05 Jul 2006  Working Papers

What Roosevelt Took: The Economic Impact
of the Panama Canal, 1903-29

Executive Summary — The Panama Canal was expected to bring great economic benefits to the people of Panama. Instead, the United States received most of the benefits. This was a deliberate act on the part of the U.S. The U.S. didn't allow Panamanian businesses to sell goods or services in the Canal Zone, it avoided the employment of Panamanian workers, and it used its military leverage to force Panama into accepting a low payment for the Canal territory. Key concepts include:

  • The Panama Canal's greatest benefit was its effect on transportation between the east and west coasts of the U.S.
  • The main benefit for Panama of canal construction was the introduction of new healthcare technologies.
  • Developing countries should be wary of large infrastructure projects such as today's pipeline and land bridge projects.

 

Author Abstract

The Panama Canal was one of the largest public investments of its time. In the first decade of its operation, the Canal produced significant social returns for the United States. Most of these returns were due to the transportation of petroleum from California to the East Coast. Few of these returns, however, accrued to the Panamanian population or government. U.S. policy deliberately operated to minimize the effects of the Canal on the Panamanian economy. The major exception to this policy was the American anti-malarial campaign, which improved health conditions in the port cities.

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