From 1819, Panama was part of the federation and country of Colombia but when Colombia rejected United States plans to build a canal across the Isthmus of Panama, the U.S. supported a revolution that led to the independence of Panama in 1903.
The new Panamanian government authorized French businessman Philippe Bunau-Varilla, to negotiate a treaty with the United States. The Hay-Bunau-Varilla Treaty allowed the U.S. to build the Panama Canal and provided for perpetual control of a zone five-miles wide on either side of the canal.
Although the French had attempted construction of a canal in the 1880s, the Panama Canal was successfully built from 1904 to 1914. Once the canal was complete the U.S. held a swath of land running the approximately 50 miles across the isthmus of Panama.
The division of the country of Panama into two parts by the U.S. territory of the Canal Zone caused tension throughout the twentieth century. Additionally, the self-contained Canal Zone (the official name for the U.S. territory in Panama) contributed little to the Panamanian economy. The residents of the Canal Zone were primarily U.S. citizens and West Indians who worked in the Zone and on the canal.
Anger flared in the 1960s and led to anti-American riots. The U.S. and Panamanian governments began to work together to solve the territorial issue. In 1977, U.S. President Jimmy Carter signed a treaty which agreed to return 60% of the Canal Zone to Panama in 1979. The canal and remaining territory, known as the Canal Area, was returned to Panama at noon (local Panama time) on December 31, 1999.
Additionally, from 1979 to 1999, a bi-national transitional Panama Canal Commission ran the canal, with an American leader for the first decade and a Panamanian administrator for the second. The transition at the end of 1999 was very smooth, for over 90% of the canal employees were Panamanian by 1996.
The 1977 treaty established the canal as a neutral international waterway and even in times of war any vessel is guaranteed safe passage. After the 1999 hand-over, the U.S. and Panama jointly shared duties in defending the canal.
Operation of the Panama Canal
The canal makes the trip from the east coast to the west coast of the U.S. much shorter than the route taken around the tip of South America prior to 1914. Though traffic continues to increase through the canal, many oil supertankers and military battleships and aircraft carriers can not fit through the canal. There's even a class of ships known as "Panamax," those built to the maximum capacity of the Panama canal and its locks.
It takes approximately fifteen hours to traverse the canal through its three sets of locks (about half the time is spent waiting due to traffic). Ships passing through the canal from the Atlantic Ocean to the Pacific Ocean actually move from the northwest to the southeast, due to the east-west orientation of the Isthmus of Panama.
Panama Canal Expansion
In September, 2007 work began on a $5.2 billion project to expand the Panama Canal. Expected to be complete in 2014, the Panama Canal expansion project will allow ships double the size of current Panamax to pass through the canal, dramatically increasing the amount of goods that can pass through the canal.