How to Read a Map: the Panamanian Isthmus and Global Trade Routes
For a small country, Panama holds an outsized importance in the Americas, a significance that can be traced back to the Spanish colonial era and has evolved through the centuries into a vital geopolitical and economic role in the region. Strategically located at the crossroads of North and South America, Panama serves as a natural land bridge and a divide between two major oceans, the Atlantic and the Pacific. This unique geographic position has made it a critical point for trade, exploration, and military strategy since the time of the Spanish conquest.
But why is Panama so important to U.S. hemispheric interests? Why has President Trump recently made statements suggesting the U.S. would "take back" the Panama Canal? To find out, we need to have a brief look at Panama's geography, history and geostrategic importance.
This will be something of a "light touch" installation of my "How to Read a Map" series, which has previously touched on Nigeria, Uganda, and Iran. We will examine only a small bit of the geography and history of Panama and see how Panama (and, by extension, its Canal) constitute a key geostrategic asset.
Geography
The prominent features of Panama's geography when we take a bird's eye (or "satellite's eye") view include the country's location and form.
The narrow Panamanian isthmus constitutes a natural land bridge between Central and South America. As an isthmus, it is, by nature, surrounded by water on either coast. Perhaps more important is its location, as crossing the isthmus (from north to south) provides a viable way to cross from the Atlantic/Caribbean to the Pacific and vice versa (south to north) without having to, like Magellan, circumnavigate South America.
Prima facie, on the basis of the above features, we would expect a defining feature of a place like Panama to be its importance as a trade route and transit point whether that trade takes place by land or by sea. We would expect a smaller population (given size limitations), and an emphasis on trade. This expectation is reinforced when we look at the country's topography.
Source: Sadalmelik, CC BY-SA 3.0 <https://creativecommons.org/licenses/by-sa/3.0>, via Wikimedia Commons
Here we see limited areas of high elevation comprised by a "spine" of hills and mountains that cross the country from East to West. The overwhelming majority of Panama is essentially lower elevation with copious coastline, and prominent lakes and rivers, especially Gatun Lake in the north on the Atlantic side of the isthmus. Put simply, whoever lives here most likely must trade to survive.
Historical Trade Routes
The Spanish understood the value of Panama to the Empire quite well. They established the old city of Panama (Panama Viejo) on the Pacific coast of Panama in 1519. Two key trade routes developed in colonial era Panama through the 1500s:
Camino Real - a land route using wagons to connect Portobelo on the Atlantic coast to what was then Panama City on the Pacific coast.
Camino Las Cruces - Connecting Panama City on the Pacific coast to Fort San Lorenzo on the Atlantic coast via a partly overland route that linked to the Chagres River and Lake Gatun (not entirely dissimilar to the route used by the Panama Canal centuries later).
The entrance to these routes on the Caribbean/Atlantic coast were protected by Spanish military forts. Panama City's port was the most important Pacific Ocean port for the Spanish Empire. All the gold and silver extracted from Peru and Bolivia passed through Panama City as it made its way to the Caribbean/Atlantic coast and, from there, back to Europe. Similarly, goods from Europe, troops, and weapons (for suppressing rebellions in other parts of the Empire) traveled across the Panamanian isthmus in the other direction and made its way to South America from Panama City. It's no wonder then, that the U.S. noticed the importance of Panama as well.
The Panama Canal - A Land Divided, the World United?
Ultimately, it was the dissatisfaction of the urbanized elites that spurred Panama's rather late move towards independence from Spain in 1821. But Panama was a small, new country with limited budget and weapons, so it immediately sought the protection of a more powerful patron voluntarily joining Bolivar's Gran Colombia project.
The honeymoon did not last long, by 1826, dissatisfied with Colombian policy, Panama's commercial elite made its first unsuccessful efforts to separate from the Colombia. It was not until 1903 that these efforts came to fruition under the patronage of the United States with the signing of the Hay-Bunau-Varilla Treaty. I will refrain from expanding on the arguably problematic circumstances under which the treaty was signed. For our purposes, the key is that this treaty secured Panama's separation from Colombia through guarantees of U.S. military protection. In exchange, the U.S. received a roughly 1,432 square-kilometer enclave of land in Panama, which would become the Panama Canal Zone.
The idea of an interoceanic canal across the Isthmus of Panama was not new. King Charles I of Spain ordered the governor of Panama to draw up plans for an interoceanic canal in 1534. But it was the Americans who ultimately succeeded in bringing the idea to fruition nearly four centuries later, in 1914.
Source: Map of the Panama Canal Zone. from the National Atlas
Importantly, the Canal Zone was much more than just the Canal itself. The Panama Canal Zone included its own police force, courts, telephone company (with a separate area code), electric company, fire department, postage stamps, etc. It was, essentially, a self-contained U.S. enclave complete with racially-segregated schools for Canal Zone residents.
