The Spanish-American War of 1898, fought in Cuba and the Philippines, drove home to American politicians the need for a shorter interoceanic route for warships as well as commercial vessels.  In November 1901, the American secretary of state, John Hay, and the British foreign minister, Julian Pauncefote, signed a treaty that gave the United States exclusive rights to a canal across the Central American isthmus, and allowed the U.S. to be the sole guarantor of the canal’s neutralization (access to the ships of all nations).  In December 1901, Congress ratified the Hay-Pauncefote Treaty, and the House overwhelmingly passed a bill naming Nicaragua as the canal’s proposed site.

However, President Roosevelt and other influential leaders considered Panama to be a technologically easier and navigationally superior route.  More importantly, the New Panama Canal Company, a French corporation that had risen from the ashes of the previous failed venture, lowered the asking price for their holdings from $109 million to $40 million.  In June 1902, Congress enacted the Spooner Act, which gave the president the authority to purchase the French company’s canal holdings for the requested $40 million if Colombia agreed to grant the United States a territorial zone around the canal.  If agreement with Colombia could not be reached, Congress stipulated that the canal should be constructed in Nicaragua.

In January 1903, Secretary of State Hay signed a treaty with Colombian diplomat Tomas Herran, which gave the United States a 99-year lease, subject to renewal, to a canal zone in Panama in return for $10 million and annual rent of $250,000.  Disliking the open-ended nature of the lease, and hoping for a larger settlement from either the Americans or the French, the Colombian senate rejected the treaty in August 1903.  Roosevelt and Hay blamed Vice President Jose Marroquin, whom they judged to be the virtual dictator of Colombia, but his power was far less than they assumed.  Colombia was a poor country torn by political factions, civil war, and occasional independence uprisings in Panama.  Roosevelt and Hay, though, considered the Colombian refusal to be evidence of bad-faith negotiating and highway robbery (as in this cartoon).  The irate American president complained that the Colombian “jack rabbits should [not] be allowed permanently to bar one of the future highways of civilization.” 

Philippe Bunau-Varilla, a French engineer who had worked on the original canal project and was a strong advocate of the Panamanian route, and William Nelson Cromwell, the lawyer for the New Panama Canal Company, began working in the summer of 1903 to foment a rebellion by Panamanians, who were worried about losing the benefits of a canal through their region.  On October 10, Bunau-Varilla met with Roosevelt at the White House, where the Frenchman surprised the president by revealing that a Panamanian revolt was imminent.  Roosevelt did not give verbal support to the situation, but ordered the Pacific fleet to move toward Central America.  On November 3, 1903, the uprising began, and within two days Panama had secured its independence with only one human death.  An hour after learning of the news, the U.S. State Department granted de facto recognition to the Panamanian government, with formal recognition following on November 13. 

Five days later, on November 18, 1903, Secretary Hay and Bunau-Varilla, representing Panama, signed the Hay-Bunau-Varilla Treaty, which gave the United States sovereign authority over a canal zone in return for the $10 million and $250,000 annual rent originally offered to Colombia (the rent was raised over the years).  In 1904, the New Panama Canal Company received $40 million for rights to its canal holdings, and the United States immediately began constructing the canal.  President Roosevelt visited the site in 1906, becoming the first president to travel outside the country while in office.  Despite initial hardships, such as a Yellow Fever epidemic, the Panama Canal was officially opened in 1914.  In 1977, President Jimmy Carter signed the Panama Canal Treaty, which returned ownership to the Republic of Panama in 2000.