A Sound Economic Investment? The Panama Canal from 1914–77

The acquisition, operation, and relinquishment of the Panama Canal Zone were highly controversial at the time. The Republic of Panama often requested higher annuity payments because the Panama Canal posted sizable revenues. Using trend analysis, we examine the profitability of the Panama Canal operations from 1914 - 1977. Data were obtained from the Annual Reports of the Governor. We conclude that after World War I and prior to World War II, the Panama Canal’s reputation as profitable was warranted. After World War II, the net income was mostly positive and the profit margin exceeded five percent only six times. During the period 1947 to 1977, the Panama Canal demonstrated very low returns on assets and equity relative to other popular investments at the time. Net present value and discounted payback periods indicated that the Panama Canal would not have paid returns to investors at rates typically expected.