The Panama Canal is one of the most important hubs of world trade. Since its inauguration in 1914, the canal has stood as one of the most impressive and significant engineering achievements in modern history.
This interoceanic passage connects the Atlantic Ocean with the Pacific, drastically shortening maritime routes and redefining global trade. Its history, marked by technical challenges, political conflicts, and economic milestones, highlights its strategic importance to Panama and the world.
Today, President-elect Donald Trump is sparking controversy with the Central American nation, criticizing the high fees it charges U.S. ships to use the canal, which was once administered by the United States.
Panama Canal: Origins of a vital passage for global trade
The idea of building a canal across the Isthmus of Panama dates to the 16th century, when Spanish explorer Vasco Núñez de Balboa crossed the isthmus in 1513 and envisioned linking the two oceans.
However, it was not until the 19th century that plans for a canal began to take shape. In 1880, France, under Ferdinand de Lesseps, the engineer behind the Suez Canal, began construction. The effort failed by 1889 due to technical challenges, diseases such as malaria and yellow fever, and inadequate planning.
In 1904, the United States took over the project after negotiating with Panama, which had recently gained independence from Colombia with U.S. support.
The project, directed by engineers John Frank Stevens and later George Washington Goethals, overcame disease through rigorous sanitation measures led by Dr. William C. Gorgas. After a decade of work, the Panama Canal was officially inaugurated on Aug. 15, 1914.
Evolution and transfer of the Panama Canal to Panamanian control
For much of the 20th century, the Panama Canal was administered by the United States, creating tensions between the two nations. The U.S. presence in the canal zone was seen as an infringement on Panamanian sovereignty, and the struggle for control of the canal became a central issue in Panama’s politics.
This conflict peaked on Jan. 9, 1964, during Martyrs’ Day, when a student demonstration advocating Panamanian sovereignty led to clashes with U.S. troops.
These events intensified the push for Panamanian control of the canal and paved the way for the signing of the Torrijos-Carter Treaties in 1977. These agreements established a gradual transfer of the canal to Panama, culminating on Dec. 31, 1999.
Since then, the Panama Canal Authority (ACP), a Panamanian government agency, has efficiently and cost-effectively managed the canal. The ACP has implemented major modernizations, including the inauguration of a third set of locks in 2016, known as the Expanded Canal.
This expansion accommodates larger vessels, called “Neopanamax,” and has doubled the canal’s capacity.
Economic impact and traffic: trade between two continents
The Panama Canal plays a crucial role in global trade. Approximately 6% of the world’s maritime trade transits through the canal, linking more than 160 countries and 1,700 ports.
In 2023, the Panama Canal Authority (ACP) reported that over 14,000 ships crossed the canal, transporting nearly 516 million tons of cargo. The United States, China, and Japan are among its primary users.
The canal generates significant economic value. In fiscal year 2023, revenues reached $4.8 billion, making it a vital source of income for Panama. Tolls, calculated based on a vessel’s type, size, and cargo, can exceed $500,000 for the largest ships.
Despite its success—and even before the controversy with President-elect Trump—the canal faces challenges. Climate change and fluctuating water levels in Gatun Lake, its main water source, threaten its operability. Additionally, competition from alternative routes, such as the Suez Canal and the Arctic passage, poses a challenge to its relevance.
To address these issues, the ACP is investing in sustainable initiatives, including water reuse projects and energy-efficient technologies. The canal is also diversifying its services, offering additional logistics solutions and positioning itself as a global hub.
Controversy with the US and need for agreement between the two countries
Despite the recent controversy sparked by statements from U.S. President-elect Donald Trump, most economic experts agree that pursuing an agreement between the United States and Panama is the most practical solution.
The Panama Canal stands as a testament to human ingenuity in overcoming engineering challenges, as well as an economic engine and a symbol of Panamanian sovereignty. Over its history, the canal has adapted to meet the demands of global trade and, under Panamanian administration, has become a source of national pride and progress.
In the near future, despite Nicaragua’s efforts to construct an alternative maritime route and Colombia’s plans to connect the oceans by land, the Panama Canal remains the dominant player in interoceanic traffic. It continues to be a critical component of the global economy and a bridge connecting cultures and markets.