxious to revolt that the
U.S.S. Nashville would arrive at Colon, Panama o^
November 2, 1903, and that the United States
would enforce the provisions of the treaty of 1846
to prevent the Colombian Government from crushing the revolt. 16 With that encouragement, the
small patriot army of Panama revolted on
November 3, and American naval forces, acting to
preserve freedom of transit across the isthmus, prevented Colombian troops from landing to suppress
the revolt. Panama declared its independence on
November 4, and the Roosevelt administration
accorded recognition on November 6.
With the establishment of the Republic of
Panama, the success of the canal negotiations was
assured. Bunau-Varilla was appointed as diplomatic
agent to negotiate the agreement for Panama, and
he completed the negotiations with Secretary Hay
before the arrival of two additional Panamanian
ministers, authorized to participate in the negotiations. The terms of the Hay-Bunau-Varilla treaty
were all that the Roosevelt administration could
desire. The United States was authorized to build a
canal through a zone 10 miles in width and to
administer, fortify, and defend it. The zone was
granted to the United States "in perpetuity"
(Article II) and the United States was accorded
rights over it tantamount to sovereignty (Article
III):
The Republic of Panama grants to the United
States all the rights, power and authority within the
zone mentioned and described in Article II of this
agreement and within the limits of all auxiliary lands
and waters mentioned and described in said Article II
which the United States would possess and exercise if
it were the sovereign of the territory within which
said lands and waters are located to the entire exclusion of the exercise by the Republic of Panama of
any such sovereign rights, power or authority. 1 '
In return, the United States guaranteed the independence of Panama and agreed to pay $10 million
and an annuity of $250,000 beginning 9 years after
the treaty came into force. 18 The treaty was ratified by the United States Senate on February 23,
1904, 3 months after it had been approved by the
Government of Panama.
he Thomson-Urrutia Treaty of 1914
The Hay-Bunau-Varilla treaty made possible
the construction of the Panama Canal, but the
entire episode placed a severe strain on U.S.Colombian relations. In April 1914, the United
States sought to repair the damaged relations. By
the terms of the Thomson-Urrutia convention, the
United States expressed "sincere regret" over the
incident and agreed to pay an indemnity of $25
million. 19 Former President Roosevelt saw the
agreement as a criticism of his administration, however, and rallied his friends in the Senate to prevent
ratification. It was not until 1921, after Roosevelt's
death, that the Senate ratified an amended form of
the treaty which retained the indemnity but
omitted the apology. Colombia accepted the compromise, and the Panamanian incident was closed.
The Bryan-Chamorro Treaty of 1914 and the U.S.Panama Treaties of 1936 and 1955
The Bryan-Chamorro treaty with Nicaragua in
"914 tied up another loose end. By the terms of
chis treaty, the United States gained the exclusive
option to build a canal through Nicaragua and thus
prevented the development of a competing canal.
The United States maintained, and gave occasional
consideration to, the Nicaraguan option until the
FOOTNOTES
treaty was abrogated in 1970. The treaty signed in
1903 by the United States and Panama has also
been subject to regular review.
Panamanians have maintained from the outset
that the Hay-Bunau-Varilla treaty was inequitable,
and the United States has made allowance for a
number of the Panamanian complaints. In 1904
Secretary of War William Howard Taft negotiated
the so-called Taft Agreements, which met a
number of minor grievances and which remained in
effect until 1924. A major revision of the treaty of
1903 did not take place until 1936, when the
United States and Panama signed a treaty revising
the terms governing American control over the
canal. Among other things, the 1936 treaty increased the annuity to $430,000 and changed the
U.S. guarantee of Panamanian independence into
an agreement to consult for mutual defense. The
other major revision of the canal agreement which
has occurred since 1903 is the treaty which was
signed by the United States and Panama in 1955.
By the terms of the 1955 agreement the canal
annuity was increased to $1,930,000, Panamanians
were accorded job and commercial equality with
Americans in the Canal Zone, some boundary
adjustments were made, and the United States
relinquished its monopoly over a trans-isthmian
railroad.2° Panamanian dissatisfaction with the
canal agreement has continued, however.
5'House Exec. Docs., 31st Cong., 1st Sess., No.
75, pp. 110-17.
1 D.C. Miner, The Fight for the Panama Route
(New York: Columbia University Press, 1940), p. 11.
6Ibid., pp. 152-54,168-74.
2j.B. Moore, A Digest of International Law
(Washington: Government Printing Office, 1906), III,
2. As it turned out, the U.S. delegates failed to arrive
at Panama.
^Senate Journal, 23rd Cong., 2nd Sess., p. 238;
Miner, The Fight for the Panama Route, p. 12.
4William M. Malloy (comp.), Treaties, Conven^tions, International Acts, Protocols and Agreements
.Washington: Government Printing Office, 1910), I,
302-14.
7 Malloy, Treaties, 1, 659-63.
^Moore, A Digest of International Law, III, 15.
^Senate Exec. Docs., 46th Cong., 2nd Sess., No.
112.
10Miner, The Fight for the Panama Route, p.
22.
11 Malloy, Treaties, I, 782-84.
. Rec., 56th Gong., 1st Sess., pp.
17 Malloy, Treaties, II, 1350.
5014-5015.
l $Cong. Rec., 57th Gong., 1st Sess., p. 7074.
1BIbid., pp. 1349 and 1354.
^Quoted in Miner, The Fight for the Panama
Route, p. 195.
^Bailey, A Diplomatic History of the American
People, p. 545.
15 Quoted in Thomas A. Bailey, A Diplomatic
History of the American People (New York: Crofts,
1940), pp. 538-39.
r a survey of U.S. -Panamanian relations
during the period 1903-1963, see Department of
State, Historical Office, Research Project No. 658,
"Highlights in the Relations Between the United
States and Panama, 1903-1963."
</., p.541.