When the people of the Isthmus of Panama revolted against the Government of Colombia, they fully realized that almost their only hope of maintaining an independent government was to secure the building of the Panama Canal by the United States. Therefore, they were in a mood to ratify a treaty which would meet every condition demanded by the Government of the United States.

The treaty, negotiated and ratified in 1904, gave to the United States every right it could have desired or which it could have possessed had it taken over the whole Isthmus itself. It was negotiated by John Hay, Secretary of State, representing the United States, and Philippe Bunau-Varilla, representing the Government of Panama. As the latter was a stockholder in the New French Canal Company, whose assets could be realized upon only through the success of the treaty negotiations, it naturally followed that he would put nothing in the way of the desires of the United States.

The treaty gave to the United States most unusual rights. For instance, in no other country on earth does one nation possess ultimate jurisdiction over the capital of another nation; yet this is what the United States possesses at Panama. The first consideration of the treaty was the establishment of the Canal Zone. This gave to the United States a territory 5 miles beyond the center line of the canal on either side, and 3 miles beyond its deep water ends, with the exception of the cities of Colon and Panama, to hold in perpetuity with all rights, powers, and authority that the United States would possess if it were sovereign, and to the entire exclusion of the exercise of any sovereign rights, powers, or authority by the Republic of Panama.

Further than this, it gave to the United States the same rights with respect to any land, or land under water, outside of the Canal Zone necessary and convenient for the canal itself, or any auxiliary canals or other works required in its operations.

Further yet, the Republic granted in perpetuity a canal monopoly throughout its entire territory, and also monopolies of railroad and other means of communication between the two oceans.

Under the terms of the treaty the cities of Panama and Colon are required to comply in perpetuity with all sanitary ordinances, whether curative or preventive, which the United States may promulgate. The Republic of Panama also agrees that if it can not enforce these ordinances, the United States become vested with the power to enforce them. The same is true with reference to the maintenance of order. The Republic of Panama agrees to maintain order, but gives to the United States not only the right to step in with American forces and restore it, but also to determine when such action is necessary.The treaty between the two countries further provides that the United States has the right to acquire by condemnation any property it may need for canal purposes in the cities of Panama and Colon. The Republic of Panama also grants to the United States all rights it has or may acquire to the property of the New Panama Canal Company and of the Panama Railroad, except such lands as lie outside of the Canal Zone and the cities of Panama and Colon, not needed for the purposes of building the canal. The Republic guarantees to the United States every title as absolute and free from any present or reversionary interest or claim. It will be seen from all this that the United States did not overlook any opportunity to make sure that it had all of the powers necessary to build a canal.

It is also agreed by the Panama Government that no dues of any kind ever shall be collected by it from vessels passing through or using the canal, or from vessels belonging to the United States Government. All employees of the canal are exempted from taxation, whether living inside or outside the Zone. The Republic grants to the United States the use of all its rivers, streams, lakes, and other bodies of water for purposes of navigation, water supply, and other needs of the canal. It also agrees to sell or lease to the United States any of its lands on either coast for use for naval bases or coaling stations.

The Republic of Panama further agrees that the United States shall have the right to import commodities for the use of the Canal Commission and its employees, free of charge, and that it shall have the right to bring laborers of any nationality into the Canal Zone.

In return for all of these concessions the United States gives to the Republic of Panama many valuable considerations. Most vital of all, it guarantees the independence of the Republic. This means that the Republic of Panama is today practically the possessor of an army and a navy as large as the United States can put into the field and upon the seas. The only aggressor that Panama need fear is her benefactor.

The second consideration involved the payment of $10,000,000 cash to the Republic, and a perpetual annual payment of a quarter of a million dollars beginning with the year 1913. The ten-million-dollar cash payment gave the impoverished new-born government a chance to get on its feet, and from this time forward the Panaman Government can look to the United States for the major portion of its necessary revenues.

Under the terms of the treaty the United States undertakes to give free passage to any warships belonging to the Republic of Panama when going through the canal, and also agrees that the canal shall be neutral. It also agrees to provide free transportation over the Panama Railroad for persons in the service of the Government of Panama, and for the munitions of war of the Republic. It also allows the Republic of Panama to transmit over its telegraph and telephone lines its message at rates not higher than those charged United States officials for their private messages.

Another stipulation of the treaty provides that it shall not invalidate the titles and rights of private landholders and owners of private property, nor of the right of way over public roads of the Zone unless they conflict with the rights of the United States, when the latter shall be regarded as superior. No part of the work of building or operating the canal, however, at any time may be impeded by any claims, whether public or private. A commission is provided, whose duty it shall be to pass upon the claims of those whose land or properties are taken from them for the purpose of the construction or operation of the canal.

In carrying out the terms of the treaty the first step taken by the Americans was to "clean up" the cities of Panama and Colon. Remarkable changes were wrought by the establishment of water and sewerage systems, and by street improvements. For several years preceding the acquisition of the Canal Zone, and the sanitization of the cities of Panama and Colon, the late W. L. Buchanan was the United States minister to Colombia. He was transferred to another South American capital and afterwards came back to the United States by way of Panama. Former Senator J. C. S. Blackburn was then governor of the Canal Zone or, more strictly speaking, the head of the Department of Civil Administration. As he and Minister Buchanan drove through the streets of Panama and surveyed the changes that had taken place, Mr. Buchanan declared to Governor Blackburn that if an angel from heaven had appeared to him and said that such a transformation in the city of Panama could be made in so few years he scarcely could have believed it.

