ANALYSIS | Panama turned its canal into a business. History shows why Trump’s threats are worrying

cnn
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The Panama Canal, born from “gunboat diplomacy,” is once again threatened from the United States.

More than 100 years after the engineering marvel that linked the Atlantic and Pacific oceans was built, and 25 years after the United States returned the canal to Panama, the waterway faces new intimidation from a president of the United States.

US President Donald Trump promised in his inauguration speech on Monday to bring back the channel. “We have been treated very badly since this foolish gift that should never have been given and the promise that Panama made to us has been broken,” Trump said, claiming that Panama overcharges the US Navy to transit the canal.

“Above all, China is operating the Panama Canal,” Trump also said, a frequent claim he has made without providing any evidence. “And we didn’t give it to China, we gave it to Panama and we are going to get it back!”

Panamanian authorities have rejected Trump’s latest claims that the country charges ships too much to transit the canal or that China has secretly taken control of the waterway.

Still, their threats are not taken lightly by Panamanians, who consider the canal fundamental to their national identity and depend on its lucrative traffic. In 2024, the channel obtained total profits of almost US$5 billion. According to a study published in December by IDB Invest, 23.6% of Panama’s annual income comes from the canal and the companies that provide services related to its operation.

Panama has also suffered several US military interventions over the years.

“All he (Trump) needs is to land ten thousand soldiers and that’s it,” said Ovidio Díaz-Espino, born in Panama and author of “How Wall Street Created a Nation: JP Morgan, Teddy Roosevelt, and the Panama Canal.” . And he added: “We don’t have an army.”

In 1903, Panama was a restive department of Colombia, with many Panamanians openly advocating independence from a central government on the other side of the impassable jungle of the Darien Gap that they felt neglected them. Colombia, however, had little interest in parting with this strategically located territory.

For generations, foreigners had considered the narrow isthmus the perfect place to build a transoceanic canal that would shorten sea travel by thousands of miles. Ships would no longer have to circumnavigate South America, braving the treacherous waters of Cape Horn. But the excavation of the so-called “Great Ditch” was much more difficult than any previous undertaking.

A French attempt to build a canal in the 1880s ended in disaster after dozens of workers died from yellow fever and malaria, amid accusations of financial mismanagement. The attempt, led by famed Suez Canal promoter Ferdinand de Lesseps, virtually bankrupted France.

Failing to reach an agreement with Colombia to build a canal, then-United States President Theodore Roosevelt sent gunboats to Panama’s Atlantic and Pacific coasts to support calls for the country’s independence. But the celebrations in Panama after declaring independence were short-lived; Public opinion in the new nation quickly deteriorated over a treaty signed with the United States that granted Americans unlimited use of the future canal.

The Panamanians accused their envoy to the United States, the French engineer and military man Philippe-Jean Bunau-Varilla, of betraying their interests to enrich themselves with the agreement. But Panama had its hands tied by depending on the United States to protect its freedom from Colombia.

The United States hired workers from across the Caribbean to build the canal. An ingenious system of locks designed by the US Army Corps of Engineers lifted ships from ocean level to Gatun Lake, the largest artificial lake at the time, from where they could cross the isthmus.

The final explosion that flooded the canal was caused from the White House via telegraph in 1913 by then-President Woodrow Wilson. “Channel opens with Wilson’s finger,” read the headline in The New York Times the next day.

The canal, controlled by the United States, quickly became a vital asset for American commerce and the Navy.

Panama received an initial payment of US$10 million from the US for the territory, followed by US$250,000 each year. Many Panamanians were upset that the canal that divided their country in half was closed to them.

“It was colonialism. The country was divided in two and you couldn’t even enter,” said author Díaz-Espino about the Canal zone. “They had everything. “They had golf courses, they had recreation centers and on the other side of the fence was Panama.”

Tensions continued to rise until, in January 1964, riots broke out after protesters entered the closed area of ​​the Canal and attempted to raise the Panamanian flag there. Twenty-two Panamanian students and four US Marines were killed in the clashes that followed.

For 13 years, U.S. and Panamanian officials debated a plan to return the canal to Panama, under both Democratic and Republican administrations. Finally, in 1977, then-President Jimmy Carter reached an agreement with then-Panamanian strongman Omar Torrijos for the U.S. and Panama to jointly manage the crucial waterway, and the canal would be returned in its entirety to Panama at midnight on the 31st. December 1999.

“Equity, not force, must be the basis of our relations with the nations of the world,” Carter declared at the signing ceremony of the agreements.

However, the final agreement still gave the US the right to intervene militarily to keep the canal open, a condition that Trump could exploit in an attempt to retake the canal by force, but which would likely not be subject to legal scrutiny. , as the channel continues to record record traffic.

In 2007, Panama began work on the largest expansion of the canal in almost a century, a new set of locks that would allow the passage of larger ships, more than one and a half times the size of the ships that previously transited the waterway. . The new locks cost Panama more than US$5 billion and came into operation in 2016. They also more than doubled the maritime traffic the canal could support.

“We paid for it, we built it, and right now more than 55% of the income of the Panama Canal comes from that investment, not from the American investment that they made so long ago,” the former administrator of the Panama Canal told CNN. Jorge Luis Quijano.

The expanded canal has brought billions of dollars to Panama and helped the country become a rare bastion of stability in Central America, where other nations are beset by poverty and violent drug trafficking that fuel emigration to the United States.

And its success has not gone unnoticed. “Panama is doing so well with the canal, there are so many workers, there are so many jobs,” Trump said in 2011. “The United States foolishly gave the canal for nothing.”

Panamanian authorities have made it clear that they would not tolerate any attempt to seize the lucrative waterway, through which about 5% of all global maritime traffic passes. “I fully reject President Donald Trump’s insinuating words in his inaugural address related to Panama and its canal,” Panamanian President José Raúl Mulino said on X on Monday. “The Canal is and will continue to be Panama’s and its administration will continue to be under Panamanian control with respect to its permanent neutrality.”

But the specter of another American intervention has raised alarm bells for a country that depends as much on its namesake waterway as on good relations with Washington.

“The Panama Canal is our oil, and this is as if they were threatening to take away Saudi Arabia’s oil, to take away our oil wells,” Díaz-Espino said. “This would be devastating for the country. “We would be left with debt and without income.”