Omar Torrijos and Carter shaking hands after signing the Torrijos-Carter Treaty in 1977

From 1903 until 1999, the United States and Panama had multiple disputes concerning the Panama Canal. These include sovereignty, entitlements from economic transport, land disputes, military involvement, and economics. Throughout the time the United States and Panama began their relations, the Panama Canal has been the source of debate for Panama to become more stable. Increases in tolls, rent, and payment of funds were always topics for Panama to bring to the United States into negotiations to improve the situation for Panama financially.

History of the TreatiesEdit

During the relations concerning the Canal and Panama with the United States, Panama and the US produced two separate treaties. The first was the Hay-Bunau Varilla Treaty in November 1903. This treaty was modified numerous times, once in 1936 then later in 1955. The Treaty was a hot button issue for much of the United States and Panamanian diplomacy leading to the tension leading the new treaty forged in 1977.

In 1977 after many years of internal conflict between the Canal Zone and Panamanian Citizens (see Martyr's Day ), Panama and the United States created a new treaty. Such events as the Riots of 1964 encouraged the United States and Panama to renegotiate the Hay-Bunau Varilla Treaties in an effort to ease tension. Panama, under Omar Torrijos, negotiated for much of the 1970’s to create a new treaty that reworked the Canal Zone and modify the distribution of income from the Canal. In 1969 the Canal Zone profits reached $15.6 million dollars but only one-seventh made it to Panama (LaFeber 139). This prompted the discussion then demand from the Panamanian government to the United States for the Canal. Torrijos and President Carter created the Torrijos-Carter treaty in 1977 which led to the turnover of the Panama Canal in 1999.

Finances of TreatiesEdit

Hay-Bunau Varilla TreatyEdit

The Hay treaty established in 1903 first began by offering Panama a limited amount of money. First, the treaty offered “ten million dollars in gold coin of the United States on the exchange of the ratificiation of this convention (Lafeber 229)” and then nine years later would provide an annual payment of $250,000 in US currency.

Philippe-Jean Bunau-Varilla, architect of Panamanian independence and U.S. control of the Panama Canal

In 1936 during the depression era, Arnulfo Arias, the President of Panama was worried about his suffering country. In 1933, 50,000 workers were unemployed (1/4 of the countries workforce) and had over $18 million dollars in debt (LaFeber 66-67). In order to combat this, Arias’s only choice was to ask the United States for help. The United States, led by President Franklin Roosevelt, negotiated a modification of the Hay-Bunau Varilla Treaty to offer more economic concessions to Panama that lessened competition between Panamanian and Zonian merchants. In addition, the annual annuity from the canal was raised to $430,000 dollars. This treaty also ended the United States’ right to acquire land, and also allowed Panama to have radio stations (Conniff 91) However, the hope of an economic increase did not serve that much of an increase because Roosevelt had devalued the dollar so the US was not paying more in rent.

The second modification to the Hay-Banau Varilla Treaty in 1955 between President Remón of Panama and President Eisenhower of Panama led to some economic increases to Panama from the United States. Before the treaty debate began, Remón brought forth a large national pride with the sl ogan “Neither Alms nor Millions, We Want Justice” (LaFeber 92). The modifications ratified in 1955 allowed the Panamanian people to tax canal employees, made stronger contraband rules, raised the annual annuity to $1.93 million dollars, returned railroad property to Panama City and Colon, a bridge over the canal, and equal pay to all employees no mater nationality (Conniff 108-109).

Torrijos-Carter TreatyEdit

After the turmoil reached its boiling point and the tension became too great, the new caudillo leader of Panama, Omar Torrijos, was determined that Panama must become a sovereign state (LaFeber 132). Panama received a great deal from this treaty ultimately ending in the transfer of the canal on December 31, 1999. The treaty first provided that the United States pay Panama $10 million dollars annually for utilities and services in the Canal Zone. Also, the United States would pay $10 million dollars annual annuity to Panama for the Canal and bases. For each ton of cargo going through the canal, the United States would pay $0.30 from Canal revenue (i.e. tolls). Lastly, the Canal would be transferred to the Republic of Panama in 2000 and all operating costs, revenue, and maintenance would be the sovereign control of Panama (LaFeber 230-238).

Implications for Dependency TheoryEdit

Dependency of Panama Seen in TreatiesEdit

The Dependency theory, stated by Black, theorizes that Latin American countries are dependent upon empowered countries such as the United States for much of their outside revenue and are unable to develop because “nations [need to] gain control over their own decision making and expand the options available to them” (Black 10). This dependency can be seen in the decision making of Panama through these treaties providing a historical indicator as to why Panama was so dependent on the United States and unable to expand economically through the last 100 years.

Hay-Bunau Treaty and Later IncarnationsEdit

Arias first made the trip to the United States in 1936 to negotiate with Roosevelt to battle the depression plaguing the country. With a fourth of the country out of work and 14.5 million dollars in defaulted loans, Panama was in need of help (LaFeber 66). Arias had lost all other options and needed to use the Canal and the Canal Zone as a means of revenue. By going to the United States to negotiate the treaty modifications, Arias set a precedent for dependency on the United States through use of the Canal annuities and the Zonian citizens. In only garnering a slight increase in funds, he restricted his country to the United States for help. This reiterates Black’s dependency in that it denoted Panama’s status in the international arena as economically dependent (Black 10).

Remón in 1954 began discussions with Eisenhower to discuss economic reform in order to fund the necessary economic development of the many social programs that he wanted to implement. The debates surrounded the dependency theory in this situation mainly stem from the fact that “development would not take place through the ‘trickle-down’ of wealth” (Black 10). The lack of Panama to allow the country to build the infrastructure for many of Remón’s programs caused Panama to, as Black states, brings “no solution to the problem of the impoverishment of the masses” (Black 10). Panama may have benefitted from the increase in funds and tax rights but lost the chance to build their own level of self-sustainability.

Torrijos-Carter TreatyEdit

The Torrijos-Carter Treaty showed Panaman’s dependency one more time before Panama removed itself from the direct dependency of the United States at the termination of the treaty in 2000. Torrijos economic concerns grew as the zero growth economy in 1976 caused exports to decrease and inflation made it difficult for the people of Panama (LaFeber 157). Also, Torrijos had created an extremely large debt with foreign backs, expanding the dependency on foreign aid for the development of his programs (LaFeber 157). Torrijos believed that the only way for Panama to get out of the large debt was through Canal revenues and he needed the United States to do that. Through the debate and finally the ratification of the treaty in 1977, Torrijos succeeded in getting some money from the United States through annuity increases. He also succeeded in getting Panamanian control of the Canal in the future and weakening the dependency of Panama on outside powers.


Black, J. K. (2005). Latin America, Its Problems And Its Promise: A Multidisciplinary Introduction, Second Edition(4th ed.). Oxford: Westview Press.

Conniff, M. L. (2001). Panama and the United States: The Forced Alliance (United States and the Americas) (2 ed.). Athens, Ga: University of Georgia Press.

Lafeber, W. (1990). The Panama Canal: The Crisis in Historical Perspective (Updated Edition ed.). New York: Oxford University Press, USA.

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