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 The constitution of the Granadine Confederation of 1853 gave the states the right to withdraw, and in 1857 Panama again seceded, soon to return. When Nuñez in 1885 disregarded the constitution of 1863, which made the component states severally sovereign, he was strongly opposed by the people of Panama, who had no actual representation in the convention which made the constitution of 1886, an instrument allowing Panama (which it made a department and not a state) no local government. The large expenditures of the French canal company made the department singularly alluring to corrupt officials of the central government, and Panama suffered severely before the liquidation of the company in 1889. There were risings in 1895 and in 1898–1902, the latter ceasing with American interposition. The treaty of the United States in 1846 with New Granada, granting transportation facilities on the Isthmus to the United States, then preparing for war with Mexico, and guaranteeing on the part of the United States the sovereignty of New Granada in the Isthmus, has been considered the first step toward the establishment of an American protectorate over the Isthmus. In 1901 by the negotiation of the Hay–Pauncefote Treaty it became possible for the United States alone to build and control an interoceanic canal. The Hay–Herran Treaty of January 1903, providing that the United States take over the Panama Canal was not ratified by the Colombian Congress, possibly because it was hoped that settlement might be delayed until the concession to the company expired, and that then the payment from the United States would come directly to the Colombian government; and the Congress, which had been specially called for the purpose—there was no regular legislative government in Bogotá in 1898–1903—adjourned on the 31st of October. Three days later, on the 3rd of November, the independence of Panama was declared. Commander John F. Hubbard of the United States gunboat “Nashville” at Colon forbade the transportation of Colombian troops across the Isthmus, and landed 42 marines to prevent the occupation of Colon by the Colombian force; the diplomatic excuse for his action was that by the treaty of 1846 the United States had promised to keep the Isthmus open, and that a civil war would have closed it. On the 7th of November Panama was virtually recognized by the United States, when her diplomatic representative was received; and on the 18th of November a treaty was signed between the United States and Panama, ceding to the United States the “Canal Zone,” for which and for the canal concession the United States promised to pay $10,000,000 immediately and $250,000 annually as rental, the first payment to be made nine years after the ratification of the treaty. On the 4th of January 1904, two months after the declaration of independence, a constitutional assembly was elected, which met on the 15th of January, adopted the constitution described above, and chose as president Manuel Amador Guerrero (1834–1909). He was succeeded in October 1908 by Domingo de Obaldia. In 1905 a treaty was made with Costa Rica for the demarcation of the boundary line between the two countries.

See Henri Pensa, La République et le Canal de Panama (Paris, 1506), devoted mainly to the question of international law; Valdés, Geografia del istmo de Panama (New York, 1905); R. T. Hill, “The Geological History of the Isthmus of Panama and Portions of Porto Rico” (1898), vol. 28, pp. 151–285, of the Bulletin of the Museum of Comparative Zoology of Harvard College; E. J. Cattell (ed.), Panama (Philadelphia, 1905), being pt. i, § 27 of the Foreign Commercial Guide of the Philadelphia Commercial Museum; and the publications on Panama of the International Bureau of American Republics.

PANAMA, the capital and the chief Pacific port of the republic of Panama, and the capital of the province of the same name, in the south-central part of the country, at the head of the Gulf of Panama, and at the south terminus of the Panama railway, 47½ m. from Colon, and of the Panama Canal. Pop. (1910), about 30,000, of whom nearly one-half were foreign-born or of foreign parentage. Panama is served by regular steamers to San Francisco, Yokohama and other Pacific ports. The city is built on a rocky peninsula jutting out to the east, near the mouth of the Rio Grande and at the foot of Mt Ancon (560 ft.). The harbour is good and is enclosed at the south by several rugged islands, the largest being Perico and Flamenco (belonging to the United States) and Taboga (935 ft.), which is a place of country residence for wealthy citizens. The main streets run north and south and are cut by the Avenida Central; nearly all the streets are narrow and crooked. The principal squares are Cathedral, Santa Ana, Bolivar and Lesseps. The city proper is almost entirely enclosed by the remains of a great granite wall (built in 1673, when the new city was established), on the top of which on the side facing the sea is Las Bovedas promenade. The public buildings include the cathedral (1760), the government palace, the municipal palace, the episcopal palace, the church of Santa Ana, a national theatre, a school of arts and trades, a foreign hospital, the former administration building of the Canal Company, Santo Tomas Hospital, the pesthouse of Punta Mala and various asylums. The houses are mostly of stone, with red tile roofs, two or three storeys high, built in the Spanish style around central patios, or courts, and with balconies projecting far over the narrow streets; in such houses the lowest floor is often rented to a poorer family. There are dwellings above most of the shops. The streets are lighted with electricity; and there are electric street railways and telephones in the city. The water supply and drainage systems were introduced by the United States government, which controls the sanitation of the city, but has no other jurisdiction over it. Two miles inland is Ancon, in the Canal Zone, in which are the hospitals of the Isthmian Canal Commission and the largest hotel on the isthmus. The city of Panama was formerly a stronghold of yellow fever and malaria, which American sanitary measures have practically eradicated. Panama has had an important trade: its imports, about twice as valuable as its exports, include cotton goods, haberdashery, coal, flour, silk goods and rice; the most valuable exports are gold, india-rubber, mother of pearl and cocobolo wood. As Balboa (3 m. west of the city, connected with it by railway, and formerly called La Boca), the port of Panama and the actual terminus of the canal, is in the Canal Zone and is a port under the jurisdiction of the United States, the commercial future of Panama is dependent upon American tariffs and the degree to which Panama and Balboa may be identified. At Balboa there are three wharves, one 985 ft. long and another 1000 ft. long, but their capacity is so insufficient that lighterage is still necessary. In the city there is one small dock which can be used only at full tide. Small vessels may coal at Naos, an island in the Gulf of Panama, which is owned by the United States. Soap and chocolate are manufactured. Founded in 1519 by Pedro Arias de Avila, Panama is the oldest European town on the mainland of America. In the 16th century the city was the strongest Spanish fortress in the New World, excepting Cartagena, and gold and silver were brought hither by ship from Peru and were carried across the Isthmus to Chagres, but as Spain's fleets even in the Pacific were more and more often attacked in the 17th century, Panama became less important, though it was still the chief Spanish port on the Pacific. In 1671 the city was destroyed by Henry Morgan, the buccaneer; it was rebuilt in 1673 by Alfonzo Mercado de Villacorta about five miles west of the old site and nearer the roadstead. The city has often been visited by earthquakes. In the city in June 1826 the Panama Congress met (see ).

 PANAMA CANAL. When he crossed the Atlantic, the object Columbus had in view was to find a western passage from Europe to Cathay. It was with the greatest reluctance, and only after a generation of unremitting toil that the explorers who succeeded him became convinced that the American continent was continuous, and formed a barrier of enormous extent to the passage of vessels. The question of cutting a canal through this barrier at some suitable point was immediately raised. In 1550 the Portuguese navigator Antonio Galvao published a book to demonstrate that a canal could be cut at Tehuantepec,