Ferdinand de Lesseps arrived in Panama flush with the triumph of Suez. The man who had connected the Mediterranean to the Red Sea would now connect the Atlantic to the Pacific -- or so his investors believed. In May 1879, he convened a congress in Paris where 136 delegates from 26 countries voted to approve his plan for a sea-level canal, dismissing the lock-and-lake alternative proposed by French engineer Baron Godin de Lepinay. It proved a fatal miscalculation. Panama was not Suez: instead of flat desert, the French faced torrential rains, landslides in the Culebra Cut, and the Chagres River in flood. The jungle was alive with venomous snakes and disease-carrying mosquitoes whose role in spreading yellow fever and malaria was not yet understood. By 1884, workers were dying at a rate of over 200 per month. De Lesseps kept the money and workers flowing long after targets had become impossible, but the enterprise went bankrupt in 1889. An estimated 22,000 men had died, $287 million had been spent, and the savings of 800,000 French investors were wiped out.

The Spanish-American War of 1898 gave the canal idea new urgency: American warships in the Atlantic had been forced to round Cape Horn to reach Pacific battle zones. When Colombia's Senate rejected a canal treaty in August 1903 by a vote of 24 to 0, President Theodore Roosevelt changed tactics. The United States sent warships to block Colombian troop movements and actively supported Panamanian independence. Panama declared independence on November 3, 1903; the United States recognized the new nation almost immediately. Philippe Bunau-Varilla, representing Panama, hastily signed a treaty granting the United States a 20-mile-wide zone with full governing authority. The Panamanians were pressured to accept the terms under threat of losing American protection. Roosevelt later boasted: "I took the Isthmus, started the canal and then left Congress not to debate the canal, but to debate me." The New York Times called it "an act of sordid conquest."

The Americans inherited a jumble of dilapidated French equipment and a workforce devastated by disease. Chief engineer John Frank Stevens, a self-educated railroad builder, understood that the canal would be won or lost on logistics and health. He rebuilt housing, cafeterias, and water systems, then threw his support behind Colonel William Gorgas's mosquito-abatement campaign -- fumigating buildings, spraying breeding areas with oil and larvicide, and eliminating stagnant water. Within two years, yellow fever and malaria were nearly eradicated. Stevens also championed the lock-and-lake design over a sea-level canal, creating what would be the world's largest dam at Gatun and the largest artificial lake of its time. When Stevens resigned in 1907, Army Major George Washington Goethals took over and drove the project to completion in 1914, two years ahead of schedule. About 5,600 workers died during the American construction phase, the great majority West Indian laborers from Barbados and Jamaica. The total cost approached $500 million.

For decades, the Canal Zone -- a strip of American territory bisecting Panama -- was a source of deepening resentment. The United States maintained its own courts, police, and civil government within the zone. Student protests were met with fencing and military buildup. On January 9, 1964, Martyrs' Day, riots left about 20 Panamanians and several American soldiers dead. The Suez Crisis of 1956 had already weakened the moral case for foreign canal control. A decade of negotiations produced the Torrijos-Carter Treaties of 1977, signed by President Jimmy Carter and Panamanian leader Omar Torrijos. At noon on December 31, 1999, the Panama Canal Authority assumed full control. The canal remains one of Panama's chief revenue sources, generating billions annually.

By 2011, 37 percent of the world's container ships were too large for the original locks. A $5.25 billion expansion, approved by Panamanian voters in 2006 and completed in 2016, added a third lane of Neopanamax locks capable of handling vessels carrying around 12,000 containers. The new locks use nine water-reuse basins per flight, recovering 60 percent of the water in each transit. That water efficiency matters: the canal consumes about 52 million gallons of fresh water per ship passage, drawn from Gatun Lake, which also supplies drinking water for much of Panama. During a severe drought in 2023-2024, daily transits dropped from the normal 36 to as few as 22 ships. The Panama Canal Authority announced plans for a $1.6 billion reservoir on the Indio River, expected to begin construction in 2027. Climate variability, geopolitical tensions, and the ever-growing scale of global shipping ensure the canal's next chapter will be as dramatic as its first.