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Panama Canal Purchase Act (1902)

Panama Canal Purchase Act (1902)

Matthew M. Taylor

Excerpt from the Panama Canal Purchase Act

"An Act to provide for the construction of a canal connecting the waters of the Atlantic and Pacific oceans. Be it enacted, ... that the President of the United States is hereby authorized to acquire, for and on behalf of the United States, at a cost not exceeding forty millions of dollars, the rights, privileges, franchises, concessions, grants of land, right of way, unfinished work, plants, and other property, real, personal, and mixed, of every name and nature, owned by the New Panama Canal Company, of France, on the Isthmus of Panama.... That the President is hereby authorized to acquire from the Republic of Colombia, for and on behalf of the United States, upon such terms as he may deem reasonable, perpetual control of a strip of land, the territory of the Republic of Colombia, not less than six miles in width, extending from the Caribbean Sea to the Pacific Ocean, and the right to use and dispose of the waters thereon, and to excavate, construct, and to perpetually maintain, operate, and protect thereon a canal..."

The Panama Canal Purchase Act (P.L. 57-183, 32 Stat. 481), enacted on June 28, 1902, provided for the construction of a canal connecting the Atlantic and Pacific Oceans. The act authorized (1) the purchase of the French New Panama Canal Company at a cost not exceeding $40 million; (2) negotiation with the Colombian government for "perpetual control" of a strip of land at least six miles wide on either side of the canal, as well as rights to operate the canal; and (3) the building and operation of the canal "for vessels of the largest tonnage and greatest draft" in use at the time of the act's passage.

Interest in a trans-isthmus canal was longstanding, and deeply affected by U.S. relations with European powers. Many believed that a canal would (1) reinforce U.S. domination of the Caribbean, especially in light of U.S. victory in the 1898 Spanish-American war; (2) ensure naval defenses on both oceans; and (3) significantly ease commerce. But before a canal could be built, the U.S. needed to overcome its obligations to Great Britain under the Clayton-Bulwer Treaty of 1850, which prevented either country from "exercising any dominion" over Central America or from acquiring "sole control" of a canal in the region. The friendly neutrality of the British during the Spanish-American war encouraged Congress to negotiate the Hay-Paunce-forte Treaty, by which both nations agreed to U.S. control of a canal but on the condition that all nations would be allowed equal peacetime access.

The location of the new canal was the second obstacle to the passage of a canal act. The recommendations of the Walker Commission, appointed by President William McKinley in 1899 to report on the best trans-isthmus route, were to build the canal through Nicaragua, rather then Panama. This route was closer to the United States and less expensive. Following these recommendations, the House of Representatives overwhelmingly approved the Hepburn Bill (named after Representative William Hepburn of Iowa), which called for construction of a Nicaraguan canal. But passage of that bill led the owners of the French New Panama Canal Company, most notably Philippe Bunau-Varilla, the majority shareholder, to lower their sale price from $109 million to $40 million, making the Panama route more attractive in terms of both length and cost. With Republican Party support, as well as the successful tactic of playing up volcanic activity in the Nicaraguan canal route, Bunau-Varilla was able to ensure the passage of an amendment (known as the Spooner Amendment after Senator John Spooner of Wisconsin) to the Hepburn Bill on June 28, 1902, authorizing President Theodore Roosevelt to purchase the company's rights for $40 million and negotiate with Colombia over land cession.

The purchase of the New Panama Canal Company was quickly undertaken. The Colombian government, however, having just emerged from a civil war, was less flexible. The Colombians, fearing political damage and the potential loss of their northernmost province, hoped to use their reluctance as a financial bargaining chip. In January 1903 the Colombian minister in Washington agreed to the Hay-Herrán Treaty, which would allow the ceded land to be sold to the United States for $10 million, plus an annuity (a yearly payment). But in Colombia the treaty was a politically sensitive issue. When U.S. communications appearing to bully the Colombian government were revealed in 1903, the Colombian lower house unanimously rejected the treaty.

Under the terms of the Spooner Amendment, this setback suggested the canal would now be built in Nicaragua. But President Roosevelt, Bunau-Varilla, and a group of Panamanian nationalists were insistent on the Panama route. The U.S. Navy was sent to Panama to prevent arrival of Colombian troops, and the United States declared and recognized Panamanian independence in early November. Bunau-Varilla became the first Panamanian ambassador to the United States and signed the Hay-Bunau-Varilla Treaty on November 18 (ratified on February 25, 1904). By means of this treaty, the United States acquired a ten-mile strip of land through Panama in perpetuity, as well as rights of intervention in the main cities, in exchange for $10 million and a $250,000 annuity.

Work on the canal began in 1904 and was completed, at a cost of over $350 million, in 1914. In 1977 President Jimmy Carter signed the Carter-Torrijos Treaties, providing for the return of the Canal to Panama in 2000. These were ratified in 1978, and the canal was returned to Panama on December 31, 1999.


McCullough, David. The Path Between the Seas: The Creation of the Panama Canal. New York: Simon and Schuster, 1977.

Miner, Dwight Carroll. The Fight for the Panama Route: The Story of the Spooner Act and the Hay-Herrén Treaty. New York: Columbia University Press, 1940.

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