What was the Panama Canal Zone (1903-1979)?


The Panama Canal Zone (Spanish: Zona del Canal de Panamá) was an unincorporated territory of the United States from 1903 to 1979, centred on the Panama Canal and surrounded by the Republic of Panama. The zone consisted of the canal and an area generally extending five miles (8.0 km) on each side of the centreline, excluding Panama City and Colón, which otherwise would have been partly within the limits of the Zone. Its border spanned three of Panama’s provinces. When reservoirs were created to assure a steady supply of water for the locks, those lakes were included within the Zone.

Although a US territory, the Zone did not have formal boundary restrictions on Panamanians transiting to either half of their country, or for any other visitors. A Panama Canal fence did exist along the main highway, although it was only a safety measure to separate pedestrians from traffic, and some of the US territory was beyond it. In Panama City, if there were no protests interfering with movement, one could enter the Zone simply by crossing a street.

In 1904, the Isthmian Canal Convention was proclaimed. In it, the Republic of Panama granted to the US in perpetuity the use, occupation, and control of a zone of land and land under water for the construction, maintenance, operation, sanitation, and protection of the canal. From 1903 to 1979, the territory was controlled by the US, which had purchased the land from the private and public owners, built the canal and financed its construction. The Canal Zone was abolished in 1979, as a term of the Torrijos-Carter Treaties two years earlier; the canal itself was later under joint US-Panamanian control until it was fully turned over to Panama in 1999.


Proposals for a Canal

Proposals for a canal across the Isthmus of Panama date back to 1529, soon after the Spanish conquest. Álvaro de Saavedra Cerón, a lieutenant of conquistador Vasco Núñez de Balboa, suggested four possible routes, one of which closely tracks the present-day canal. Saavedra believed that such a canal would make it easier for European vessels to reach Asia. Although King Charles I was enthusiastic and ordered preliminary works started, his officials in Panama soon realized that such an undertaking was beyond the capabilities of 16th-century technology. One official wrote to Charles, “I pledge to Your Majesty that there is not a prince in the world with the power to accomplish this”. The Spanish instead built a road across the isthmus. The road came to be crucial to Spain’s economy, as treasure obtained along the Pacific coast of South America was offloaded at Panama City and hauled through the jungle to the Atlantic port of Nombre de Dios, close to present day Colón. Although additional canal building proposals were made throughout the 16th and 17th centuries, they came to naught.

The late 18th and early 19th centuries saw a number of canals built. The success of the Erie Canal in the United States and the collapse of the Spanish Empire in Latin America led to a surge of American interest in building an interoceanic canal. Beginning in 1826, US officials began negotiations with Gran Colombia (present-day Colombia, Venezuela, Ecuador and Panama), hoping to gain a concession for the building of a canal. Jealous of their newly obtained independence and fearing that they would be dominated by an American presence, the president Simón Bolívar and New Granadan officials declined American offers. The new nation was politically unstable, and Panama rebelled several times during the 19th century.

In 1836, US statesman Charles Biddle reached an agreement with the New Granadan government to replace the old road with an improved one or a railroad, running from Panama City on the Pacific coast to the Chagres River, where a steamship service would allow passengers and freight to continue to Colón. His agreement was repudiated by the Jackson administration, which wanted rights to build a canal. In 1841, with Panama in rebellion again, British interests secured a right of way over the isthmus from the insurgent regime and occupied Nicaraguan ports that might have served as the Atlantic terminus of a canal. In 1846 the new US envoy to Bogotá, Benjamin Bidlack, was surprised when, soon after his arrival, the New Granadans proposed that the United States be the guarantor of the neutrality of the isthmus. The resulting Mallarino–Bidlack Treaty allowed the United States to intervene militarily to ensure that the interoceanic road (and when it was built, the Panama Railroad as well) would not be disrupted. New Granada hoped that other nations would sign similar treaties, but the one with the United States, which was ratified by the US Senate in June 1848 after considerable lobbying by New Granada, was the only one.

The treaty led the US government to contract for steamship service to Panama from ports on both coasts. When the California Gold Rush began in 1848, traffic through Panama greatly increased, and New Granada agreed to allow the Panama Railroad to be constructed by American interests. This first “transcontinental railroad” opened in 1850. There were riots in Panama City in 1856; several Americans were killed. US warships landed Marines, who occupied the railroad station and kept the railroad service from being interrupted by the unrest. The United States demanded compensation from New Granada, including a zone 20 miles (32 km) wide, to be governed by US officials and in which the United States might build any “railway or passageway” it desired. The demand was dropped in the face of resistance by New Granadan officials, who accused the United States of seeking a colony.

