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The idea of constructing a transoceanic canal across the Central American isthmus was not a new one; the first surveys for such a purpose were conducted during the reign of Charles V, when those territories were still under Spanish rule. Since then, centuries had passed and Spanish fortunes had faded, as the recent Spanish-American War had dramatically illustrated. Now, the most dominant power in the region was the United States, led by the reticent imperialist McKinley, who was vigorous in pursuing Hawaiian annexation and expanding the US Navy but very reluctant to go to war with Spain, having experienced first-hand the sorrows of war.

The 1896 GOP platform had declared support for a number of measures intended to enhance America's standing in the world; among them were calls to expand the Navy, annex Hawaii, support Cuban independence, and to build a canal through Nicaragua.

While American politicians and businessmen discussed the possibility of a canal through Nicaragua, France had already set out on the construction of its own canal in the Colombian province of Panama. Plagued by monumental engineering challenges and a high mortality rate among the construction workers, the whole ordeal seemed less like a project to allow ships to pass between the Caribbean and the Pacific and more like a sieve through which the fortunes and lives of hundreds of thousands of investors and workers passed without discernible gain.

When Leon Czolgosz made his ill-starred attempt on the President's life in late 1901, sentiment in Washington leaned more towards a Nicaraguan canal than a Colombian one. In early November, Secretary of State John Hay and his British opposite number (and Ambassador to the United States), Lord Pauncefote, concluded a treaty (which nullified the Clayton-Bulwer Treaty of 1850) which granted the United States the right to create, control, and fortify an Isthmian canal. Just where, however, this canal would be situated remained a topic for debate.

A Nicaraguan canal seemed then to be the safe prospect, but there existed a devoted grouping of people dedicated to the construction of a Panamanian canal and willing to use any means to bring it into existence.

At the center of the canal issue were the questions of how much digging should be done and what payment would be necessary in order for that digging to occur. Without a doubt, the Nicaraguan option was the one which was easier to construct; while it would require the installation of "locks" just as its Colombian counterpart would, the Nicaraguan canal would follow the course of the San Juan River, allowing for dredging operations to be conducted on top of an existing river; the Panamanian option would entail the construction of an artificial river.

On top of the physical digging, there was also the question of how much political "digging" needed to be done. With regard to the Nicaraguan option, this meant negotiating the cession of the southern bank of the San Juan River from Costa Rica. Otherwise, Nicaragua was a stable country where there would be no unrest to jeopardize the construction and function of the canal. The same could not be said for the other option, where separatist sentiment was brewing in Panama. Such unrest, it was thought, could potentially disrupt the operations of any canal there.


In 1899, the Nicaraguan Canal Commission (established in the opening days of the McKinley administration) concluded that a Nicaraguan canal could be achieved for $138 million in total. Given the complex engineering challenges associated with a canal through Panama, as well as the need to purchase the French stake there, it could be reasonably concluded by any observer that a Panamanian canal would be both costlier and riskier. With both the numbers and Washington favoring the Nicaraguan option, 1901 drew to a close with a favorable outlook for the Nicaraguan Canal's prospects; in early 1902 the House of Representatives voted in favor of the Nicaraguan option. It would not be so easy from there on out.

In order to make the Panamanian option competitive, the Panama Canal Company's representative in Washington, Phillipe Bunau-Varilla, offered to sell the entire French stake in Panama to the US for just $40 million. Momentum, however, vastly favored the Nicaraguan option. It would take an upset to truly level the playing field.

On Ascension Day 1902, the upset that Bunau-Varilla had hoped for was delivered, seemingly by the land itself of France. Mount Pelée, on the French island of Martinique, had erupted spectacularly, destroying completely the town of Saint-Pierre. The Caribbean eruption had thrust Nicaragua's own volcanoes into the spotlight. Supporters of the Panamanian option called into question the long-term viability of any canal which could be threatened by volcanic eruption. In truth, Nicaragua's principal active volcano, Momotombo, was nearly 150 kilometers away from the canal and posed no risk to such an investment. The Nicaraguan government was sure to do its best to make that truth clear.

Though an education campaign on the part of the staunchest pro-Nicaraguan senators and the Nicaraguan government had staunched the bleeding, the eruption of Mount Pelée and the subsequent concerns raised over Nicaraguan volcanoes had certainly made things competitive. The McKinley administration itself was split over the issue, with the Major backing the Nicaraguan Canal as the safer, more practical option (and the one he had campaigned on in 1896), while the adventurous Roosevelt sensed that the Panamanian option could be exploited to carve out of Colombia a Panamanian state beholden to US interests. In late June, the Senate convened for a vote, the tally being 49-41 to authorize the construction of a canal through Nicaragua.

Subsequently, the United States negotiated the Hay-Corea Treaty with Nicaragua. In exchange for $11 million and an annual payment, the United States received a perpetually renewable lease on the lands required for the canal itself. The United States was allowed to fortify and garrison this canal with its own military forces. Lake Nicaragua and its surroundings remained Nicaraguan territory, but the US Navy was allowed to station ships on the islands of Lake Nicaragua and conduct military exercises within the waters of the lake. In a subsequent treaty with Costa Rica, the United States paid $2 million in exchange for the cession of the south bank of the San Juan River and a five-mile-wide strip of land.

A transoceanic canal was on its way.