Panama is only 79,990 square kilometers big and has a population of 3.36 million people. It is located in Central America between Costa Rica and Colombia, and is the narrowest land point of the isthmus separating the Atlantic and Pacific oceans. Many call Panama a land bridge connecting North and South Americas. We expected the history of such a young and small country to be short and simple. Not at all. Panama has an absolutely fascinating and complex saga. In the History of Kuna Yala, we touched on a few key historical events, but there is so much more.
As you may recall, Balboa helped establish the first lasting colony on the American mainland, called Darien, in western Panama in 1511, and two years later “discovered” the Pacific Ocean. In 1514, the evil Pedro Arias de Avila, nicknamed Pedrarias, was made governor of Panama. In 1519, he moved the main city from Darien to the Panama City, on the Pacific side. From there, Pedriarias sent out many exploration parties, who claimed more land in Central and South Americas for Spain and set up more settlements. Included in that is Peru, and the wealthy Incas in Peru. The Spaniards would ship Peruvian gold to Panama City, then walk the gold overland on mules to the town of Venta de Cruces, then load the gold onto river boats that would take the loot down the Chagres River to Nombre de Dios on the Atlantic side, then the gold would go on to Spain. Panama City thrived.
Of course, all the gold got the attention of the pirates. In addition to the usual attacks at sea, a few pirates attacked on shore. In 1572, Sir Francis Drake destroyed Nombre de Dios and took a ship full of gold. In 1671, Captain Morgan destroyed Panama City and took its entire treasure, which crippled the province. In 1739, Admiral Edward Vernon destroyed a key fortress. The Spaniards decided to abandon the shortcut through Panama and bring Peruvian gold home the long way, sailing around the bottom of South America. Panama was no longer important to the Spanish crown.
In 1821, Panama declared its independence from Spain (see History of Spain for more details) and joined Gran Colombia, a single nation made up of what is today Colombia, Bolivia, Ecuador, Peru and Venezuela. Gran Colombia was dissolved in 1831 due to political turmoil. Panama became a province within Colombia. All of Central America was basically a backwater at this point.
In 1848, gold was discovered in California. Suddenly, there was a renewed interest in Panama because it is the shortest path between the Atlantic and the Pacific oceans. Overland travel from the east to west coast within the USA was possible, but arduous and dangerous. Sea travel was easier and safer. Going around South America was a long trip, though, so many gold seekers would take the old Spanish short cut through Panama, which significantly reduced the time it took to get to/from California. Despite the fact that many fell ill on the short trail and died, tens of thousands of people made the crossing each year.
The American government obtained the exclusive right from Colombia to transit the Isthmus of Panama by whatever means existed or may be thereafter constructed. An American owned railroad was begun in 1850. It was believed the railroad would take 2 years and cost $1.33 million to build. It wound up taking 5 years and costing $8 million. It was the world’s first trans-continental railroad, with only 47 ½ miles of track. It was the most expensive railroad in the world, both in terms of cost to ride, cost to build and lives claimed during building. The real death toll is unknown because only the death of whites were recorded, and roughly only 25% of workers were white. It is believed 6,000 people died, but the number could easily be double that or more, given reports from men in the field at the time. The workers died of horrible illnesses — cholera, dysentery, fever, smallpox, malaria, yellow fever, etc. With too many bodies to deal with, the railroad’s solution was to pickle the bodies in barrels and sell them to medical schools around the world. They used the proceeds to build a small hospital.
A canal connecting the Pacific and the Atlantic had been dreamed of ever since Balboa first discovered the Pacific. With the boon in travel, the Americans decided it was time to get serious about constructing one. From 1870 to 1875, US President Grant sent seven survey teams to Central America to do an extensive survey of the region to decide on the best possible place to dig a canal. The Panama shortcut route was a possibility, but the extreme flooding of the Chagres River in the rainy season and areas of unstable ground made it a poor choice. Nicaragua was viewed as a better choice, largely because of the big natural lake in the middle of the proposed path.
Meanwhile”¦ Ferdinand de Lesseps was a career diplomat for France and was stationed in Egypt for several years. After de Lesseps retired, he took on the Suez Canal project. Many respected people, including engineers, told him he would never succeed, that the task too great. De Lesseps believed any challenge could be overcome through human ingenuity. And, while incredibly difficult, he did succeed.
In 1875, de Lesseps announced he was going to build the Atlantic-Pacific canal before the Americans did. He had basically decided that he wanted to build a sea level canal in Panama near the railroad. He sent out surveyors. The surveyors returned without any surveys or maps, telling him a canal was impossible. De Lesseps sent the surveyors back, ordering that they come up with a route. The surveyors did virtually no exploring the second time. They merely wrote a report saying what de Lesseps wanted and then went to the Colombian government to get the rights to build the canal. The Colombians granted the land rights, saying the French would have to work it out with the Americans over the transit rights.
De Lesseps put together a committee to work on the Panama Canal project. It was estimated to cost $240 million and take 12 years. Few on the committee were engineers, and few had ever been to Panama. Most of the engineers did not think this plan could work, and only one person who had been to Panama thought it could work (the Panamanian representative). De Lesseps believed that if he could make Suez work, he could make Panama work, too. While negative opinions were voiced loudly in private, no one would go against de Lesseps publicly. De Lesseps also arbitrarily cut the estimates down to 8 years and $131,720,000.
In 1879, a French engineer came forward and suggested to both the Americans and de Lesseps that the best way to make a canal at Panama would be to create a lake at the top of the mountains similar to the one in Nicaragua by damming up the Chagres River, with locks going up to the lake and back down. His idea was completely ignored by both.
