Hay–Bunau-Varilla Treaty

The Hay–Bunau-Varilla Treaty was a treaty signed on November 18, 1903, by the United States and Panama, which established the Panama Canal Zone and the subsequent construction of the Panama Canal. It was named after its two primary negotiators, Philippe-Jean Bunau-Varilla, the French diplomatic representative of Panama, and United States Secretary of State John Hay.

Background
Bunau-Varilla was originally involved in the building of the Panama Canal under Ferdinand de Lesseps, who had built the Suez Canal. After the collapse of the de Lesseps efforts to build the Panama Canal, Bunau-Varilla became an important shareholder of the Compagnie Nouvelle du Canal de Panama, which still had the concession, as well as certain valuable assets, for the building of a canal in Panama. Although not Panamanian himself, Bunau-Varilla had provided financial assistance to the rebel side in Panama's independence from Colombia, which occurred two weeks prior to the signing of the treaty. He had not, however, been in Panama for seventeen years, nor had he ever returned. As part of the Hay–Bunau-Varilla negotiations, the U.S. bought the shares and assets of the Compagnie Nouvelle du Canal de Panama for US$40 million.

Terms
The treaty was negotiated in Washington, D.C. and New York City. The terms of the treaty stated that the United States was to receive rights to a canal zone which was to extend five miles on either side of the canal route in perpetuity, and Panama was to receive a payment from the U.S. up to $10 million and an annual rental payment of $250,000.

Aftermath
This treaty was a source of conflict between Panama and the United States since its creation, that reached its peak on January 9, 1964, with riots over sovereignty of the Panama Canal Zone. The riot started after a Panamanian flag was torn during conflict between Panamanian students and Canal Zone Police officers, over the right of the Panamanian flag to be flown alongside the U.S. flag. U.S. Army units became involved in suppressing the violence after the Canal Zone Police were overwhelmed. After three days of fighting, about 22 Panamanians and four U.S. soldiers were killed. This day is known in Panama as Martyrs' Day.

The events of January 9 were considered to be a significant factor in the U.S. decision to negotiate the 1977 Torrijos–Carter Treaties, which finally abolished the Hay–Bunau-Varilla Treaty and allowed the gradual transfer of control of the Canal Zone to Panama and the handover of the full control of the Panama Canal on December 31, 1999.