 In 1899 , the Isthmian Canal Commission was set up to determine which site would be best for the canal ( Nicaragua or Panama ) and then to oversee construction of the canal . After Nicaragua was ruled out , Panama was the obvious choice . A few problems had arisen , however . With the U.S. ' solidified interests in Panama ( then a small portion of Colombia ) , both Colombia and the French company that was to provide the construction materials raised their prices . The U.S. , refusing to pay the higher @-@ than @-@ expected fees , " engineered a revolution " in Colombia . On November 3 , 1903 , Panama ( with the support of the United States Navy ) revolted against Colombia . Panama became a new republic , receiving $ 10 million from the U.S. alone . Panama also gained an annual payment of $ 250 @,@ 000 , and guarantees of independence . The U.S. gained the rights to the canal strip " in perpetuity " . Roosevelt later said that he " took the Canal , and let Congress debate " . After Colombia lost Panama , they tried to appeal to the U.S. by the reconsidering of treaties and even naming Panama City the capital of Colombia . 
