The Panama Canal: History and Impact on Global Shipping



When we think about the items we use every day, it’s easy to overlook how those items arrived at our stores, markets, and warehouses. Only recently have we learned about things like supply chain disruptions and logistics issues at our world’s ports. 

It’s estimated that 11 billion tons of consumer goods travel by cargo ship each year. But how does the cargo shipping network work, and what are the logistical challenges that cargo ship transport faces?

Miraflores Locks In Panama Canal. Cruise ship entering locks to up into the lake.

In this article, we’ll learn about one of the most important components of cargo shipping, the Panama Canal. We’ll discuss the shipping industry before the canal’s construction, the canal’s construction methods, how canals and locks work, and learn more about the people that keep the Panama Canal open for traffic, so your necessary goods arrive on time. 

Early Cargo Shipping and Its Challenges 

When early humans built the first watercraft, moving people and products became more accessible and profitable. As early as 4,000 BCE, Egyptians built the first sailing ships, and trade along Africa’s coast was born. 

By the 15th century, the Europeans, Chinese and other cultures took to the seas to trade goods and colonize other parts of the world. However, sailing at that time was not with its challenges, some of them deadly. 

In order for European sailors to reach Asia, they had to traverse some of the most dangerous waters on the planet. Many were successful, but many more were not.

The Cape of Good Hope

Located on the southern tip of Africa, the Cape of Good Hope isn’t the southernmost point on the continent. Cape Agulhas holds that distinction and is about 90 miles southeast of the Cape of Good Hope. 

Regardless, it is in this area that the Atlantic and Indian Oceans meet. As the warm waters from the Indian Ocean currents meet their colder Atlantic counterparts, the waters along the cape become very turbulent, often capable of sinking even the most seaworthy of vessels. 

Experts believe that more than 3,000 ships lie at the bottom of the ocean near the Cape of Good Hope. 

History tells us that the Greek navigator Eudoxus was the first to complete a journey around Africa’s southern coast. However, the records of Portuguese sailor Bartolomeu Dias indicated he was the first European sailor to tackle the treacherous route in 1488 and emerge unscathed. 

By the 17th century, Dutch and French ships actively sailed around the Cape of Good Hope, and many of those sailors stayed and colonized the area. However, sailing around the Cape of Good Hope remained a risky endeavor. As safer sailing routes emerged, many ship captains avoided the area.

But in 2021, a cargo ship out of Taiwan ran aground in the Suez Canal, blocking the canal for six days. Ships had no choice but to detour around the Cape of Good Hope. 

Cape Horn 

Once explorers traversed the Atlantic Ocean and reached North America, they had no plans to stop. However, Christopher Colombus and others believed they had reached Asia when they first set foot in the Americas. It wasn’t until 1501 that these continents were deemed separate from Asia. 

Italian explorer Amerigo Vespucci was the first to determine that the New Worlds that Colombus thought were Asia were, in fact, entirely different continents. He made the voyage to the south and reached Patagonia, ultimately naming these new continents after himself. 

In 1616, Dutchman Willem Schouten was the first to sail around the southern tip of South America. He dubbed it Kaap Hoorn after the Dutch city of Hoorn. 

While Schouten was the first person to navigate around Cape Horn, Ferdinand Magellan was there several years earlier. In 1520, Magellan navigated through the straits between the many islands that make up Patagonia. It took him 99 days, but he eventually reached the open ocean on the other side. 

Cape Horn is one of the most dangerous places on earth. The converging currents bring up powerful waves, and the icy water is deadly to anyone who falls overboard. Even Charles Darwin’s ship, the Beagle, barely made it through unscathed. 

As the worldwide shipping industry increased over the years, it became clear that safer and faster passages were necessary. 

The Growing Need for Canals

Europeans didn’t solely invent canals in their quest for worldwide trade routes. Ancient civilizations widely used canals for transport and irrigation, but these canals were generally limited to local use. 

Archaeologists found evidence of canals amongst ancient Mesopotamian ruins, which dated to 3,500 BCE. As early as 650 CE, the Chinese built extensive canal systems throughout the country. Remnants of canal systems are found all over the world, and some variations of those canals are still in use today. 

