This is the part 2 of the “Classic Cons: the Panama Canal Bubble” article. Read the Part 1.
But, most of all, the hero of Suez was proud of financial success of his enterprise. All costs associated with the grandiose construction of the Suez Canal paid off in just five years! It is not surprising that many investors around the world were looking forward to a successful Frenchman taking up a new project.
And the construction scale in Panama promised to be no less grandiose. Lesseps’s world fame and his reputation in the scientific world seemed to guarantee a successful future for a new project. It is not surprising that the company’s shares quickly spread with a huge circulation of 600,000 copies. The company even had to urgently declare additional subscription for its securities.
Workers on the Panama Canal
At first, everything in the French garden was lovely. The thing is that the rights to build a canal in Panama had already belonged to the descendants of the Gauls. In 1878, Lucien Napoleon Bonaparte-Weiss, an engineer, received from the Colombian authorities the concession to construct and operate a canal for 99 years. But the great-nephew of the emperor realized in the right time that he was unable to deal with such a project. Ferdinand de Lesseps easily persuaded Bonaparte-Weiss to concede him the right for the construction of the canal for 10 million francs, and began to act according to the scenario already tested on the Suez Canal.
Proceeds from the company’s shares sale were less than required, – 300 million francs instead of the planned four. The creator of the Suez Canal went to the US, but there he was not given money. Yankees remained loyal to the Monroe Doctrine: the American continent was a protected zone of American companies. The Frenchman, however, was not going to back down and in 1881 he started the construction.
The Panama Canal Scandal
From the very beginning, things went wrong. Building tools broke, unable to cope with the rocky soil. Workers delivered mainly from the nearby Caribbean colonies of France, were dying in thousands because of yellow fever and malaria. It got to the point that the people recruited for the construction left for Panama with pre-prepared coffins!
Photo Portrait and Caricature of Ferdinand De Lesseps
The money disappeared as if getting in a bottomless pit. It soon became clear that the initial value of the business – 600 million francs – was incorrectly calculated. Neither a loan secured by the government of France, nor the issue of lottery tickets helped. In addition, de Lesseps planned to build the Panama Canal according to the Suez type – at the sea level. And it was a terrible mistake. In some places the altitude difference was up to twenty meters, i.e. locks were necessary. Spending a few years on the fight with the rocky rapids, Ferdinand de Lesseps appealed for help to the engineering bureau of Gustave Eiffel.
But it was too late. By 1888 it was impossible to hide the true situation in the construction from the public. Decent old dame Europe was shocked to learn, at last, in detail, how ineptly almost half a billion of gold francs was squandered. It was time to sum up the disappointing results: during eight years the canal wasn’t dug even for a quarter; tens of thousands of ordinary shareholders lost their money in a giant scam.
Continue to the Part 3