The 1879 Paris congress and the sea-level decision
The decision to attempt a sea-level canal at Panama was made at an international geographic congress convened in Paris in May 1879 by the French Société de Géographie. Ferdinand de Lesseps, then at the height of his fame from the successful Suez Canal (1869), presided over the congress as its honorary chairman. The congress’s decision was to recommend a sea-level canal across Panama, modelled on Suez, on the assumption that a sea-level design was technologically simpler than the lock-canal design that had been proposed by the French engineer Baron Godin de Lépinay [1].
The de Lépinay lock-canal design, presented at the same congress, would have built dams across the Chagres and Rio Grande rivers and lifted ships through a series of locks about 80 feet high. The de Lépinay design “contained all of the basic elements ultimately designed into the current Panama Canal,” but the congress “received no serious attention” to its design because de Lesseps had already committed publicly to a sea-level canal that resembled Suez. De Lesseps was a “trained diplomat and not an engineer” who “relied on a rather naive faith in the serendipitous nature of emerging technology”; his preference was as much about brand as about engineering, and he had spent years selling the public on a sea-level Panama canal modelled on Suez [1].
De Lesseps organised the Compagnie Universelle du Canal Interocéanique de Panama on 17 August 1879 and was its president. The Compagnie held its ceremonial groundbreaking on 1 January 1880, with de Lesseps’ daughter Ferdinande turning the first sod in “a dirt-filled champagne box” because the tide had receded from the planned ceremony site. Construction work on the actual canal cuts began in earnest in 1881, under the contractors Couvreux and Hersent [1].
Construction, disease, and the financial collapse (1881–1889)
The French construction effort “fell into four phases” between 1881 and 1889. The first phase (1881-1882) was a small-contractor excavation phase under Couvreux and Hersent, with work concentrated on the central-cordillera cuts at Culebra and the access cuts at the Atlantic and Pacific ends. The second phase (1883-1885) was a period of mid-sized contracts and rising labour costs as the project reached its maximum labour force (over 19,000 workers at peak in 1884, mostly Jamaican) [1].
The third phase (1886-1887) saw the consolidation of contracts into the largest operators, and the fourth phase (1888-1889) saw the long-delayed shift to a lock-canal design. The lock concept was formally adopted in October 1887 by the Superior Advisory Committee, with a highest level of 170 feet using “a series of 10 locks” and a bottom width of 61 feet. Gustave Eiffel was contracted to build the locks; work on the lock canal started on 15 January 1888. The decision was too late. “By May 15, 1889, all activity on the Isthmus ceased” [1].
Disease took a heavier toll than the engineering. “Malaria, of course, continued to take even more lives than yellow fever.” Director Jules Dingler lost his daughter, son, and wife to yellow fever within roughly a year. The death toll during the French period is not known precisely. The loss is estimated at over 22,000 dead from disease and accidents over the eight-year period, but the French company did not keep systematic mortality records and the records that survive are incomplete. What is certain is that the workforce turnover was very high and that the company’s failure to invest in worker sanitation (the medical budget was consistently underspent) was a direct contributor to the death toll [1].
The financial collapse came in two waves. The first wave was the public subscription of 1887-1888, in which the Compagnie tried to raise additional capital from the French public; the subscription “had failed” and the company was already over-extended. The second wave was the liquidation of January 1889, in which “shareholders, at their last meeting in January 1889, decided to dissolve the Compagnie Universelle, placing it under legal receivership under the direction of Joseph Brunet.” All construction on the Isthmus ceased by 15 May 1889. Ferdinand de Lesseps and his son Charles were indicted for “fraud and maladministration” and given five-year prison sentences, “though the penalty was never imposed, as the statute of limitations had run out.” Ferdinand de Lesseps died at age 89 on 7 December 1894 [1].
The Compagnie Nouvelle and the sale to the United States (1894–1904)
A second French company, the Compagnie Nouvelle de Canal de Panama, was organised on 20 October 1894 with only $12 million in working capital (enough to maintain the equipment on the Isthmus and to keep the canal concession from lapsing, but not enough to resume construction). By 1898, the public had lost faith in the project and “there would be, therefore, no funds forthcoming from a bond issue.” The Compagnie Nouvelle’s directors “decided to proffer a deal to the most likely taker, the United States of America,” and met President William McKinley on 2 December 1899. The deal was five years in the making but was eventually signed [1].