However, by the 1800’s it became clear that the shipping industry had outgrown its laborious trips around the capes. Many inland canals showed great success for barge travel. Still, newer ships required wider and deeper canals to shorten the travel time and distance between oceans. 

The Suez Canal

Since shipping canals were a top priority for business people and heads of state, it’s no surprise Ferdinand de Lesseps spearheaded the Suez Canal project. De Lesseps was a French diplomat who worked in Cairo in 1833. He participated in discussions regarding the connection between the Red Sea and the Mediterranean Sea. 

In 1858 de Lesseps formed the Suez Canal Company, and construction ended in 1869. The canal is 120 miles long, and the transit time from London to the Arabian Sea was shortened by 5,500 miles and eight to ten days, depending on wind speed and direction. 

While the Suez Canal did have a positive effect on worldwide shipping, it wasn’t without controversy. The reduction in travel time between Europe and Africa increased the rate at which the Europeans conquered and colonized the African continent. Additionally, plundering Africa’s resources was now easier than ever. 

Undeterred, de Lesseps immediately set his sights on a new canal halfway around the world in a country that didn’t yet have independence. 

Panama: The Beginning 

Like many countries in the world, Panama wasn’t always an independent nation. Panama was also the destination of many European explorers during the 1500s. Christopher Columbus landed here, but Rodrigo de Bastidas arrived first in Panama in 1501. 

Due to Panama’s location, there was little influence from the indigenous ruling people. The Mayans and the Aztecs were too far north, and the Incas were too far south. Thus, Panama’s people were left largely undisturbed. 

This isn’t to say that Panamanian people were isolated. Archeologists found evidence of gold, pottery, and other items originating in Mexico and South America. Ancient people did travel through Panama but didn’t stay long enough to alter their culture. 

That would happen when the Spanish established their strongholds in the region.

Panama Under Spanish Rule 

Vasco de Balboa returned to Panama in 1501 and learned from the locals that Panama had another coastline. He walked across the entire country and saw the Pacific Ocean. It’s widely believed that Balboa was the first European to dip his toe in the Pacific in 1513. 

Magellan didn’t enter the Pacific Ocean until 1520. 

The Spanish treated Panama as a hub for further exploration. They got busy building ports and storage facilities for their numerous ships. When the Spanish conquered the Inca empire, the treasure went to Panama for safekeeping. 

As the Spanish continued to conquer Central and South America, they set up ruling parties in various areas. These viceroyalties were headquartered in Mexico and Guatemala and as far south as Lima, Peru. 

The people of Panama answered to Lima rather than Mexico or Guatemala. This led to a feeling of separation early on. Panamanian people were not a part of Central America, nor were they part of South America. 

These feelings of uneasiness lasted for years, and the Spanish drew new boundaries, removing existing people and tribes from their ancestral lands. 

The Viceroyalty of New Granada 

By the 1700s, Spain had increased its established territories. The Spanish reduced the area of the Viceroyalty of Peru and created the Viceroyalty of New Granada. The new territory included Colombia, Ecuador, Venezuela, and Panama.

The viceroyalty enjoyed a measure of prosperity due to the Europeans’ high demand for local goods. But by the early 1800s, the locals grew restless, and a series of civil wars broke out. By 1823, the region achieved independence and was renamed the Republic of New Granada. 

Gran Colombia 

The aforementioned Republic of New Granada didn’t last very long.

Disagreements over government styles and the differing cultures of the people in the region forced its collapse. By 1831, the republic collapsed and Ecuador and Venezuela focused on forming their own republics. This collapse was also the final stand for famed revolutionary Simon Bolivar.

But during this breakup, Panama remained under Colombian rule which would continue for nearly 70 years. 

The United States Involvement in Panama 

Like most regions of trade significance, it’s in the best interest of the superior powers to maintain control. This is precisely what happened in Panama during the lead-up to Panama’s separation from Colombia. 