Through the remainder of the 19th century, the United States landed troops several times to preserve the railway connection. At the same time, it pursued a canal treaty with Colombia (as New Granada was renamed). One treaty, signed in 1868, was rejected by the Colombian Senate, which hoped for better terms from the incoming Grant administration. Under this treaty, the canal would have been in the middle of a 20-mile zone, under American management but Colombian sovereignty, and the canal would revert to Colombia in 99 years. The Grant administration did little to pursue a treaty and, in 1878, the concession to build the canal fell to a French firm. The French efforts eventually failed, but with Panama apparently unavailable, the United States considered possible canal sites in Mexico and Nicaragua.

The Spanish-American War of 1898 added new life to the canal debate. During the war, American warships in the Atlantic seeking to reach battle zones in the Pacific had been forced to round Cape Horn. Influential naval pundits, such as Captain Alfred Thayer Mahan, urged the construction of a Central American canal. In 1902, with the French efforts moribund, US president Theodore Roosevelt backed the Panama route, and Congress passed legislation authorising him to purchase the French assets on the condition that an agreement was reached with Colombia. In March 1902 Colombia set its terms for such a treaty: Colombia was to be sovereign over the canal, which would be policed by Colombians paid for by the United States. The host nation would receive a larger percentage of the tolls than provided for in earlier draft treaties. The draft terms were quickly rejected by American officials. Roosevelt was in a hurry to secure the treaty; the Colombians, to whom the French property would revert in 1904, were not. Negotiations dragged on into 1903, during which time there was unrest in Panama City and Colón; the United States sent in Marines to guard the trains. Nevertheless, in early 1903, the United States and Colombia signed a treaty which, despite Colombia’s previous objections, gave the United States a 6 miles (9.7 km) wide zone in which it could deploy troops with Colombian consent. On 12 August 1903, the Colombian Senate voted down the treaty 24-0.

Roosevelt was angered by the Colombians’ actions, especially when the Colombian Senate made a counteroffer that was more financially advantageous to Colombia. A Frenchman who had worked on his nation’s canal efforts, Philippe Bunau-Varilla, represented Panamanian insurgents; he met with Roosevelt and with Secretary of State John Hay, who saw to it that his principals received covert support. When the revolution came in November 1903, the United States intervened to protect the rebels, who succeeded in taking over the province, declaring it independent as the Republic of Panama. Bunau-Varilla was initially the Panamanian representative in the United States, though he was about to be displaced by actual Panamanians, and hastily negotiated a treaty, giving the United States a zone 20 miles (32 km) wide and full authority to pass laws to govern that zone. The Panama Canal Zone (Canal Zone, or Zone) excluded Panama City and Colón, but included four offshore islands, and permitted the United States to add to the zone any additional lands needed to carry on canal operations. The Panamanians were minded to disavow the treaty, but Bunau-Varilla told the new government that if Panama did not agree, the United States would withdraw its protection and make the best terms it could with Colombia. The Panamanians agreed, even adding a provision to the new constitution, at US request, allowing the larger nation to intervene to preserve public order.

Construction (1903-1914)

The treaty was approved by the provisional Panamanian government on 02 December 1903, and by the US Senate on 23 February 1904. Under the treaty, Panama received US$10 million, much of which the United States required to be invested in that country, plus annual payments of US$250,000; with those payments made, as well as for the purchase of the French company assets, the Canal Zone was formally turned over by Panama on 04 May 1904, when American officials reopened the Panama City offices of the canal company and raised the American flag. This marked the beginning point for US excavation and construction which concluded in August 1914 with the opening of the canal to commercial traffic.


By order of President Theodore Roosevelt under the Panama Canal Acts of 1902 and 1904 the secretary of War was made supervisor of canal construction and the second Isthmian Canal Commission made the governing body for the Canal Zone. Under the Panama Canal Act of 24 May 1912, President Woodrow Wilson issued Executive Order 1885, 27 January 1914, effective 01 April 1914, abolishing the previous governance placing it under the direction of the secretary of War with the entity designated as The Panama Canal. The governor of the Panama Canal was charged with “completion, maintenance, operation, government and sanitation of the Panama Canal and its adjuncts and the government of the Canal Zone” in the Executive Order. A number of departments were specified in the order with others to be established as needed by the governor of the Panama Canal with approval of the president and under the supervision of the secretary of War. Defence of the canal was the responsibility of the secretary of War who retained control of troops with provisions for presidential appointment of an Army officer in wartime who would have “exclusive authority over the operation of the Panama Canal and the Government of the Canal Zone.” The executive order noted in closing “that the supervision of the operations of the Panama Canal under the permanent organisation should be under the Secretary of War” thus establishing the essentially military arrangement and atmosphere for the canal and Canal Zone.

