The Great Panama Canal Giveaway

I have often wondered why in the world the US gave up the Panama Canal so easily. What follows is the best explanation I can muster.

The Great Panama Canal - Expanded with 2 sets of locks
Now the Canal has one more set for MONSTER ships

The Great Panama Canal Giveaway

The history between the US and Panama is a sordid one. The country that is Panama was created by and for the United States. When Colombia, which was the sovereignty in the area of the Canal in 1902, would not grant the US rights to build a canal (after the US had already paid good money to France for its interests in the Canal), the US simply initiated a “revolution” among the residents of what is now Panama to succeed from Colombia. With over 5,000 US Army troops, artillery and a full Navy battleship group backing the revolt, the Colombians ceded control after the first confrontation. And the US was quickly given not only the right to build and maintain the Canal, but sovereignty over the entire 580 square mile Canal Zone. The treaty was basically forced upon the Panamanians, as their “chief negotiator” was a US resident of Panamanian birth, who was not even appointed by the new Panama government.

On this dubious foundation, the US maintained absolute control of the Canal and Canal Zone for 80 years. Its huge military bases were clearly established for much more than simple protection of the Canal and included the nefarious Covert Jungle Warfare  training center. From the start, the people of Panama were not pleased with Uncle Sammy’s role in their affairs. Large US corporations like United Fruit and Coca-Cola enjoyed the protection of US military and CIA whenever they ran into labor problems. The US sent a warship to aid the Kuna tribe in obtaining their independence and sovereignty ( I still haven’t figured out why). Any government leaders in Panama who were anti-US seemed to have very short political careers. The US used its “big stick” very effectively. The US built the Canal, paid for it and protected it. Who could question its absolute rights to the Canal Zone?

Then why in the world, would the US “suddenly” decide to completely give up all of its interests and control of the Canal, the Canal Zone and all of the military and civilian bases, airports, hospitals, shopping centers, offices and housing – without ANY compensation. Indeed, the US agreed to PAY Panama almost $4 Billion dollars to “help with the transition costs” over the 20 years of the transition period. It was estimated at the time that the total package was worth around $50 Billion ($367B in todays $). That is one Helluva gift. The only “compensation” the US got was a priority in scheduling US flagged vessels through the Canal. Whoop-dee-doo.

There are five major reasons that are cited in various texts as the causes for this extraordinary transfer of wealth: 1. Col Torrijos and his coup government owed over $3B to mostly US banks. 2. US banks wanted another monetary “safe haven”  money laundering center, like the Caymans. 3. The US wanted to end its appearance of “Colonialism”.  4. Jimmy Carter wanted a political win. 5. Panama threatened violence if the Canal was not given.

1.     1   From the time Col Torrijos staged a military coup against the democratically elected government of Panama, he and his cronies began a borrowing spree of epic proportions. They amassed debts of over $3 Billion to mostly US banks and were on the verge of defaulting. This meant that the US banks put some serious pressure on the US government to get some money into the Panama treasury fast. To this day, most of that $3B has never been accounted for.

2.       2   US banks reached a side agreement with Torrijos to completely revise all banking regulations in Panama, allowing easy laundering of money, anonymous accounts and other advantages similar to those in the Bahama and Cayman islands. But, even better, Panama would give up use of the Balboa and use the US Dollar as its official currency.  And suddenly, every major US bank (BofA, WellsFargo, CitiCorp, Goldman, etc) had a subsidiary bank in Panama – for nefarious purposes, no doubt.

3.       3   This is the one that I had always heard quoted as the primary reason for the Canal gift. The US wanted to avoid the appearance of Colonialism, so that we would “look good” to the international community. Really? Yet we still propped up friendly governments and regimes all over the world and blatantly kept places like Puerto Rico afloat. There was a PR campaign that focused on the fact that Panamanians had to go through US Customs just to cross the Canal Zone to the other side of their own country.

4.       4     Jimmy Carter’s approval ratings were in the tank. He saw this opportunity for an “international political victory” and took it. Despite fierce opposition from conservatives (especially Strom Thurmond), he got Congressional approval. His administration sold a few lies to do it, but they got it done. I’ve never seen how giving away a huge asset is a great victory, but this supposedly was.

5.        5    After the student violence and riots in 1963, there was a subtle threat that guerilla tactics and violence would be used to disrupt operation of the Canal. This is to me the weakest of all arguments. Damage to the Canal would decrease revenues to Panama itself. Moreover, the US military presence in Panama was so strong , that seems unlikely.

So, bottom line : US banks put pressure on the US government to avoid losses and find a money laundering center, Carter administration wanted to make the deal (with a corrupt military coup leader and drug trafficker, who needed to be bailed out of huge debt), so the US could look “non Colonial” and avoid any further violence. All that for just $400 Billion of taxpayer money.

Such a deal.