Panama Canal (1904)

Historic administrative entity in Panama over which the United States exercised jurisdictional rights from 1903 to 1979. It was a strip of land 10 miles (16 km) wide along the Panama Canal, extending from the Atlantic to the Pacific Ocean and bisecting the Isthmus of Panama. It covered 553 square miles (1,432 square km), of which about one-third was water (principally Gatun Lake). The Canal Zone had two administrative subdivisions, the Balboa (Pacific) and Cristobal (Atlantic) districts. Balboa Heights was the administrative headquarters for both the Canal Zone government and the Panama Canal Company.

The Canal Zone came into being on May 4, 1904 ("Acquisition Day"), under the terms of the Hay-Bunau-Varilla Treaty of 1903 (see below) by which Panama granted to the United States, in return for annual payments, the sole right to operate and control the canal and about 5 miles (8 km) of land on each side. The canal was constructed between 1904 and 1914. As reorganized in 1951, the administration of the canal and adjoining land was entrusted to two closely related U.S. agencies, the Panama Canal Company (responsible for operating the canal itself) and the Canal Zone government (responsible for civil rule in the zone). The governor of the Canal Zone, appointed by the president of the United States and supervised by the secretary of the army, was ex officio president and director of the Panama Canal Company.

The zone was abolished on Oct. 1, 1979, with the return to Panama of direct civil control under a treaty signed in 1977. By the same treaty a commission under joint American-Panamanian ownership was established to operate the canal until the year 2000, when Panama was to assume full control.

Hay-Bunau-Varilla Treaty (1903)

(Nov. 18, 1903), agreement between the United States and Panama granting exclusive canal rights to the United States across the Isthmus of Panama in exchange for financial reimbursement and guarantees of protection to the newly established republic. The United States had offered similar terms to Colombia, which then controlled Panama, in the Hay-Herrán Treaty (Jan. 22, 1903), but they were rejected by the Colombian government as an infringement on its national sovereignty and because it considered the compensation inadequate.

With the tacit approval of the U.S. government and the benevolent presence of the U.S. Navy in nearby waters, Panama declared its independence of Colombia on November 3, followed by de facto U.S. recognition three days later. On the 18th, Philippe Bunau-Varilla, representing Panama, met with Secretary of State John M. Hay in Washington, D.C., to negotiate the treaty that gave the United States in perpetuity a strip 10 miles (16 km) wide across the isthmus for canal construction. The United States was allowed to govern and fortify this Canal Zone. In return Panama was guaranteed its independence and received $10,000,000 outright plus an annuity of $250,000 beginning nine years later. The treaty was ratified by both countries in 1904, and the Panama Canal was completed in 1914.

From its inception, there were intermittent disputes over interpretation of the treaty and charges of U.S. discrimination against Panamanians in the zone. In 1978 two new treaties were concluded detailing the steps by which the United States would transfer to Panama full control over the zone and the canal in the year 2000. (Encyclopaedia Britannica Article)