On 05 September 1939 with the outbreak of war in Europe Executive Order 8232 placed governance of the Canal and “all its adjuncts and appurtenances, including the government of the Canal Zone” under the exclusive control of the Commanding General, Panama Canal Department for the duration.

Effective 01 July 1951, under an act of Congress dated 26 September 1950 (64 Stat. 1038), governance of the Canal Zone was through the Canal Zone Government with the canal operated by the Panama Canal Company until 1979 when the Panama Canal Commission took over its governance. The entire structure was under the control of the United States government with the secretary of the Army appointing the Panama Canal Company board of directors and the Canal Zone Government was entirely financed by the company. The office of the governor of the Panama Canal Zone was not usually a stepping stone to higher political office but a position given to a US Army active duty general officers of the United States Army Corps of Engineers. The governor was also president of the Panama Canal Company. The Canal Zone had its own police force (the Canal Zone Police), courts, and judges (the United States District Court for the Canal Zone). Despite being an unincorporated territory, the Canal Zone was never granted a congressional delegate.

Everyone worked for the company or the government in one form or another. Residents did not own their homes; instead, they rented houses assigned primarily based on seniority in the zone. When an employee moved away, the house would be listed and employees could apply for it. The utility companies were also managed by the company. There were no independent stores; goods were brought in and sold at stores run by the company, such as a commissary, housewares, and so forth.

In 1952, the Panama Canal Company was required to go on a break-even basis in an announcement made in the form of the president’s budget submission to the United States Congress. Though company officials had been involved in previewing the requirement, there was no disclosure in advance, even though the Bureau of the Budget directed that the new régime become effective on 01 March. The company organisation was realigned into three main divisions; Canal Activity and Commercial Activity with the Service Activity providing services to both operating activities at rates sufficient to recover costs. Rate adjustments in housing and other employee services would be required and a form of valuation, compared to a property tax, would be used to determine each division’s contribution to the Canal Zone Government.

Tensions and the End of the Canal Zone

In 1903, the United States, having failed to obtain from Colombia the right to build a canal across the Isthmus of Panama, which was part of that country, sent warships in support of Panamanian independence from Colombia. This being achieved, the new nation of Panama ceded to the Americans the rights they wanted in the Hay-Bunau-Varilla Treaty. Over time, though, the existence of the Canal Zone, a political exclave of the United States that cut Panama geographically in half and had its own courts, police, and civil government, became a cause of conflict between the two countries. Major rioting and clashes occurred on 21 May 1958 and on 03 November 1959. Demonstrations occurred at the opening of the Thatcher Ferry Bridge, now known as the Bridge of the Americas, in 1962 and serious rioting occurred in January 1964. This led to the United States easing its controls in the Zone. For example, Panamanian flags were allowed to be flown alongside American ones. After extensive negotiations, the Canal Zone ceased to exist on 01 October 1979, in compliance with provisions of the Torrijos-Carter Treaties.

Lifestyle of Residents

“Gold” Roll and “silver” Roll

During its construction and into the 1940s, the labor force in the Canal Zone (which was almost entirely publicly employed) was divided into a “gold” roll (short for payroll) classification, and a “silver” roll classification. The origins of this system are unclear, but it was the practice on the 19th-century Panama Railroad to pay Americans in US gold and local workers in silver coin. Although some Canal Zone officials compared the gold roll to military officers and the silver roll to enlisted men, the characteristic that determined on which roll an employee was placed was race. With very few exceptions, American and Northern European whites were placed on the gold roll, and blacks and southern European whites on the silver roll. American blacks were generally not hired; black employees were from the Caribbean, often from Barbados and Jamaica. American whites seeking work as labourers, which were almost entirely silver roll positions, were discouraged from applying. In the early days of the system, bosses could promote exceptional workers from silver to gold, but this practice soon ceased as race came to be the determining factor. As a result of the initial policy, there were several hundred skilled blacks and Southern Europeans on the gold roll. In November 1906, Chief Engineer John Stevens ordered that most blacks on the gold roll be placed on the silver roll instead (a few remained in such roles as teachers and postmasters); the following month, the Canal Commission reported that the 3,700 gold roll employees were “almost all white Americans” and the 13,000 silver roll workers were “mostly aliens”. On 08 February 1908, President Roosevelt ordered that no further non-Americans be placed on the gold roll. After Panamanians objected, the gold roll was reopened to them in December 1908; however, efforts to remove blacks and non-Americans from the gold roll continued.