U.S. Interest in Panama
But what was the source of U.S. interest in the Canal apart from its obvious centuries-long importance as a key trade route? From a military perspective, the Canal not only provided an easy means of transit for naval vessels between the Atlantic and Pacific oceans, it also constituted a key trade route chokepoint. Furthermore, together with Guantanamo Naval Base in Cuba, the Panama Canal was a key linchpin in the U.S. strategy for naval domination of its own maritime "backyard" and protection of its coasts.
With naval assets at both these points and a chokepoint in the Panama Canal, the U.S. military could easily assert hemispheric dominance. It's not a coincidence that, as with the erstwhile Spanish Empire, for the U.S., the Panama Canal Zone was a key focal point for concentration and transport of U.S. military assets--including those of U.S. Southern Command--before the handover of the Canal to Panama in 1999.
The more things change, the more they stay the same
Naturally, China's emergence as a global trade power in the globalized economy beginning in the 1970s brought with it eventual trade ties and an interest in Panama as a means of both furthering its arguably mercantilist economic policies and undermining traditional U.S. influence in the region. The People's Republic of China (PRC) eventually amassed a series of construction and infrastructure projects and other assets in Panama. These range from interests in a key copper mining project to a cruise terminal, a fourth bridge over the Canal, and a key role for Huawei in Panama's digital infrastructure.
The most dramatic change in Panama-PRC relations came in 2017 when then President Varela shifted Panama's diplomatic recognition from Taiwan to the PRC and Panama joined the Belt and Road initiative in addition to signing a series of agreements with the PRC. The shift marked a break from historical relations with the Republic of China dating back to 1912, it came on the heels of reportedly secret meetings between Panamanian and PRC officials in Madrid and Beijing. The U.S. ambassador at the time, John Feeley, was reportedly blindsided by the decision having received notice just an hour before it was announced.
Concurrently, reports emerged of plans for the PRC to build a massive embassy complex in the Amador Peninsula such that ships transiting the Canal would be greeted by a PRC flag and embassy--the symbolism was unmistakable. These plans were eventually scrapped, and only later did reports emerge of alleged corruption involving then Panamanian president Varela's family business interests as a potential motivator for this drastic policy change. By then, however, the political and diplomatic shift had been made, however, imperfectly.
In the end, the lesson remains that Panama has not changed much in 500+ years, it remains the same trade/transit-focused isthmus where the interests of an urbanized, commercial elite will inevitably dictate policy. It remains the same small country that ultimately relies on an outside patron (the U.S.) for military protection. The problem is that, increasingly, the commercial interests of the Panamanian business-political elite vis-a-vis China have clashed with the security interests of the U.S. in the region. Panama is effectively being pulled in two directions. On the one hand, a U.S. wary of growing Chinese influence, especially in Uncle Sam's "backyard" (Latin America), and increasingly poised to escalate a trade war with China, on the other, a PRC seeking to further consolidate its influence and power while undermining that of the U.S.
2025 and beyond - all about trade routes?
Panama's predicament is much like that of a character in a story beseeched by an angel on one shoulder and a devil on the other, even if, from a Panamanian perspective, it's not always clear which country is which. China is a major user of the Panama Canal and has quickly consolidated power, standing, and ties with the country's commercial elite who "run the show" even if its behind closed doors.
At the same time, roughly 70% of maritime traffic passing through the Canal is on its way to or from an American port. American influence remains a strong force in the country both economically, culturally, and in terms of security. In other words, even if President Trump does not actually intend to use military force to "take back" the Panama Canal, Panama is in no position to ignore American concerns, it remains quite firmly in the U.S. sphere of influence in that sense. I would venture to say that U.S. concern over the Canal is primarily geostrategic and commercial. I am loath to believe that the U.S. actually wants the headache of administering the Canal Zone once again or that the current U.S. Administration is keen to embark on a repeat of the 1989 U.S. invasion of Panama. At the same time, it's clear the U.S. have concerns about growing Chinese influence likely motivated by the importance of trade routes in the face of an escalating trade war with the PRC.
In the first instance, the U.S. is concerned that Chinese interests in Panama provide the PRC opportunities to potentially target the Canal during a hypothetical wartime scenario. In the second instance, the current U.S. posture is about the increasing trade tensions with China. To be clear, these trade tensions pre-date COVID, but as I've written elsewhere, I think the trend of seeking dominance over trade routes will continue. Spurred by the supply chain chaos engendered by COVID, the war in Ukraine, and the Hamas-Israel war, a U.S. poised to escalate a trade war with China will need to have its "ducks in a row" where influence over key trade routes is concerned. Inevitably, that will involve Panama, which remains just as geostrategically important today as it was five centuries ago in the era of the Spanish Empire, if not more so.
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