Panama Canal Railway
The Panama Railway also operated a significant shipping line, connecting its service with New York and San Francisco. It ran a Central American line of steamships linking Nicaragua, Costa Rica, San Salvador, and Guatemala to Panama City. The shipping service was greatly expanded when canal construction began. Ships included the SS "Salvador", SS "Guatemala", SS "Cristobel", and , which became the first of the ships to cross the completed canal in 1914.
In 1904 the United States took over the license to build and operate the canal. The choice to use locks and an artificial lake (Gatun) meant that the old railway route from 1855 had to be changed because it followed the Chagres River valley, which would be flooded by the lake. Also, the railway would be extended and altered continuously for the building process. The stock of the Panama Railway Company, vital in canal construction, was entirely controlled by the United States Secretary of War.
Panama during World War II
The history of Panama during World War II begins in 1939. Due to the American-controlled Panama Canal cutting across the center of the country, Panama was of major strategic importance to the Allied war effort, as well as the most important strategic location in Latin America during World War II. It provided an invaluable link between the Atlantic and Pacific Oceans that was vital to both commerce and the defense of the Western Hemisphere. Therefore, the defense of the Canal Zone was the United States' chief concern in the American Theater. Panama never received Lend-Lease assistance, but in return for the rights to build military infrastructure within Panamanian territory, the United States undertook large-scale public works projects, which did much to modernize the country and boost the economy.