When he was there the main streets of the city were nothing but unbroken chains of mud puddles in which, during the wet season, carriages sank almost to the axles. When he returned he found those same streets well paved with vitrified brick, measuring up to the best standards of American street work. Where formerly peddlers hawked water from disease-scattering springs, there were hydrants throughout the town and wholesome water on tap in almost every house. Where there had been absolutely no attempt to solve the problems of sewage disposal, where the masses of people lived amid indescribable filth, absolutely oblivious to its stenches and its dangers, now there was a sewerage system fully up to the best standard of American municipal engineering.

When one considers that the Republic of Panama is made up largely of the cities of Panama and Colon, with a large area of almost wholly undeveloped territory, it will be seen that this service was rendered to practically all the people of the Republic.

The relations which have existed between the Republic of Panama and the United States have not always proved wholly satisfactory to the Panamans. Like all other tropical Americans, the Panamans profess great admiration for a republican form of government, but the party in power seldom has relished the idea of a full and free accounting of its stewardship at the polls. When the time came for the first national election, the party in power sought to insure its return by the use of tropical-American methods; that is, by a wholesale intimidation of the opposition supporters. When the registration books were opened the administration was unwilling to register the supporters of the opposition. The government forces always were relied upon to back up the registrars. This situation was resented by the opposition and the indications were that the usual civil war, the tropical American substitute for an election, was about to follow.

At this juncture Governor Blackburn called the Panaman authorities together and notified them that the United States did not care a continental which side won the election, but that it was very deeply interested in maintaining conditions of peace and amity on the Isthmus—conditions which could not prevail except there be a fair election. He reminded them of the right of the United States to maintain order in their two principal cities, and of the blood and treasure the United States had invested in Panama, all of which would be placed in jeopardy by any civil conflict. He therefore declared it the intention of the United States to see that there was a fair election.

Election commissioners were consequently appointed, and they saw to it that the voters were fairly registered, allowed to vote, and to have their votes counted. The result was that for the first time in Central American history there was a fair election and for the first time a real change of administration without a resort to arms. So successful was this plan that in the election of 1912 both sides agreed again to call in the United States to umpire their battle of the ballots, and once again the "outs" won over the "ins."

The French Canal Company has some very unpleasant experiences with the Republic of Colombia when it, as a private corporation, undertook to build the canal. It was at the mercy of the Government and the Government seldom showed mercy. For instance, a Colombian owned 30 acres of swamp land which was needed for the construction of the canal. It was worth $10 an acre; he demanded $10,000. The canal company took the matter to the courts of the Republic and instituted condemnation proceedings. Here the owner admitted that the land was not intrinsically worth more than $10 an acre, but claimed that he had as much right to demand $300,000 for the tract as if it were located in the very heart of Paris; that in every case it was what the land could be used for that determined its value. The court shared his view and nothing was left for the canal company to do but to pay the $300,000.

Shortly after the Americans took charge, the Central and South American Telegraph Company wanted to land the new "all American" cable on the Canal Zone. They applied to the United States for permission which was granted. The Panamans fought against it under every possible pretext, their desire being to have their consent regarded as essential, so that they could get a good fee for the concession, but the United States notified the Republic of Panama that it had no interest whatever in requiring compensation, and so the cable was laid.

While there has been substantial agreement between the two countries, it has been difficult to prevent some conditions which are contrary to American ideas of morality. For instance, while the Canal Commission was strongly opposed to having a lottery on the Canal Zone, one is maintained just across the line in the city of Panama. The Panama lottery and the Bishop of Panama share the same house. One has to pass the lottery to see the bishop and, mayhap, a half dozen old women ticket sellers will try to intercept him before he reaches the church dignitary.

This lottery is a veritable gold mine to those who own it. Each ordinary drawing brings in $10,000—$1 for each ticket issued. The grand prize takes $3,000 of this, the next 9 prizes calling for a total of $900, the next 90 for a total of $450 and the remaining prizes for $2,070. Thus, $6,420 in prizes is paid out of the total of $10,000 received. Out of the remainder, 5 per cent goes to the ticket sellers and 5 per cent to the Panaman Government. Once a month the drawing is made for a grand prize of $7,500. Most of the money which the lottery people make is contributed by workers on the canal. Only 64 per cent of the money received from the sale of tickets is won back by the ticket buyer at each drawing. The net profits approximate a hundred thousand dollars a year.

On the whole, however, the relations entered into between the two Republics in 1904 have been such as to leave no serious ground for complaint. They have permitted the satisfactory construction of the canal, and they will permit its satisfactory operation. With the United States as the ultimate judge of every question vital to American interests, little is left to be desired. The fact is that the canal has been built with less friction and fewer difficulties with the Republic of Panama than could reasonably have been hoped for at the outset. This has been due principally to the fact that the Americans responsible for the success of the work have approached the Panaman situation with tact where tact was needed and with firmness where firmness was essential.