So, without even a map or survey of the area, and with ridiculously low estimates, de Lesseps raised money and started construction in 1881. He bought the railroad and some buildings to base their operation out of. He constructed more buildings, including two state of the art hospitals. They brought in top of the line equipment and the most brilliant engineers. They paid top dollar to their laborers. But the project was plagued with problems. The death toll was high from the beginning and rose significantly as time went on. Portions of the canal kept collapsing. They couldn’t adequately contain the flooding from the Chagres. And everything was costing much, much more than originally estimated. By 1889, 22,000 workers had died and the company went bankrupt.
After Theodore Roosevelt took office in the USA, he again started to plan a canal construction. He was going to build it at Nicaragua, but a few things changed to make Panama more attractive. First, Nicaragua said no. Second, in 1903, de Lesseps’s company dropped the asking price for all the assets left behind in Panama from $109 million to $40 million. But the Colombian government wouldn’t go along with the plan. Wanting to make the sale to the Americans, de Lesseps’s chief engineer, Bunau-Varilla, suggested to the US that Panama should become independent from Colombia. Aided by Bunau-Varilla and the American military, the Panamanians revolted against Colombia and on November 3, 1903, Panama declared itself independent. The Colombian troops were no match for the US troops.
The US government paid Panama $10 million up front and an annual fee of $250,000 for rights to the “Canal Zone”, a 10 mile swath in the center of the country. The US also guaranteed Panamanian independence and later paid $25 million in compensation to Colombia to help smooth over the controversy. However, the US wound up taking much more than the Panamanians had agreed to, both in terms of land and rights, including the right to intervene in the Panamanian government. The Panamanians were dismayed that their new little nation was forced to be a puppet government to the US. Friction between the US and Panama resulted.
Work on the canal was resumed in 1904 by the US Army Corps of Engineers. At first, they had many of the same problems as the French. They had already scrapped the original French plan, but even still, the US’s engineering plans had to be drastically changed to make the canal work. They wound up going with the artificial lake approach originally suggested in 1879. The sickness problems also had to be tackled. In 1854, the first report had come out in the scientific community stating that diseases such as malaria and yellow fever were caused by insects. Over the years, more scientists came forward, narrowing it down to mosquitoes and even the specific species of mosquitoes. It wasn’t until 1905 that the theory was taken seriously enough to try in Panama. Once the Americans eliminated the mosquito problem, the death toll was greatly reduced. The canal was completed in 1914, just as World War I was beginning in Europe.
Anti-US sentiment continued to grow, despite some minor concessions made by the US government to try to appease the people. In 1964, it culminated in a student protest that left 27 Panamanians dead and 500 injured, now referred to as National Martyr’s day and still commemorated. The Panamanian army grew more powerful, and in 1968, they deposed the Panamanian president and took over control of the government. General Omar Torrijos emerged as the new leader. Torrijos began massive works projects and negotiated with US President Jimmy Carter to get control of the canal. The Carter-Torrijos treaty was signed in 1977, giving Panama 60% control of the canal in 1979. From 1979 to 1999, the two countries were to work together on transitioning the Americans out of the canal interests. On December 31, 1999, the Panamanians would have 100% canal control, all American interests in Panamanian government would cease, and all American military forces would leave Panama. In 1981, Torrijos died in a mysterious plane crash, leaving a power vacuum. John Perkins claims that the CIA blew up Torrijo’s plane in his book Confessions of an Economic Hitman.
In 1983, Manuel Noriega seized control of the Panamanian military and made himself the de facto ruler of the country. Noriega consolidated and expanded his power, especially militarily. He set up a secret force to rat out any Panamanian who was not loyal to Noriega. He also made it legal to imprison any journalist for printing material officials found offensive. Interestingly, those journalism laws have never been repealed and are still invoked. In 1987, Noriega became the center of an international scandal involving drug trafficking, murder, and election rigging. The people began to protest Noriega’s power, which led to violent suppression from the military forces behind him.
In 1988, the US set up economic sanctions against Panama. The US ended trade agreements, froze all Panamanian assets in American banks and refused to allow American businesses to pay any money to Panama, including canal fees. A few days later, there was an unsuccessful military coup. Noriega became even more violently oppressive in response. In 1989, Noriega refused to allow the newly elected president and vice presidents to take office and had them beaten up on international TV. There was another failed coup in 1989.
In December 1989, Noriega declared war on the US. The next day, an unarmed off duty US military officer was killed by Noriega’s men as he left a restaurant. On December 20th, the US responded with a severe attack intended to cripple Noriega’s forces. The US attacks left 2,000 Panamanian civilians dead and tens of thousands homeless, with Panama City largely destroyed. Wide spread looting created more problems. On day 5 of the invasion, Christmas Day, Noriega sought asylum in the Vatican City embassy. To get him out, the US used psychological warfare and blared rock music for 10 straight days until the Vatican staff demanded Noriega surrender himself. Noriega was quickly tried in the US and sentenced to 40 years in prison.
Panama was now in shambles economically speaking. The subsequent presidents had a hard time improving conditions for the people and in 1999, 2/3 of people lived below the poverty line, with staggering amounts of unemployment and underemployment. The US leaving at the end of the year only aggravated the situation. An estimated $350 million a year of income generated via various US tied industries was suddenly gone, along with 4,000 jobs on/connected to the American military bases. 90% of the canal jobs were already filled by Panamanians, so few new jobs on the canal opened up to offset the other job losses. By 2003, unemployment was 18% and underemployment 30%.
The situation seems to be slowly but steadily improving in Panama now. Today only a third of people live in poverty and foreign investment in businesses in Panama is greatly expanding. In 2007, construction began on a canal expansion project, including a new set of locks that can accommodate larger ships, which has further reduced unemployment.