Right. But, clearly the Panama Canal is possible
We can only say that though because it happened IOTL.
ITTL however, it has yet to happen by the time of POD. Furthermore, an attempt has been ongoing both IOTL & ITTL by the time of the POD since 1880 by the French, a major world power, and has yet to lead to anything at all asides from lots of dead men and wasted money.
IOTL the Hay–Herran Treaty went forward and the Senate voted in favor of pursuing the Panamaian option because political conditions were ripe for such an event, and because it was obvious to all and most especially to the US that some way was needed to rapidly ship men and material from one ocean to the other. However, if the POD occurs we have a stronger, richer, and more united UPCA already fulfilling this role. The Panama Canal is butterflied away.
and clearly there are people with the will and ability to think of it and fund it.
People who were, at the time, thought of as delusional. See above on the French attempts at building a canal, and the reasons why it would not be followed up upon ITTL.
In summary; in a world with a successfully united Central American state already providing the shipping across the Atlantic to the Pacific, and vice-versa, there is no impetus for a Canal project. Coupled with the obvious French failure in attempting to construct an ocean-going, continent dividing canal through the mountainous jungle terrain of Panama would make people less likely to attempt such a project.
While everyone would recognize that a direct, ocean-going route would be more cost-efficient than overland shipping, they would also recognize that the initial investment cost to literally move mountains to create such a canal would be too high when there already was a suitable shipping service in the area.
why wouldn't the UPCA's efficient overland shipping play a similar role to Panama Canal?
...
a) Is there an echo in here? I could have sworn I was the one arguing for that side just a moment ago. The UPCA's overland route, especially fueled by railway construction by foreign investment, would be extremely efficient in carrying goods from one ocean to the other.
b) Well for one, you can't move a US Navy battleship from the Atlantic to the Pacific via an overland route. Economically the UPCA would still fulfill the same as our OTL Panama Canal.
However, the butterflies of a successful UPCA operating a mercantile republic in this way would have a significant affect on the United States and the rest of the world.