A SECOND MIRACLE? At Suez, the dirt removed from the canal was piled along or near the banks. That had worked so they saw no reason why it would not work.

A SECOND MIRACLE?At Suez, the dirt removed from the canal was piled along or near the banks. That had worked so they saw no reason why it would not work at Panama.

Almost from the start, this plan proved a disaster – one for which they never had an answer beyond to keep trying. Along the Culebra Cut, the spoil generated massive mudslides into the work. Everywhere it created great mires of mud and swamp – something they did not yet understand.

An excavator and conveyor at work. The conveyor moves to spoil to a dumping point about 100 yards away.

A SECOND MIRACLE?- Initial cost estimate: $209 Million

- De Lessops stated estimate: $104 Million

- Initial Stock substription (1880-1881): $60 Million

Costs rose rapidly. There was nothing in Panama beyond a single line railroad.

Everything had to be imported including labor as there was little surplus labor in Panama.

And, everyone wanted to make money on the deal.

A SECOND MIRACLE?RENTS – PANAMA CITY

1875: $140 ($2800)

1881: $185 ($3936)

1885: $639 ($14,860)

1895: $141 ($3357)

The French Canal Company was more a general contractor than anything. Most of the work was done by sub-contractors. Initially these were French Companies.

A SECOND MIRACLE?Most of the heavy equipment such as dredges were American. Initially purchased by French contractors, as the project continued they were operated increasingly by American companies.

The major French Contractor quit in 1883 after its founder died in Panama.

A SECOND MIRACLE?Armand Reclus was the first Chief Engineer. He would quit in 1883.

Coucreux, Hersent & Co. was the major French contractor. They quit in 1883.

The company cited the death of their lead Engineer, Gaston Blanchet. Much later, it was revealed they left because they also were certain the project was impossible to accomplish in the time or at the cost predicted, or anything close to it.

But, they did not want to tell the great French hero he was wrong.

A SECOND MIRACLE?De Lessops estimated cost of $104,000,000 was exceeded within three years.

His estimate was less than the cost that had been expended building Suez. He estimated less earth would be moved.

By 1883, he could no longer sell stock. The company began issuing bonds with guaranteed interest returns. (Basically borrowing money from the public rather than banks who refused to back the issues.)

DEATH TRAPFrench records indicate that approximately 22,000 workers died.

The death rate was comparable to the death rate the Americans experienced building the Railroad.

But, French numbers only included those who were French or died in hospital.

THE PROBLEMSThe Death Toll was not the problem. The French had little trouble replacing losses, although it was so bad it was compared to war.

There was no plan. The plan was to dig and keep digging.

French engineers were methodical and scientific, well trained but…

Perhaps this was the problem as they lacked the ingenuity that less scientific, and technical American engineers would be known for.

No standardization. Not even the railroad. The Panama Railroad was U.S. gauge, not French. French had to build separate for their rolling stock.

The biggest problem, however, was De Lesseps. It was his idea and no one was willing to tell the emperor he had no clothes.

THE PROBLEMS1887

Heavily in debt, the French finally give up on a sea level canal.

A lock canal is designed. Gustav Eiffel designed the locks.

But by then it was too late.

MONEY PITFrench Canal Company Stock and Bond Issues.

1881: ~$60,000,000

1882: ~$15,000,000

1883: ~$34,000,000

1884: ~$18,000,000

1886: ~$58,000,000

1888: ~$52,000,000

~$237,000,000 total.

By 1888, the money raised did not match the debt service on the prior issues.

AN IGNORED WARNING?

CORINTH CANAL

A contemporary French project at the time de Lesseps began in Panama and should have served as warning. Two French companies tried to build this seven mile ditch and went bankrupt. Like Panama, costs outstripped the ability of private companies and finance.

AN IGNORED WARNING?

Ultimately completed by the Greek government in 1893, oddly this canal was used by some to later argue that a canal at Panama was possible if only people would be patient and invest more.

