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 Canal Zone
The Spanish–American War of 1898 added new life to the canal debate. During the war, American warships in the Atlantic seeking to reach battle zones in the Pacific had been forced to round Cape Horn. Influential naval pundits, such as Captain Alfred Thayer Mahan, urged the construction of a Central American canal. In 1902, with the French efforts moribund, US President Theodore Roosevelt backed the Panama route, and Congress passed legislation authorizing him to purchase the French assets on the condition that an agreement was reached with Colombia. In March 1902 Colombia set its terms for such a treaty: Colombia was to be sovereign over the canal, which would be policed by Colombians paid for by the United States. The host nation would receive a larger percentage of the tolls than provided for in earlier draft treaties. The draft terms were quickly rejected by American officials. Roosevelt was in a hurry to secure the treaty; the Colombians, to whom the French property would revert in 1904, were not. Negotiations dragged on into 1903, during which time there was unrest in Panama City and Colón; the United States sent in Marines to guard the trains. Nevertheless, in early 1903, the United States and Colombia signed a treaty which, despite Colombia's previous objections, gave the United States a wide zone in which it could deploy troops with Colombian consent. On August 12, 1903, the Colombian Senate voted down the treaty 24–0.