Until 1918, when all employees began to be paid in US dollars, gold roll employees were paid in gold, in American currency, while their silver roll counterparts were paid in silver coin, initially Colombian pesos. Through the years of canal construction, silver roll workers were paid with coins from various nations; in several years, coin was imported from the United States because of local shortages. Even after 1918, both the designations and the disparity in privileges lingered.

“Diasporisation” in the Panama Canal Zone

Until the end of World War II in 1945, the Panama Canal Zone operated under a Jim Crow society, where the category of “gold” represented white, US workers and the title “silver” represented the non-white, non-US workers on the Zone. There were even separate entrances for each group at the Post Office. After the strike of 1920, the Afro diasporic workers were banned from unionising by the US Canal officials. As a result, the Panama Canal West Indian Employees Association (PCWIEA) was created in 1924 to fill this vacuum of representation. The PCWIEA did not garner much support on the Canal Zone because of its restrictive membership policies and the haunting of the 1920 strike and its damaging consequences. However, in 1946, the PCWIEA summoned the Congress of Industrial Organisations (CIO) for representation and the establishment of a local union. In July of that year, the West Indian and Panamanian workers received a charter for Local 713 of the United Public Workers of America (UPWA)-CIO. Together, with the assistance of U.S. representatives for the Local, these Afro-diasporic workers came together to secure material benefits in their livelihoods. They organised together in order to pose a serious threat to the Jim Crow system which resulted, however, only in minimal gains. American segregationist policies persisted as it related to housing and schooling. In the end, ties to communism destroyed the UPWA and as a result Local 713 collapsed. Nevertheless, Frank Gurridy describes this as diasporisation, “diaspora in action, or the ways Afro-diasporic linkages were made in practice”. In the case of the Panama Canal Zone, these linkages were made not only by the West Indian and Panamanian communities, but also between the Afro descended workers on the Zone and African Americans, on the mainland of the US, through the transnational struggle to dismantle the system of Jim Crow.

Community (Housing and Goods)

Canal Zone housing was constructed in the early days of construction, as part of Stevens’ plans. Housing constructed for couples and families consisted of structures containing four two-story apartments. The units had corrugated-iron roofs, and were uniformly painted gray with white trim. Constructed of pine clapboard, they had long windows and high ceilings, allowing for air movement. Better-paid employees were entitled to more square feet of housing, the unit in which allowances were expressed. Initially, employees received one square foot per dollar of monthly salary. Stevens from the first encouraged gold roll employees to send for their wives and children; to encourage them to do so, wives were granted a housing allowance equal to their husband’s, even if they were not employees. Bachelors mostly resided in hotel-like structures. The structures all had screened verandas and up-to-date plumbing. The government furnished power, water, coal for cooking, ice for iceboxes, lawn care, groundskeeping, garbage disposal, and, for bachelors only, maid service.

In the first days of the Canal Zone, the ICC provided no food, and workers had to fend for themselves, obtaining poor-quality food at inflated prices from Panamanian merchants. When Stevens arrived in 1905, he ordered food to be provided at cost, leading to the establishment of the Canal Zone Commissary. The functions of the Commissary quickly grew, generally against the will of the Panamanian government, which saw more and more goods and services provided in the Zone rather than in Panama. Merchants could not compete with the commissary’s prices or quality; for example, it boasted that the meat it sold had been refrigerated every moment from the Chicago slaughterhouse to the moment it was passed to the consumer. By 1913, it consisted of 22 general stores, 7 cigar stores, 22 hostels, 2 hotels, and a mail-order division. It served high-quality meals at small expense to workers and more expensive meals to upper-echelon canal employees and others able to afford it.

The commissary was a source of friction between the Canal Zone and Panama for several other reasons. The commissary dominated sales of supplies to passing ships. The commissary was off limits to individuals who were not in the US Military, employees of the Panama Canal Company, the Canal Zone Government and/or their dependents. This restriction was requested by Panama for the benefit of Panamanian storekeepers, who feared the loss of trade. Panama had laws restricting imports from the Canal Zone. Goods from the commissary would sometimes show up in Panamanian stores and in vendor displays, where Comisariato goods were deemed of high quality. Additionally, there were separate commissaries on the US military installations that were available only to the US Military personnel and their dependents. Employees and dependents of the Panama Canal Company/Government were not allowed to utilise the commissaries, exchanges, package stores, theatres, gas stations, and other facilities on the US Military installations.


