The occupation of the Panama route by Europeans, and the prospect of a canal there under for ign control, was not a pleasing spectacle to the people of the United States. The favour with which the Nicaragua route had been considered since 1876 began to assume a partisan character, and the movement to construct a canal on that line to assume a prac tical shape. In 1884 a treaty, known as the Frelinghuysen-Zarala Treaty, was negotiated with Nicaragua, by the terms of which the United States Government was to build the canal without cost to Nicaragua, and of ter completion it was to be owned and managed jointly by the two Governments. The treaty was sub mitted to the United States Senate, and in the vote for ratification, on Jan. 29, 1885, failed to receive the necessary two-thirds vote. This failure led to the formation in New York by private citizens in 1886 of the Nicaragua Canal Association, for the purpose of obtaining the necessary concessions, making surveys, laying out the route, and organizing such corporations as should be required to construct the canal. They obtained a concession from Nica ragua in April 1887, and one from Costa Rica in Aug. 1888, and sent parties to survey the canal. On Feb. 20, 1889 the Maritime Canal Company of Nicaragua was incorporated by Congress, and on May 4, 1889 the company was organized. It took over the concessions and began work upon the canal in June 1889. Opera tions upon a moderate scale and mainly of a preliminary character were continued until 1893, when the financial disturbances of that period drove the construction company into bankruptcy and compelled a suspension of the work.
Congress continued to take an interest in the enterprise, and in 1895 provided for a board of engineers to inquire into the possibility, permanence, and cost of the canal as projected by the Maritime Canal Company. The report of this board led to the appointment in 1897 of another board, to make additional surveys and examinations. Its report was not completed when the revival of the Panama scheme attracted the attention of Congress, and led to the creation in 1899 of the Isthmian Canal Commission.
The Spanish-American War of 1898 gave a tremendous impetus to popular interest in an isthmian canal, and it seemed an article of the national faith that the canal must be built, and, furthermore, that it must be under American control. To the American people the canal appeared a means of unifying and strengthening their national political interests, and of developing their industries, particularly in the Pacific States; in short, a means essential to their national growth. The Isthmian Canal Commission created by Congress in 1899 to, examine all practicable routes, and to report which was the most practicable and most feasible for a canal under the control, man agement and ownership of the United States, reported that there was no route which did not present greater disadvantages than those of Panama and Nicaragua. The cost of a canal at Panama,
built essentially upon the French plans, was estimated at $156, 378,258. The time required to build the Nicaraguan canal was estimated at ten years and its cost at $200,540,000.
The report of the commission recommended the Nicaragua route. This caused the New Panama Canal Company, which was having serious financial difficulties, to view the question of selling its property in a new light and in the spring of 1901 it obtained permission from the Colombian Government to dispose of it to the United States. It showed itself, however, somewhat reluc tant to name a price to the Canal Commission, and it was not till Jan. 1902 that it definitely offered to accept $40,000,000. In consequence of this offer, the commission in a supplementary report issued on Jan. 18, 1902 reversed the conclusion it had stated in its main report, and advised the adoption of the Panama route, with purchase of the works, etc., of the French company. The Hepburn bill, then before Congress, authorizing the Nicaragua canal at a cost of $180,000,000, was amended so that the president was authorized to acquire all the property of the Panama Canal Company, including not less than 68,869 shares of the Panama Railroad Company, for a sum not exceeding $40,000,000, and to obtain from Colombia perpetual control of a strip of land 6 m. wide; while if he failed to come to terms with the company and with Colombia in a reasonable time and on reasonable terms, he was by treaty to obtain from Costa Rica and Nicaragua the territory necessary for the Nicaragua canal.
Negotiations were forthwith opened with Colombia, and ultimately a treaty (the Hay-Herran treaty) was signed in Jan. 1903. The Colombian Senate, however, refused ratification, and it seemed as if the Panama scheme would have to be abandoned when the complexion of affairs was changed by Panama revolting from Colombia and declaring itself independent in Nov. 1903. Within a month the_ new republic, by the Hay-Bunau-Varilla Treaty, granted the United States the use, occupation and control of a strip of land 10 m. wide for the purposes of the canal. A few days after the ratification of this treaty by the United States Senate in Feb.
—the concession of the French company having been purchased— a commission was appointed to undertake the organization and management of the enterprise, and in June Mr. J. F. Wallace was chosen chief engineer. Work was begun without delay, but the commission's methods of administration and control soon proved unsatisfactory, and in April 1905 it was reorganized, three of its members being constituted an executive committee which was to be at Panama continuously. Shortly afterwards Wallace resigned his position and was succeeded by John F. Stevens.