FAILURE1889

French company seeks to issue stock by lottery, de Lesseps remains certain of success.

Plan is rejected by French government under pressure from unpaid creditors.

Company cannot pay outstanding debts and creditors will not allow another forgiveness of debts.

Company goes bankrupt.

FAILURE1890: French economy collapses as hundreds of thousands lost savings in the Canal Company issues. It is the worst economic collapse of the century.

1891: New French Canal Company is formed to continue work under Colombian concession. It is in effect a holding company and seeks to sell its work and equipment, but there are no takers.

FAILUREBy 1893, the damage is complete.

Ferdinand de Lesseps is convicted of fraud and is sentenced to house arrest. He dies under arrest in 1894. His son Charles would serve a year in prison.

Several French cabinet Ministers and 104 members of the Chamber of Deputies are charged with corruption and bribe taking, having accepted bribes from the Canal Company to allow the Company to continue to issue bonds and borrow money.

Most resign to avoid prosecution. Most who do not would be convicted.

France avoids total collapse only because the major banks stayed out of it having neither loaned money or backed debt issues of the French canal company.

A SECOND MIRACLE?

WHY DID THEY FAIL?TECHNOLOGY? The technology to excavate was not so

primitive or inadequate that failure was a certainty.

BUT It was less capable than what would come, less efficient which meant the effort would cost more and take longer.

FRENCH ENGINEERS? The French were among the most capable and highly regarded civil engineers in the world with a tradition of advanced, technical education dating back to the 17th Century. They were methodical and competent.

BUT Perhaps because they were, they lacked the mindset to innovate and depart from prepared plans except as a last resort.

WHY DID THEY FAIL?DISEASE? 22,000 died, or at least that many died in

hospital and most to Yellow Fever. But losses at all levels were replaced with little break in the work (unlike the American railroad project)

The impact would come later when the Americans recruited labor. They went to the Caribbean just as the French had. The French recruited almost entirely from Jamaica and in the early years when

America took over, they could not hire a Jamaican who remembered all too well how many did not come home.

WHY DID THEY FAIL?PLANNING: One of the main reasons the French failed

was a failure to plan and understand the obstacles. They were not ignorant of them. There were many, not in the least of which was the Chagres River. But they dismissed this at the outset. Much of the work could be done in the cut without dealing with the river, but ultimately it had to be dealt with. When the French finally adapted, it was too late.

The Americans would face this same problem

except they would change everything very early on once it was apparent that the

original plan would not work.

WHY DID THEY FAIL?ESTIMATING: The French grossly underestimate

everything. They under estimated the scope of the work (not even taking into account their fatally flawed plan). They estimated the

amount of earth to be moved was about the same as at Suez – they would fail after having dug more than twice as much. They grossly underestimated the cost and did not revise their estimate even when it rapidly proved unrealistic.

De Lesseps campaigned for the first successful stock offer claiming the work

was neither harder nor more expensive than Suez

had been. It ultimately cost almost three times as much to fail at Panama than it had to succeed at Suez.

WHY DID THEY FAIL?FINANCING: The failure at Panama was as much a failure of

private finance and anything. Private finance had built the Suez Canal. It had built railroads. It had built great industries. But private finance had its limits.

Private finance relies upon the confidence of investors, and their patience. If the project fails to meet expectations, investment dries up and creditors demand payment.

De Lesseps proceeded until the end championing the

work as a foregone conclusion of French genius. But

at the end, investors did not invest and patriotism and glory could not keep the creditors from calling in the debts.

Panama was too expensive and complex for private enterprise.

WHY DID THEY FAIL?Ultimately, it boiled down to one man.

De Lessepes very attributes were not up to the challenge.

Optimism alone was not enough.

His distrust of engineers’ concerns was fatal. No one wanted to tell the Great Man he was wrong.

There was no second miracle, just a new expression.

“Quel Panama!” became a word for unmitigated disaster in French.