Knowledge of the topography of the isthmus was extremely vague until the great increase of travel due to the discovery of gold in California in 1848 rendered improved communications a necessity. A railroad at Panama and a canal at Nicaragua were both projected. Instru mental surveys for the former in 1849, and for the latter in 185o, were made by American engineers, and, with some small excep tions, were the first accurate surveys made up to that time. In order to determine the most practicable route for a ship canal across the American isthmus, the United States Government sent out, between 187o and 1875, a series of expeditions under officers of the navy, by whom the various routes were examined. The result was to show that the only lines by which a tunnel could be avoided were the Panama and the Nicaragua lines; and in 1876 a United States Commission reported that the Nicaragua route possessed greater advantages and offered fewer difficulties than any other. At Nicaragua the distance is greater, being about 156 m. in a straight line, but more than one third is covered by Lake Nicaragua, a sheet of fresh water with an area of about 3,000 sq.m. and a maximum depth of over 200 ft., the surface being about io5 ft. above sea-level. Lake Nicaragua is connected with the Atlantic by a navigable river, the San Juan, and is sepa rated from the Pacific by the continental divide, which is about 16o ft. above sea-level. At Nicaragua only a canal with locks is feasible, but at Panama a sea-level canal is a physical possibility.
By the Clayton-Bulwer Treaty of 185o with Great Britain, the United States guaranteed that the projected canal, whether the Panama cr the Nicaraguan, should be neutral, and, furthermore, that it be used and enjoyed upon equal terms by the citizens of both countries in each case. A modification of the Clayton-Bulwer Treaty being necessary to enable the United States to build the canal, a treaty making such modifications, but preserving the principle of neutrality, known • as the Hay-Pauncefote Treaty, was negotiated with Great Britain in I goo; it was amended by the United States Senate, and the amendments not proving acceptable to Great Britain, the treaty lapsed in March 1901. A new treaty, however, was negotiated in the autumn, and accepted in December by the United States Senate. In the meantime (1876) an association entitled "Societe Civile Internationale du Canal Interoceanique" was organized in Paris to make surveys and explorations for a ship canal. In May 1878 Lieut. Wyse, in the name of the association, obtained a concession from the Colombian Government, commonly known as the Wyse Concession. This is the concession under which work upon the Panama Canal was later prosecuted.
In May 1879 an International Congress composed of 135 delegates from various nations—some from Great Britain, United States and Germany, but the majority from France—was convened in Paris under the auspices of Ferdi nand de Lesseps, to consider the best situation for, and the plan of, a canal. After a session of two weeks the Congress decided that the canal should be at the sea-level, and at Panama. Im
mediately after the adjournment of the Congress the Panama Canal Company was organized under a general law of France, with Lesseps as president, and it purchased the Wyse Concession at the price of 1 o,000,000 francs. An attempt to float this company in Aug. 1879 failed, but a second attempt, made in Dec. 188o, was fully successful. The next two years were devoted to surveys and examinations and preliminary work upon the canal. The plan adopted was for a sea-level canal having a depth of 291 ft. and bottom width of 72 f t., involving excavation estimated at 157, 000,000 cu.yd. The cost was estimated by Lesseps in 188o at 658,000,000 francs, and the time required at eight years. The terminus on the Atlantic side was fixed by the anchorage at Colon, and that on the Pacific side by the anchorage at Panama.
Work under this plan continued until the latter part of 1887, the management being characterized by a degree of extravagance and corruption rarely if ever equalled in the history of the world. By that time it had become evident that the canal could not be completed at the sea-level with the resources of time and money then available. The plan was accordingly changed to one including locks, and work was pushed on with vigour until 1889, when the company, becoming bankrupt, was dissolved by a judgment of the Tribunal Civil de la Seine, dated Feb. 4, 1889, a liquidator being appointed by the court to take charge of its affairs. One of the more important duties assigned to this official was to keep the property together and the concession alive, with a view to the for mation of a new company for the completion of the canal. He gradually reduced the number of men employed, and finally sus pended the works on May 15, 1889.
The liquidator finally secured the organization of a new company on Oct. 2o, 1894. The old company and the liquidator had raised by the sale of stock and bonds the sum of 1,271,682,637 francs. The securities issued to raise this money had a par value of 2,245,151,200 francs, held by about 200,000 persons. Immediately after its organization the new company took possession of the property (except the Panama railroad shares, which were held in trust for its benefit), and proceeded to make a new study of the entire subject of the canal in its engineering and commercial aspects. It resumed the work of excavation, with a moderate number of men sufficient to com ply with the terms of the concession, in a part of the line—the Emperador and Culebra cuts—where such excavation must con tribute to the enterprise if completed under any plan. By the middle of 1895, about 2,000 men had been collected, and after that time the work progressed continuously, the number of work men varying between 1,900 and 3,600. The engineering questions had been solved to the satisfaction of the company, but the financial questions, by 1899, had been made extremely difficult, if not insoluble, by the appearance of the United States Govern ment in the field as a probable builder of an isthmian canal. The company continued to conduct its operations in a provisional way, without appealing to the public for capital.