Panama And The United States The Building of a Canal
Panama’s history, as well as its present-day social, economic, and political life, has been dominated by the country’s significant geographic position. Encompassing the lowest and narrowest portion of the isthmus connecting North America and South America, Panama has for centuries served as a land bridge and transit zone between continents and oceans. Since that time, the Panama Canal has been the single greatest factor influencing Panama’s society, economy, political life, and foreign relations. Panamanian society in the 1980s continued to reflect Panama’s unusual position as a transit zone and the home of the canal, factors that subjected Panama to a variety of outside influences and gave the country an ethnic diversity not commonly associated with Latin America. This essay will point out the single most prolific economic advancement in Panamanian history—the creation of the Panama Canal. Furthermore, this essay will explain how the entire process of construction of the canal caused overwhelming dissention and malcontent between the United States and Panama. In the end, I will attempt to relate my position on the handling of the process and whether the United States could have improved the political and economic relationship with Panama.
The Panama Canal drastically helped to shape Panama’s economic development. First, the canal has been a major source of wealth for Panama because of revenue generated by canal traffic, the influx of workers who built and later maintained the canal, and the large United States civilian and military presence associated with the canal. Until the Latin American economic slump in the mid-1980s, Panama was generally regarded as wealthy in the regional context, although the distribution of income remained skewed. Reflecting this relative wealth, Panama registered one of the highest levels of per capita income in the developing world (US$2,100) in 1985. Second, because of the canal and other transportation and service activities deriving from the country’s location, Panama’s economy always has been service-oriented rather than productive. Services accounted for 73 percent of the gross domestic in 1985, the highest level in the world. The Panama Canal was the primary activity in the nation’s service sector–a trans-isthmian pipeline, and the International Financial Center, which promoted offshore banking and foreign investment in Panama
A third characteristic of Panama’s economy was the country’s use of the United States dollar as its paper currency. The local currency, the Balboa, was available only in coins. Reliance on the United States dollar meant that the country could neither print nor devalue currency as a means of establishing and implementing monetary policies. Finally, Panama’s development in terms of both location and economic activity and concentration of population followed an axis across the isthmus between ColÃ³n at the Atlantic terminus of the Panama Canal and Panama City on the Pacific coast. Over half of the population and most nonagricultural economic activity were located there. In addition to its major influence on social and economic life in Panama, the canal also bound Panama inexorably to the United States–and therein lays the Canal’s dominance of Panamanian politics and foreign policy. In essence, the canal itself spurred the creation of the modern-day nation of Panama.
In order to obtain the rights to construct a canal, the United States fostered separatist sentiment in Panama, then a department of Colombia, and engineered Panama’s independence from Colombia in 1903. Panama became a virtual protectorate of the United States, and the pattern of United States intervention set at independence was to be repeated numerous times throughout the first half of the twentieth century. This close relationship was from the start, however clouded by resentment and bitterness.
The Hay-Bunau-Varilla Treaty of 1903, by which the United States acquired the right to construct a canal, was the primary source of this discontent–at least initially–for several reasons. First, Panama was not even a party to the treaty, which was signed by the United States and a French-born entrepreneur. Second, and more important, the treaty gave the United States “in perpetuity” a sixteen-kilometer-wide strip of territory known as the Canal Zone that split the nation into two unconnected pieces. (In return, Panama was to receive an annuity.) Sovereignty or jurisdiction over the Canal Zone, profits from canal operations, frustration over the continued highly visible presence and domination of the United States in Panama, and other related issues became and remained the primary focus of both internal politics and foreign relations for Panama.
Nationalism, consistently a powerful force in Panama in the twentieth century, was directed primarily against the United States presence. National leaders of all political persuasions both cultivated and capitalized on public discontent with the United States. Indeed, these leaders kept popular resentment narrowly focused on the United States lest it turn on the Panamanian elite, commonly known as the oligarchy, which traditionally controlled Panama’s political, economic, and social life. In the very first year of the Hay-Bunau-Varilla Treaty, dissension had already arisen over the sovereignty issue. Acting on an understanding of its rights, the United States had applied special regulations to maritime traffic at the ports of entry to the canal and had established its own customs, tariffs, and postal services in the zone. These measures were opposed by the Panamanian government. Mounting friction finally led Roosevelt to dispatch Secretary of War William Howard Taft to Panama in November 1904. His visit resulted in a compromise agreement, whereby the United States retained control of the ports of AncÃ³n and CristÃ³bal, but their facilities might be used by any ships entering Panama City and ColÃ³n. The agreement also involved a reciprocal reduction of tariffs and the free passage of persons and goods from the Canal Zone into the republic.