The deal that the Compagnie Nouvelle offered the United States, and that the Spooner Act of 1902 authorised, was a sale of the French canal concession, the equipment, and the surveys for $40 million. The U.S. also paid Panama $10 million for the canal-zone concession under the 1903 Hay–Bunau-Varilla Treaty, and Colombia $250,000 for recognised transit rights. The total cost to the U.S. of acquiring the canal-zone concession (including the cash paid to Panama and Colombia) was approximately $50 million. The Compagnie Nouvelle’s shareholders received the $40 million, the U.S. received the existing French excavations (most importantly the Culebra Cut) and the survey data, and Panama received recognition and an annuity [2].
Why the United States succeeded where the French had failed
The U.S. canal-era engineers who took over the project in 1904 inherited the French infrastructure but made four specific design changes that the French had not managed. First, the U.S. accepted the lock-canal design that the French had rejected in 1879. Second, the U.S. invested heavily in worker sanitation, particularly mosquito control, and reduced the death toll from yellow fever and malaria to near zero during the U.S. construction period (compared to the estimated 22,000 French-period deaths). Third, the U.S. accepted the longer construction timeline and the higher capital cost, while the French had run out of money and credibility by 1889. Fourth, the U.S. had access to the same technology that had not existed in 1879 (specifically, electric-powered lock machinery, mechanised excavation equipment, and reinforced concrete structures) and was able to deploy it where the French could not [2].
The lesson the U.S. took from the French failure, expressed in the ACP’s history, was that “a large part of the eventual success on the part of the United States in building a canal at Panama came from avoiding the mistakes of the French” [1].
The single most valuable physical asset the United States acquired from the Compagnie Nouvelle was the Culebra Cut (the excavation through the central cordillera that the French had begun at great cost in lives and francs between 1881 and 1889). The Cut accounted for the bulk of the tangible value in the roughly $40 million purchase, and the U.S. engineers who resumed work on the isthmus in 1904 were able to widen and deepen the existing French excavation rather than begin it from scratch [1].
The de Lesseps family and the legal aftermath of the collapse
The legal and financial aftermath of the Compagnie Universelle’s dissolution in January 1889 was one of the largest corporate scandals in 19th-century France. The Compagnie was placed under legal receivership under the direction of Joseph Brunet, and popular pressure on the French government over what was called the “Panama Affair” led to the prosecution of company officials, including Ferdinand de Lesseps and his son Charles. Both were indicted for “fraud and maladministration” and found guilty, with five-year prison sentences imposed; “however, the penalty was never imposed, as the statute of limitations had run out.” Advanced age and ill health excused the senior de Lesseps from appearing in court. Charles, in a second trial for corruption, was indicted and found guilty of bribery, with time already served in jail during the trials deducted from a one-year sentence; he then completed the remainder in hospital after falling seriously ill [1].
The financial blow to the company’s backers was severe: by the time work on the Isthmus ceased in May 1889, “the savings of 800,000 investors were lost.” Ferdinand de Lesseps himself was spared much of the reckoning. By then his mental state “was mercifully such that he knew little of what was going on,” and he “remained sequestered at home within the family circle.” He died at age 89 on 7 December 1894. Charles lived until 1923, “long enough to see the Panama Canal completed, his father’s name restored to honor and his own reputation substantially cleared” [1] [2].
The collapse also threatened the original Wyse Concession that had launched the venture. Lucien Bonaparte-Wyse had negotiated that concession with the Colombian government on March 20, 1878, granting the Société Civile the exclusive right to build an interoceanic canal through Panama, with the waterway to revert to Colombia after 99 years. With the concession due to expire in 1893, Wyse returned to Bogotá and negotiated a 10-year extension, the legal foundation on which the Compagnie Nouvelle was then organised effective 20 October 1894 [1].
Last reviewed: