The History of the Panama Canal

The History of the Panama Canal
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The Panama Canal, an engineering marvel.

The Panama Canal, an engineering marvel, has played a pivotal role in global maritime trade by connecting the Atlantic and Pacific Oceans. It was constructed primarily by the United States in order to shorten the length and time of ocean voyages between the countries of the North Atlantic and those of the North and South Pacific. 

The canal, spanning approximately 80 kilometers, was constructed in one of the narrowest parts of the continent, linking North and South America. Nowadays, it is operated by the Panama Canal Authority, an agency of the government of Panama that was granted control over it in 1999. The canal’s significance is in its construction and operation, maintenance, and socio-economic impact over the years. Its inception changed global trade and economies remarkably and enabled significant growth for businesses across the globe. 

The following post will cover critical aspects of the Panama Canal’s history, geography, operations, and engineering, focusing on its immense impact on world trade.

The Story of the Panama Canal

In order to understand the Panama Canal’s profound influence on world trade, we must first understand its history.

From Vision to Inception

The aspiration to carve a waterway across the Isthmus of Panama, bridging the Atlantic and Pacific oceans, can be traced back to the early 16th century. This dream was ignited by Vasco Nuñez de Balboa’s 1513 discovery that a mere strip of land separated the two vast oceans. The Holy Roman Emperor, Charles V (also the king of Spain, Charles I), initiated the idea of constructing a passage across the Isthmus. However, it would take centuries for technological advancement to make it a reality. 

The 1848 California gold discovery ignited the region’s development, predominantly via the Panama Railroad. The California gold rush heightened US interest in a canal. In 1852, a devastating cholera outbreak during Ulysses S. Grant’s military passage across Panama highlighted the urgent need for a safer and more efficient route. This experience would later influence President Grant, who, after his inauguration in 1869, sanctioned extensive survey expeditions to Central America between 1870 and 1875, aiming to identify the most viable location for a canal.

The Panama Canal’s early plans were marked by extensive explorations, geopolitical considerations, and the desire to connect two of the world’s largest oceans. Over time, these plans would materialize into one of history’s most significant engineering accomplishments.

Initial Planning of the Panama Canal

The Geographical Society of Paris 1876 initiated a committee led by Ferdinand de Lesseps, who oversaw the Suez Canal, in order to explore the possibility of building a canal in Central America. Lieutenant Lucien N. B. Wyse surveyed potential routes. After examining several paths, Wyse proposed a sea-level canal paralleling the Panama Railroad, requiring a tunnel through the Continental Divide at Culebra. This plan led to the Wyse Concession treaty with the Colombian government in 1878, granting exclusive rights to build the canal. Although construction began with enthusiasm, the project faced numerous challenges: Slides and inadequate equipment hindered progress, and the death toll from diseases like yellow fever and malaria soared, further dampening morale. By 1886, the realization dawned that a sea-level canal might be unfeasible within the projected time and budget. Alternative plans, including a lock canal, were considered. However, by 1888, the French effort was grinding to a halt, setting the stage for the inevitable American intervention.

The Geological and Environmental Challenges

The Isthmus of Panama, with its narrowest stretch spanning about 50 miles (about 80 km), presented a formidable landscape for canal construction. Characterized by mountains, dense jungles, swamps, and unpredictable weather patterns, the region posed significant challenges. The geological complexity of the land was particularly daunting. Panama’s mountains resulted from individual volcanic actions, a chaotic mix of hard rock interspersed with softer materials, marine cavities, and unpredictable strata. The dense tropical rainforest covering the terrain further complicated matters with its rapid growth threatening to reclaim any cleared areas.

Flooding, especially from the Chagres River, was a recurring issue. The region’s steep terrain meant heavy rainfall quickly flowed into the river, leading to rapid and devastating floods. 

The American Canal Construction

After the French Canal venture, Panama was seen worldwide as a symbol of failure. The US Isthmian Canal Commission initially favored a canal route through Nicaragua. However, the narrative changed when Theodore Roosevelt became president. For Roosevelt, the canal was not just a dream but a practical necessity for the US to assert its dominance on both coasts. He believed in the doctrine proposed by naval officer Thayer Mahan, which emphasized the importance of sea power in determining a nation’s strength. Therefore, despite popular sentiment favoring a Nicaraguan canal, Roosevelt pushed for the Panama route. 

The American construction project had to overcome the health and geographical challenges of this tortuous route: Dr. William C. Gorgas played a pivotal role in eradicating yellow fever from the Isthmus, and John F. Stevens, the chief engineer, introduced innovative systems for excavation and spoil disposal. He also championed the idea of a lock canal over a sea-level one, emphasizing its practicality and efficiency. 

The Innovation of the Panama Canal Locks

The Panama Canal uses a unique system of locks, which function as water lifts. These locks raise ships from sea level to the level of Gatun Lake, situated approximately 26 meters above sea level. This design and functionality of the locks were the conception of three men: Lieutenant Colonel Harry Hodges, Henry Goldmark, and Edward Schildhauer. Hodges was responsible for designing and constructing the lock gates, while Schildhauer, an electrical engineer, and Goldmark oversaw the lock gate design. The locks operate using water, which lifts ships 85 feet (roughly 26 meters) above sea level, allowing them to pass over the Continental Divide. The water flow generated the electrical power for the operation of the self-sufficient Canal system. The lock gates, known as miter gates, were designed as buoyant in water due to their hollow construction. The design and manufacturing of these gates were one of the canal’s most significant engineering achievements. The electric towing locomotive system, designed by Schildhauer, ensured complete control over vessels transiting the locks. The control system, which has been used for over eight decades, allows a single operator to manage the lock operation from a central control board.

