French Panama Canal (1881-1889): De Lesseps's Failure and Scandal

The French Panama Canal attempt was the effort by Ferdinand de Lesseps’s Compagnie Universelle du Canal Interocéanique de Panama to dig a sea-level canal across the Isthmus of Panama between 1881 and 1889. Disease killed an estimated 20,000 or more workers, the engineering problems proved overwhelming, and the company collapsed in bankruptcy. The fallout produced the Panama scandal, one of the largest political corruption cases in the history of the French Third Republic.

Background: the hero of Suez

Ferdinand de Lesseps (1805–1894) was a former French diplomat who had driven through the Suez Canal, opened in 1869. The triumph made him one of the most admired men in Europe, and he believed the same approach could link the Atlantic and Pacific.

Panama was then a province of Colombia. In 1878 the French naval officer Lucien Napoléon Bonaparte Wyse obtained a concession from the Colombian government to build a canal. In May 1879 an international congress in Paris, chaired and dominated by de Lesseps, voted for a canal at Panama. Crucially, it backed a sea-level design without locks, which de Lesseps favoured because it had worked at Suez. Several engineers, including Adolphe Godin de Lépinay, argued for locks and a dammed lake, but they were overruled.

De Lesseps formed the canal company and appealed directly to the French public. After a first share offer failed in 1879, a second issue in December 1880 succeeded, attracting large numbers of small investors who trusted his reputation. The company also bought a controlling interest in the American-owned Panama Railroad, which had crossed the isthmus since 1855, at a high price.

Work formally began on 1 January 1881. Engineers, contractors and labourers arrived during 1881, and excavation started in earnest along the line of the railway from Colón on the Caribbean to Panama City on the Pacific.

Engineering problems

The task was far harder than Suez. Instead of flat desert, the route crossed dense rainforest, swamps and the continental divide at the Culebra (Gaillard) section, where the ground was unstable clay and shale. Heavy rains caused repeated landslides that refilled cuts as fast as they were dug. The Chagres River, which crossed the planned route, could rise by several metres in a day during the wet season, and no one found a reliable way to control it within a sea-level design.

Steam excavators, dredges and narrow-gauge railways were brought in, much of the work was handed to contractors, and costs rose steeply. In 1887, with the money running out, the company finally accepted a temporary lock canal, and Gustave Eiffel was contracted to build the locks. The change came too late.

Yellow fever and malaria

Disease was the greatest killer. Yellow fever and malaria were endemic on the isthmus, and nobody yet knew that both were spread by mosquitoes. Hospitals unwittingly helped breed the insects: the legs of beds were set in pans of water to keep ants away, and the ornamental gardens held standing water.

The death toll fell on everyone. Jules Dingler, director-general from 1883, lost his wife, son and daughter to yellow fever. Most of the workforce, which peaked at around 19,000 to 20,000 people in the mid-1880s, came from Jamaica and other Caribbean islands, and they bore much of the loss. Records are incomplete, but historians commonly estimate total deaths during the French period at about 20,000 to 22,000.

Bankruptcy

As the cost climbed far beyond the original estimates, the company kept raising money through new bond issues. In 1888 the French parliament authorised a lottery-bond loan, but the issue fell well short of its target. On 14 December 1888 the company suspended payments, and in early February 1889 a Paris court placed it in liquidation. Roughly 1.4 billion francs had been spent, and hundreds of thousands of French savers lost their money.

The Panama scandal

In 1892 the antisemitic journalist Édouard Drumont’s newspaper La Libre Parole published allegations that the company had bribed members of parliament and journalists to win approval for the lottery loan. The financier Baron Jacques de Reinach, who had handled payments, was found dead in November 1892, and his associate Cornelius Herz fled to England.

Investigations named many deputies as having taken money. In 1893 Ferdinand de Lesseps, his son Charles, Gustave Eiffel and other directors were convicted of fraud and maladministration, but the Court of Cassation overturned these verdicts on procedural grounds in June 1893. In a separate corruption trial, Charles de Lesseps and the former public works minister Charles Baïhaut were convicted of bribery; Baïhaut, who confessed, served a prison sentence. The scandal damaged the careers of prominent politicians, including Georges Clemenceau, and its antisemitic overtones foreshadowed the Dreyfus affair. Ferdinand de Lesseps died on 7 December 1894.

Key people

• Ferdinand de Lesseps (1805–1894): builder of the Suez Canal and president of the Panama company, whose prestige drew in investors and whose insistence on a sea-level canal shaped its fate.
• Charles de Lesseps (1840–1923): Ferdinand’s son and closest associate, who managed much of the company’s business and was convicted of bribery in 1893.
• Jules Dingler: French government engineer who directed the works from 1883 to 1885 and lost most of his family to yellow fever.
• Philippe Bunau-Varilla (1859–1940): young engineer who briefly led the works in Panama and later lobbied the United States to take over the project.
• Gustave Eiffel (1832–1923): engineer of the Eiffel Tower, hired in 1887 to build the locks for the revised canal.

What happened next

After the liquidation, a successor company, the Compagnie Nouvelle du Canal de Panama, was formed in 1894, partly to protect the old company’s concession from Colombia. It kept a small workforce digging, mainly at Culebra, but it had little hope of finishing the canal alone. Its main asset was what the French had already done: excavations, maps, machinery, buildings and the Panama Railroad.

In 1902 the United States Congress chose Panama over a rival route through Nicaragua, helped by vigorous lobbying from Bunau-Varilla. When Colombia refused to ratify a treaty, Panama declared independence in November 1903 with American support, and Bunau-Varilla, acting as Panama’s envoy, signed a treaty giving the United States control of a canal zone. In 1904 the United States bought the French company’s assets for 40 million dollars. American engineers found much of the French excavation and equipment usable, and the lessons of the French years, above all about locks and disease, shaped their success.

By the numbers

Timeline

• 1869, 17 November: The Suez Canal opens, making de Lesseps famous.
• 1879, May: An international congress in Paris votes for a sea-level canal at Panama.
• 1880, December: A successful share issue funds the canal company.
• 1881, 1 January: Work on the canal formally begins.
• 1883–1885: Jules Dingler directs the works; yellow fever kills members of his family.
• 1887: The company switches to a lock canal and contracts Gustave Eiffel for the locks.
• 1888, 14 December: The company suspends payments after a failed lottery-bond issue.
• 1889, February: The company is placed in liquidation.
• 1892–1893: The Panama scandal breaks and trials follow.
• 1904: The successor company sells its assets to the United States.

Why it matters

The French failure was a costly lesson in engineering, medicine and finance. It showed that a sea-level canal was impractical and that tropical disease had to be conquered before work could succeed. The United States learned from both points when it built the Panama Canal of 1904–1914 with locks and mosquito control. In France the scandal shook public faith in parliament and fed the antisemitic politics of the 1890s.