European Influence

When the Spanish conquered Panama between 1502 and 1519, the country became a source of gold and potential religious converts for the Spanish crown. From 1519 through 1538, the area functioned as a base for soldiers sent to conquer the Andean civilizations in South America. After 1538, it was used as a land route to Spain's South American colonies and a shipping port for Andean gold. Subjected to pirate raids from 1568 to 1671, Panama City was ravaged by buccaneers under the command of Sir Henry Morgan in 1671.

Colombian Territory

The isthmus again became an important transportation hub after independence from Spain and union with Colombia in 1821. To expedite trade from the gold fields in California, the United States completed a railroad across the area in 1855. The French tried and failed to build a sea-level canal in the 1880s, and sold their concession to the United States. The elite in Panama City conspired with the Americans to declare independence in 1903, when they could not obtain a favorable treaty from Colombia.

The Panama Canal

In 1904, the new Panamanian government granted the United States control of a five-mile strip of land along both sides of the canal. Under the direction of the Americans, the Panama Canal was completed after a decade of intensive engineering and labor. This technological marvel immediately became an important strategic and economic asset to the United States and revolutionized world shipping patterns.

Transfer of Ownership

In 1977, U.S. President Jimmy Carter signed the Torrijos-Carter treaty that abolished the Canal Zone as a colonial enclave, arranged for Panamanian ownership of the canal in the year 2000, and provided for the closing of American military bases. Since then, the canal has been run by the Panama Canal Authority, also called the Autoridad de Canal De Panama (the ACP).

The canal’s transfer to local control has been an economic boon to the country:

• Canal income has gone from $769 million in 2000 to $1.4 billion in 2006, according to ACP figures.
• Canal traffic increased from 230 million tons in 2000 to nearly 300 million tons in 2006.

New Canal Improvements

In 2006, Panamanian citizens overwhelmingly approved a $5.25-billion referendum to expand the Panama Canal. The following year, construction began on a new set of locks and a process to widen and deepen the canal to accommodate even larger vessels and increased traffic.

Panama Facts

• 30 percent increase in Panama Canal tonnage traffic since 2000
• A $5.25 billion Canal expansion is currently underway, with a scheduled completion in 2014