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Panama and the US Foreign Policy in Central America

The Panama Canal serves as an anchor in global trade and maritime geostrategy. The canal stretches over 80 kilometres across the isthmus of Panama. This man-made waterway connects the Atlantic Ocean and the Pacific Ocean, being a key choke point for global trade and military movements. 

An Illustration on Panama Canal and US Foreign Policy in Central America

Illustration by The Geostrata

Upon its completion in 1914, the Panama Canal revolutionised trade by significantly reducing the distance and time taken to travel between the two oceans. Prior to the Panama Canal, vessels navigated via the treacherous and elongated route in the southern tip of South America through the Drake Passage or the Cape of Horn, increasing the cost and time of voyage.


Construction of the Panama Canal began in 1880, when the French developer and diplomat Ferdinand de Lesseps initiated the ambitious project. Initially, the plan was to create a sea-level canal, similar to the Suez Canal in Egypt. But the French faced significant challenges and hurdles, including heavy rainfall leading to landslides and widespread diseases like yellow fever and malaria, and deaths of more than 5000 workers in the tropical climate, and the rampant species of flora-fauna of Panama.

These factors proved to be impractical for a sea-level canal and led to a shift to constructing a lock canal, involving a system of locks to raise and lower water levels, which can allow ships to navigate further.


To expand US influence in the region and strategic significance, under President Theodore Roosevelt, a proposal was made to the Republic of Colombia (of which Panama was a part) for developing the Panama Canal Project. The Colombian government rejected the proposal citing a violation to its sovereignty, and the movement for the independence of Panama grew aggressively with US support. Eventually, in 1903, the Republic of Panama was recognised as an independent state.

The independence also included a bilateral treaty of Hay-Bunau-Varilla between the US and Panama for establishing the Panama Canal Zone and subsequent construction of the Panama Canal.

The canal was completed in 1914 and remained under US control until 1999. During this period, the canal played a strategically important role, including in World War II allowing US ships to maintain their strength in the Atlantic and Pacific Oceans, blocking Soviet warships during the Cold War, and generating revenue from transit fees of vessels. In 1977, after decades of negotiations, President Jimmy Carter agreed on a phased handover of the canal zone to Panama in view of diplomacy with the rest of America. US control of the canal zone, particularly military bases, was looked at as imperialist by nations in Central and South America.

Secondly, the Suez Canal Crisis of 1956 showcased the need for international waterways to be neutral and accessible to all. This return of the Canal Zone assured the rest of the nations of this region of fair trade relations with its neighbours. Moreover, the 1977 Canal Treaty stipulated that the US make the canal accessible to all the nations for trade relations including the communist nations.

The Cold War foreign policy of the United States under Carter regime continued such a decision on concerns of the USSR financing alternate canal development projects in Nicaragua and military presence in Grenada. Ratification of treaty and handing control of the Panama Canal Zone to Republic of Panama made it from being politically cut in half to geographically.


In contemporary times, the canal facilitates the transit of approximately 12,000 to 15,000 ships annually. The canal accommodates 46 percent of the total market share of containers moving from Northeast Asia to the East Coast of the United States. A single vessel navigates through the canal and uses around 50 million gallons of fresh water from the artificial lakes Alajuela and Gatun through the process of natural rainfall.

In 2023, the region witnessed lowest rainfall level since the 1950s, which has shown major challenges for the canal operations and restrictions, including limiting daily number ships to 24 slots from previous 36 slots, and cutting draft restrictions for vessels to traverse by the Panama Canal Authority (ACP). 


Addressing the current low water environmental problems requires solutions like water recycling systems, infrastructure enhancements for more efficient water usage, and building climate resilient infrastructure to mitigate the impacts of future droughts.

Deliberation to implement the solutions also emphasises the need for global cooperation among nations and intergovernmental organisations like the WTO and UNCTAD to plan, evaluate, and execute such sustainable and long term solutions.


Beyond trade, the Canal Zone holds geostrategic and military significance, one of which is the significant ability to rapidly deploy naval assets and strength through and between the Atlantic and Pacific Oceans, which is critical for many countries, particularly the United States, allowing them to project power and respond to potential threats across the region. The canal is an impetus for global maritime trade. 




3 commentaires

Good take on entire Panama Canal history, especially the USSR alternative point.


An amazing analysis of geopolitics of the Panama Canaal


Crucial to ensure security in the canal as a means of protecting vital global trade.

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