American seizure of the Canal Construction Zone

U.S. President Theodore Roosevelt convinced U.S. Congress to take on the abandoned works in 1902, while Colombia was in the midst of the Thousand Days War. During the war there were at least three attempts by Panamanian Liberals to seize control of Panama and potentially achieve independence, including one led by Liberal guerrillas like Belisario Porras and Victoriano Lorenzo, each of which was suppressed by a collaboration of Conservative Colombian and U.S. forces. By the middle of 1903, the Colombian government in Bogotá had balked at the prospect of a U.S. controlled canal under the terms that Roosevelt's administration was offering. The U.S. was unwilling to alter its terms and quickly changed tactics, encouraging a handful of Conservative Panamanian landholding families to demand a Panama independent from Colombia. The USS Nashville was dispatched to local waters around the city of Colón to deter any resistance from Bogotà and so, on November 3, 1903, with United States' encouragement and French financial support, Panama proclaimed its independence. Less than three weeks later, the Hay-Bunau Varilla Treaty was signed between the French and the United States, without a Panamanian in the room. The treaty allowed for the construction of a canal and US sovereignty over a strip of land 10 miles wide and 50 miles long, (16 kilometers by 80 kilometers) on either side of the Panama Canal Zone. In that zone, the U.S. would build a canal, then administer, fortify, and defend it "in perpetuity." The Panama Canal was built by the U.S. Army Corps of Engineers between 1904 and 1914; the existing 83-kilometer (50-mi.) lock canal is considered one of the world's greatest engineering triumphs. On January 5, 1909 the government of Rafael Reyes in Colombia signed and presented to its Congress a treaty that would officially recognize the loss of its former province, but the matter was dropped due to popular and legislative opposition, without any ratification being achieved. Different negotiations continued intermittently until a new treaty was signed on December 21, 1921 which finally and formally accepted the independence of Panama.

Military coups and coalitions

From 1903 until 1968, Panama was a republic dominated by a commercially-oriented oligarchy. During the 1950s, the Panamanian military began to challenge the oligarchy's political hegemony. The January 9, 1964 Martyrs' Day riots escalated tensions between the country and the U.S. government over its long-term occupation of the Canal Zone. Twenty rioters were killed, and 500 other Panamanians were wounded.

In October 1968, Dr. Arnulfo Arias Madrid, elected president for the third time and twice ousted by the Panamanian military, was again ousted (for the third time) as president by the corrupt National Guard after only 10 days in office. A military junta government was established, and the commander of the National Guard, Brig. Gen. Omar Torrijos, emerged as the principal power in Panamanian political life. Torrijos' regime was harsh and corrupt, and had to confront the mistrust of the people and guerrillas backing the populist Arnulfo Arias. However, he was a charismatic leader whose populist domestic programs and nationalist foreign policy appealed to the rural and urban constituencies largely ignored by the oligarchy.

On September 7, 1977, the Torrijos-Carter Treaties were signed by the Panamanian head of state as well as U.S. President Jimmy Carter, for the complete transfer of the Canal and the fourteen US army bases from the US to Panama by 1999 apart from granting the US a perpetual right of military intervention. Certain portions of the Zone and increasing responsibility over the Canal were turned over in the intervening years.