Compromises were reached in other areas, and both sides emerged with most of their grievances blunted if not wholly resolved. Before the first year of independence had passed, the intervention issue also complicated relations. Threats to constitutional government in the republic by a Panamanian military leader, General EstÃ©ban Huertas, had resulted, at the suggestion of the United States diplomatic mission, in disbanding the Panamanian army in 1904. The army was replaced by the National Police, whose mission was to carry out ordinary police work. By 1920 the United States had intervened four times in the civil life of the republic. These interventions involved little military conflict and were, with one exception, at the request of one Panamanian faction or another. The internal dynamics of Panamanian politics encouraged appeals to the United States by any currently disgruntled faction for intervention to secure its allegedly infringed rights. United States diplomatic personnel in Panama also served as advisers to Panamanian officials, a policy resented by nationalists.
In 1921 the issue of intervention was formally raised by the republic’s government. When asked for a definitive, written interpretation of the pertinent treaty clauses, Secretary of State Charles Evans Hughes pointed to inherent difficulties and explained that the main objectives of the United States were to act against any threat to the Canal Zone or the lives and holdings of non-Panamanians in the two major cities.
Actual intervention took several forms. United States officials supervised elections at the request of incumbent governments. To protect lives of United States citizens and property in ChiriquÃ Province, an occupation force was stationed there for two years over the protests of Panamanians who contended that the right of occupation could apply only to the two major cities. United States involvement in the 1925 rent riots in Panama City was also widely resented. After violent disturbances during October, and at the request of the Panamanian government, 600 troops with fixed bayonets dispersed mobs threatening to seize the city. At the end of the 1920s, traditional United States policy toward intervention was revised.
In 1928 Secretary of State Frank B. Kellogg reiterated his government’s refusal to countenance illegal changes of government. In the same year, however, Washington declined to intervene during the national elections that placed Florencio H. Arosemena in office. The Arosemena government was noted for its corruption. But when a coup d’Ã©tat was undertaken to unseat Arosemena, the United States once again declined to intervene. Though no official pronouncement of a shift in policy had been made, the 1931 coup d’Ã©tat–the first successful one in the republic’s history–marked a watershed in the history of United States intervention. Meanwhile, popular sentiment on both sides calling for revisions to the treaty had resulted in the Kellogg-Alfaro Treaty of 1925.
Despite the negotiations, limiting the freedom of the United States to intervene in Panama’s internal affairs, various problems between the two countries continued to generate resentment among Panamanians. Aside from the larger issue of jurisdiction over the zone–which split the country into two parts–Panamanians complained that they did not receive their fair share of the receipts from the canal, that commissaries in the zone had damaged their commercial interests, that Panamanian workers in the zone were discriminated against in economic and social matters, and that the large-scale presence of the United States military in the zone and in bases outside the zone cast a long shadow over national sovereignty.
In the end, it is clear to see that the United States proceeded in the wrong manner in order to form a stable political relationship with Panama. From dissent to aggravation, Panama fell victim to the greed and selfishness enacted by the United States government. It is important to recognize that the U.S. was guided by good intentions. However, through multiple retroactive interventions, the United States only increased the strain on an already tumultuous relationship. The Panama Canal was no doubt an economic powerhouse, but rather than ensuring the Panamanian people were cared for during the proceedings, the United States insisted on exerting its’ international power and left Panama—as well as the relationship—with a black eye. Only in the last half century has the United States been able to repair this fractured affiliation. In retrospect, the United States might have been better off incorporating a more subtle role in the matter. Had this “kid’s- glove” mentality been used, the hardship experienced on behalf of both nations, could quite possibly have been avoided.