Although the Panama Canal Zone was legal territory of the United States until the implementation of the Torrijos-Carter Treaties in 1979, questions arose almost from its inception as to whether it was considered part of the United States for constitutional purposes, or, in the phrase of the day, whether the Constitution followed the flag. In 1901 the US Supreme Court had ruled in Downes v. Bidwell that unincorporated territories are not the United States. On 28 July 1904, Controller of the Treasury Robert Tracewell stated, “While the general spirit and purpose of the Constitution is applicable to the zone, that domain is not a part of the United States within the full meaning of the Constitution and laws of the country.” Accordingly, the Supreme Court held in 1905 in Rasmussen v. United States that the full Constitution only applies for incorporated territories of the United States.

The treaty with Panama made no mention of the nationality status of the native inhabitants of the Zone. Pursuant to the principles of international law, they became non-citizen US nationals unless they elected to retain their previous nationality. Children of non-citizen US nationals generally acquired the status of their parents. However, for most nationality purposes, the Canal Zone was considered to be foreign territory and the status persons acquired at birth was governed by the Naturalisation Act of 1795, which granted them statutory US citizenship at birth but only if their fathers were, at the time of the child’s birth, US citizens who had previously resided in the United States. In 1934 the law was amended to allow for citizenship to be acquired at birth through either parent if the parent was a U.S. citizen who had previously resided in the United States. In 1937 the law was further amended to provide for US citizenship to persons born in the Canal Zone (since 1904) to a US citizen parent without that parent needing to have been previously resident in the United States. The law is now codified under title 8, section 1403. It not only grants statutory and declaratory born citizenship to those born in the Canal Zone after 26 February 1904, of at least one US citizen parent, but also does so retroactively for all children born of at least one US citizen in the Canal Zone before the law’s enactment. This rule was later rendered moot when the rules were changed to state that (almost all) children born to US citizens anywhere in the world were considered US citizens.

In 2008, during a minor controversy over whether John McCain, born in the Zone in 1936, was legally eligible for the presidency, the US Senate passed a non-binding resolution that McCain was a “natural-born Citizen” of the United States.

Notable People

Notable people born in the Panama Canal Zone include:

  • Leo Barker (US football player).
  • Earl Bell (US pole vaulter).
  • Frederick C. Blesse (US Air Force General).
  • Rod Carew (Major League Baseball player).
  • Kenneth Clark (US Psychologist).
  • The Del Rubio Triplets (Cover Band).
  • Bill Dunn (Politician).
  • John Hayes (Professional Tennis Player).
  • George Headley (West Indian cricketer).
  • Jeff Hennessy (US trampolining team coach).
  • Tom Hughes (Professional baseball player).
  • Eric Jackson (politician, journalist, and talk show host).
  • Thomas H. Jordan (seismologist and director).
  • Shoshana Johnson (US soldier and first black female prisoner of war).
  • Stephen J. Kopp (Educator).
  • John McCain, the Republican 2008 presidential nominee and former US Senator from Arizona.
  • Edward A. Murphy Jr., for whom Murphy’s law is named.
  • John S. Palmore (Justice of the Kentucky Court of Appeals).
  • Richard Prince (painter and photographer).
  • Thomas Sancton Sr (novelist and journalist).
  • Klea Scott (Panamanian-Canadian actress).
  • Charles S. Spencer (Museum Curator).
  • Sage Steele (US television anchor).

Other people associated with the zone include:

  • John G. Claybourn, the civil engineer who designed Gamboa, Panama.
  • Charles Patrick Garcia, who graduated from Balboa High School.
  • Ernest Hallen, the official photographer of the Panama Canal.
  • Karen Hughes, the daughter of Harold Parfitt, the last US Governor of the Panama Canal Zone.
  • Gustavo A. Mellander, noted historian and expert on Panamanian history and seasoned university administrator.
    • Graduate of Balboa High School and the Canal Zone Junior College.
  • Louis E. Sola.
  • Stephen Stills, who graduated from Lincoln High School.
  • Hillary Waugh, mystery writer who served in the Naval Air Force in the Panama Canal Zone.


Frederick Wiseman made the film Canal Zone, which was released and aired on PBS in 1977.


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