In 1846, the United States and Colombia signed a treaty granting the US access to the Isthmus of Panama for trade purposes. The treaty also authorized the United States to use military force to quell any uprisings that might threaten Colombia. 

While this treaty favored Colombia, the United States had ulterior motives. Following the gold rush in California in 1848, the United States sought an easier way to traverse the isthmus of Panama. They constructed a railway across the country to transport gold and other goods. 

In the beginning, the United States supported Panama’s independence from Colombia. But when the US proposed a canal in 1903, they were denied access to the desired areas. The US then withdrew its support for Panamanian independence. 

The Return of Ferdinand de Lesseps

While the United States was actively seeking to begin a canal in 1903, the French had already taken that idea and ran with it years earlier. Still celebrating his success with the Suez Canal, De Lesseps presented the concept of a transcontinental canal in Panama. 

The French government supported this endeavor wholeheartedly and easily raised the money for the canal’s construction. In 1879, De Lesseps made his first trip to Panama for a ceremonial groundbreaking. He wouldn’t return for seven years. 

Construction of the French Canal in Panama

At first, the French engineers and construction workers made good progress, but that progress wouldn’t last for long. The landscape of Panama proved difficult, and the team lost equipment, experienced landslides and dealt with devastating floods. Large outbreaks of malaria and yellow fever further hampered construction. 

By 1885, overseers began to wonder if this feat of engineering might be impossible.

De Lesseps returned in 1886 to bolster enthusiasm for the French canal project. But by 1889, the project was all but abandoned. The French lost $287 million, which paled compared to the 20,000 workers who died during the project. 

The United States Steps In 

When the French realized their planned canal would not come to fruition, they offered the project to the United States at a price of $109 million. The US shied away from that price and began planning their own canal through Nicaragua. But a volcanic eruption in Nicaragua brought those plans to a halt. 

During this time, the French lowered the price of their canal company to $40 million, and in 1902 the Americans finalized the purchase of the canal project. But the United States still hadn’t received permission from the Colombian government to take over the project. 

When the Colombians rejected the proposal, the United States, with Teddy Roosevelt as president, responded by sending warships under the guise of supporting Panamanian independence from Colombia. The Colombians could not retaliate, and Panama gained independence on November 3, 1903. 

Also in 1903 and led by French emissary Philippe Vunau Barilla, a treaty was signed between the US and Panama. Panama would grant the US a ten-mile-wide swath of land spanning the coasts. The United States also offered a one-time $10 million payment and a yearly annuity of $250,000 paid to Panama. 

Also stipulated was that the finished canal would operate under US control. 

The Completion of the Panama Canal

The United States entered the Panama Canal project with bravado but soon realized they faced the same obstacles as the French. Muddy terrain, disease, lack of food, oppressive heat, and poor living conditions caused 75% of workers to head home. 

New project leaders arrived, headed by John Stevens, who built the Great Northern Railway in the United States. With the help of Dr. William Gorgas, he shelved the canal project and focused on sanitation. Stevens and Gorgas drained swamps, eradicated mosquitoes and built safe housing for the workers.

On September 26, 1913, the first tugboat traveled through the locks to Lake Gatun and exited the locks on the other side. The Panama Canal opened for business on August 15, 1914. 

Unfortunately, the rest of the world focused on the outbreak of World War l, and the world’s most extraordinary engineering feat to date went largely unnoticed. 

Facts About the Panama Canal

A canal is simple in theory. A small waterway connects two larger bodies of water. In the case of the Suez Canal, the principle was very straightforward. The canal connected two oceans so they built it at sea level. 

The Panama Canal operates very differently, and the rise of enormous cargo ships required specialized effort. 

Locks in the Panama Canal

When building the Panama Canal, the Chagres River was flooded to create Lake Gatun. Because Lake Gatun is higher than sea level, engineers constructed a series of locks to raise boats upon entry and lower them upon exit. 

There are 12 locks in the Panama Canal. Six of those locks raise the ships to the height of Lake Gatun. Once the ships have passed Lake Gatun, they enter the second series of locks and are lowered back to sea level. 