The construction of these locks began with the first concrete laid at Gatun on August 24, 1909, and took four years to complete. The use of concrete was still in its infancy, and its application in the Panama Canal was groundbreaking. The original lock canal plan envisioned a series of locks at Gatun, Pedro Miguel, and Sosa Hill. However, in 1907, the locks at Sosa Hill were relocated to Miraflores due to a more stable foundation. All lock chambers were designed with dimensions of 110 by 1,000 feet and constructed in pairs to facilitate two lanes of traffic. With their massive size and innovative design, the locks were considered an engineering marvel. Despite the challenges, the results were remarkable. The concrete structures, including the locks and spillways, have remained in near-perfect condition for over 80 years.

Completion and Transition

The first complete Panama Canal passage by a self-propelled, oceangoing vessel occurred on January 7, 1914, with the Alexandre La Valley, an old French crane boat, passing through the Pacific locks. As the construction neared its end, significant changes took place. By April 1, 1914, the Isthmian Canal Commission was dissolved, giving way to the Canal Zone Governor, with Colonel Goethals becoming its first Governor.

Costs, Impact, and Legacy of the Panama Canal

With the Panama Canal project completed, travel distances between the Atlantic-Gulf coast, the Pacific coast, and South America have significantly been reduced.

Plans for a grand celebration marking the canal’s official opening on August 15, 1914, were made. However, the onset of World War I led to the cancellation of many planned festivities. The opening was a subdued event, with the Canal cement boat Ancon making the first official transit. The canal’s construction cost Americans approximately $375 million, deeming this construction project the most expensive in the US at the time. On top of that, the human cost was also significant, with hospital records indicating that 5,609 lives were lost during the American construction era. In the French era, the death toll was estimated to be around 22,000

Despite all that, the Panama Canal stands as a testament to human ingenuity, determination, and collaboration. Its construction bridged gaps, connected oceans, and brought people together, symbolizing the triumph of civilization over nature’s challenges.

The Canal’s Role in Reducing Transportation Costs and Fostering Economic Growth in the US.

The Panama Canal will become of benefit to American producers and traders by providing new and cheaper transportation facilities. The commercial value of the canal may be measured by its effect on service rates by water and rail. Research suggests that without the canal, transportation costs between the two seaboards of the United States would increase by an additional $3.00 – $3.50 per cargo ton. The tolls fixed for using the Panama Canal are $1.20 per net vessel ton (at the time of research). These allow better services and journeys to become more efficient and cost-effective.

The Evolution of Container Ships and the Influence of the Panama Canal

With its size limitations and subsequent expansion, the Panama Canal has played a pivotal role in shaping container ship classes and influencing global maritime trade routes. 

With the world’s growing economies and technology, the canal’s operational efficiency led to the need to innovate container ships. The first generation of container ships, emerging in the 1950s, were modified bulk vessels or World War II T2 tankers with capacities of up to 1,000 TEUs

As containerization gained attraction in the 1970s, fully cellular container ships (FCC) were introduced, dedicated solely to container transport. The Panama Canal’s size limitation, known as the Panamax standard, was reached in 1985 with ships having a capacity of about 4,000 TEUs. 

The demand led to the design of Panamax Max ships, optimized for the canal’s beam width constraints that can carry 5,000 TEUs. However, as time passed, economic demand drove container ships to outgrow the canal’s width, with capacities exceeding 20,000 TEUs by 2017. 

The Panama Canal Expansion

The Panama Canal’s expansion in June 2016 introduced the Neo-Panamax (NPX) class, designed specifically for the canal’s new locks. These ships, with capacities of about 12,500 TEU, are expected to become the new standard for decades, influencing port infrastructure design across the Americas and the Caribbean. The expansion enabled bulk trade routes from Brazil, Australia, and the US to China and Australia to India.

The Free Trade Zones of Panama

Panama has established special economic zones to bolster its position as a key logistics hub in the Americas. These zones, primarily along the Panama Canal’s Metropolitan corridor, provide businesses with cost advantages and a strategic vantage point to cater to Latin American markets. 

The Colon Free Zone (CFZ) on Panama’s Atlantic coast is the Western Hemisphere’s largest free-trade zone, serving as a primary distribution channel for reaching Latin American and Caribbean markets. Over 2,500 firms, including renowned brands, operate within the CFZ, focusing on B2B operations related to importing and re-exporting products. Additionally, the Panama Pacifico Special Economic Zone on the Pacific side houses over 160 companies, including giants like Dell and 3M. 

To further enhance its trade capabilities, the Panamanian government approved five new free trade zones in 2020 to support various sectors, including agro-industrial production and waste management for energy generation.

The Panama Canal’s Contribution Commerce

Since its inception, the Panama Canal has been a cornerstone of global maritime trade, offering a strategic shortcut between the Atlantic and Pacific Oceans. 

There are many benefits associated with the canal for small and medium businesses. Its efficiency translates to reduced transportation costs, enabling to maintain competitive pricing for their products. The canal’s capacity to accommodate a vast range of ship sizes means that businesses can benefit from its facilities regardless of their scale. This inclusivity helps to ensure that an access global markets without being overshadowed by larger corporations. 

The canal’s strategic location in Panama, a country with a stable economy, favorable trade policies, and the Free Trade Zone, offers a conducive environment for establishing trade relations and exploring new market opportunities. 

In essence, the Panama Canal helps to level the playing field, granting small to medium businesses access to the same global routes and markets as their larger counterparts. Its role in facilitating and streamlining international trade should not be underestimated, especially for SMBs striving to expand their reach and global presence.


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