Panama’s 20th century was dominated by one defining reality: the presence of an interoceanic canal controlled by a foreign power running through the middle of the country. The struggle to reconcile national sovereignty with the Canal shaped politics, identity, and Panama’s place in the world.
A Republic and Its Canal
Panama became independent in 1903, and construction of the U.S.-controlled Canal began the following year. When the Canal opened in 1914, it brought jobs, commerce, and global attention, but it also created a U.S.-administered Canal Zone that divided the nation and became a persistent source of friction.
Early Decades
In its early years the young republic saw a series of governments and considerable U.S. influence in its affairs. The economy revolved around Canal traffic and related services. A small elite dominated politics, while questions of sovereignty over the Zone simmered beneath the surface.
The Flag Riots of 1964
National frustration over the Canal Zone came to a head in January 1964. Disputes over the display of the Panamanian flag in the Zone triggered violent clashes in which a number of Panamanians were killed. The events, commemorated as Martyrs’ Day, became a rallying point for the movement to reclaim the Canal.
The Torrijos Era
In 1968 the military took power, and General Omar Torrijos emerged as Panama’s leader. Torrijos pursued populist policies and made recovering the Canal his central mission. His efforts culminated in the Torrijos–Carter Treaties of 1977, which set the path for the Canal’s eventual transfer to Panama.
The Noriega Years and the 1989 Invasion
After Torrijos died in a 1981 plane crash, power eventually consolidated under General Manuel Noriega. His rule grew increasingly authoritarian, and his ties to drug trafficking led to deteriorating relations with the United States. In December 1989, the United States launched a military invasion, Operation Just Cause, that removed Noriega from power. He was captured and later tried in the United States.
Democracy and the Canal’s Return
Following the invasion, Panama rebuilt its democratic institutions and disbanded its military. The decade closed with a historic milestone: on December 31, 1999, Panama took full control of the Canal, fulfilling the promise of the Torrijos–Carter Treaties and completing the country’s long quest for sovereignty over its most vital asset.
A Century of Transformation
Panama entered the 20th century as a new republic tied to a foreign-run canal and left it as a democracy in command of that same waterway, poised to become the regional hub of finance and logistics it is today.
Learn more in our guides to the Torrijos–Carter Treaties y the history of the Panama Canal.