How Big are the Ships That Transit the Panama Canal?

When the Panama Canal began operations, the size of the vessels was directly related to the size of the locks. Ships could weigh no more than 52,500 tons, be no taller than 190 feet, be no wider than 106 feet, and no longer than 950 feet. 

In 2016, engineers built another series of locks to allow larger ships to transit the canal safely. Their weight can’t exceed 120,000 tons, the height is maxed at 190 feet, the width increased to 168 feet, and the length is 1,200 feet. 

Today, most new ships are built to the specifications of the Panama Canal. 

How Much Does It Cost to Use the Panama Canal?

The cost of travel through the Panama Canal correlates to the ship’s dimensions and how much water it displaces. This means that a fully loaded ship will pay much more than a ship without cargo. 

A ship transiting the original locks will pay approximately $135,000. A larger ship using the newer locks will pay approximately $260,000. In comparison, a sailboat less than 50 feet in length will pay $800. 

How Many Vessels Pass Through the Canal Each Day?

Under normal circumstances, about 40 ships pass through the canal each day. Fourteen thousand ships make the journey each year. The total length of the canal and the locks is only 50 miles, but ships can take 10 hours to make the passage. 

The majority of the ships that use the canal are American vessels. China, South Korea, and Colombia also use the canal in large numbers. Cruise ships also use the canal on a regular basis. 

Who Works at the Panama Canal?

Aside from the people who worked tirelessly to build the canal, a large number of highly skilled maritime experts carry out the canal’s operations. For instance, a ship’s captain is not allowed to pilot his own vessel through the canal. 

Panama Canal pilots spend about 14 years in training in order to handle the variety of vessels that transit the canal. The Panama Canal is the only waterway in the world that requires outside personnel to take over the helm.

In addition to pilots, tugboat captains, linemen, traffic controllers, booking agents and administrative staff work tirelessly to ensure the canal stays open for traffic every day of the year. 

Who Owns the Panama Canal? 

Until 1999, Panama and the United States managed the Panama Canal in tandem. In 1999, the United States turned over the management of the canal to the Panamanian government. However, the United States did reserve the right to use military force in the event access to the canal is threatened. 

In recent years China has funneled a great deal of capital into the canal’s operations. This is a touchy subject and is just another aspect of the already tense relations between China and the United States. 

This also puts Panama in a precarious situation. On the one hand, Panama has treaties with the United States regarding the latter’s unfettered access to the canal. On the other hand, China has a lot of money they’re willing to spend on canal improvements and environmental safeguards. 

It will be interesting to see what the future holds for the mighty Panama Canal. 

The Panama Canal’s Impact on Global Shipping

In all likelihood, the Panama Canal has had more impact on global shipping than anything since the advent of the steam and internal combustion ship engines. Not only did the canal drastically reduce the time that cargo spends at sea, but it also dictates how new ships are built. 

Since the canal’s opening in 2016, ships have been built to the dimensions of the canal’s locks. Any ship built larger would not be able to use the canal, placing them back in the precarious position of traveling around the capes. 

These ships were even dubbed Panamax to indicate their ability to move through the canal successfully. 

When the larger locks were completed in 2016, a new class of ships called Neo Panamax or New Panamax could finally make their way through the Panama Canal. These ships can carry up to 14,000 containers, making them some of the largest container vessels in the world. 

In 2019, the Panama Canal Authority ran a series of test runs with container ships that exceeded the Neo Panamax length by 3 meters. The trials were successful, and the Greek container ship Triton was the first to make an official transit.

However, there are a few remaining ships that are still too large for even the new locks. But that number is low as nearly 97% of today’s container ships conform to the dimensions of the canal.

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Learn More About All Things Maritime 

The history of the Panama Canal is one of the most fascinating aspects of modern ocean transport. The Panama Canal fundamentally changed the way cargo moves around the world. The time and money saved by this incredible feat of engineering are incalculable. 

Would you like to learn more about how ocean shipping affects our lives? Check out our other articles to stay up to date on news and current events in the maritime world.

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