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.
Presidency of Theodore Roosevelt
Secretary of State Hay and French diplomat Philippe-Jean Bunau-Varilla, who represented the Panamanian government, quickly negotiated the Hay–Bunau-Varilla Treaty. Signed on November 18, 1903, it established the Panama Canal Zone—over which the United States would exercise sovereignty—and insured the construction of an Atlantic to Pacific ship canal across the Isthmus of Panama. Panama sold the Canal Zone (consisting of the Panama Canal and an area generally extending on each side of the centerline) to the United States for $10 million and a steadily increasing yearly sum. In February 1904, Roosevelt won Senate ratification of the treaty in a 66-to-14 vote. The Isthmian Canal Commission, supervised by Secretary of War Taft, was established to govern the zone and oversee the construction of the canal. Roosevelt appointed George Whitefield Davis as the first governor of the Panama Canal Zone and John Findley Wallace as the Chief Engineer of the canal project. When Wallace resigned in 1905, Roosevelt appointed John Frank Stevens, who built a railroad in the canal zone and initiated the construction of a lock canal. Stevens was replaced in 1907 by George Washington Goethals, who saw construction through to its completion. Roosevelt traveled to Panama in November 1906 to inspect progress on the canal, becoming the first sitting president to travel outside of the United States.