U.S. imperialism in the Caribbean extended beyond Cuba and Puerto Rico to the prize the United States had pursued for decades: a canal to connect the Atlantic and Pacific Oceans. The canal would transport cargo between the east and west of the United States much less expensively than rail. In the mid-nineteenth century the U.S. railroad tycoon Cornelius Vanderbilt tried but failed to build a canal through Nicaragua. Later in the century enthusiasm for a canal turned to the narrowest land in Central America, located in the northernmost province of what was then Colombia: Panama. A consortium of French investors pursued the construction of a canal in Panama, encouraged by the success of the Suez Canal that connected the Mediterranean to the Red Sea and the Indian Ocean, completed in 1869 (see “Egypt: From Reform to British Occupation” in Chapter 25). Engineers and laborers completed some excavation before the French company went bankrupt.

After the Spanish-American War, the completion of a canal seemed more feasible to U.S. authorities. They negotiated with the Colombian government for the right to continue the project started by the French company, but the Colombian congress balked at the U.S. government’s demand that it should have territorial control of the canal. The U.S. government responded by encouraging an insurrection in Panama City and recognized the rebels as leaders of the new country of Panama. The new Panamanian government negotiated favorable terms for the United States to build and control the canal. With the 1904 Isthmian Canal Convention, the new Panamanian government gave the United States permanent control over the canal and the land upon which it was built, which became known as the Canal Zone. The Canal Zone became an unincorporated U.S. territory, similar in status to Puerto Rico and Guam. It housed canal workers as well as U.S. military installations.

Tens of thousands of migrant workers from around the Caribbean provided labor for construction of the canal, which opened in 1914. U.S. authorities instituted the same segregationist policies applied in their other Caribbean territories. Workers were divided into a “gold roll” of highly paid white U.S. workers and a “silver role” of mostly black workers, who came from Barbados, Panama, Nicaragua, Colombia, and other parts of the Caribbean. They were paid lower wages, faced much higher rates of death and injury, and lived in less healthy conditions. The Canal Zone itself functioned as a segregated enclave: U.S. residents could move freely between it and Panamanian territory, but it was closed to Panamanians except those who entered through labor contracts.