The treaty did not end tensions between the two nations, and nationalist protests over sovereignty continued. On Panama's Independence Day in 1959, students demonstrated at the U.S. Embassy in Panama City, demanding that the Panamanian flag fly at the canal. President Eisenhower ended the "flag riot" by allowing the Panamanian flag to be placed below, but not beside, the U.S. flag, a compromise that temporarily assuaged the citizens.
The diplomatic impasse over control of the canal ended in 1977 with two new U.S.-Panama treaties signed with dictator General Omar Torrijos. A nation still smarting from the embarrassing Watergate debacle, it was a time of conciliation, of new beginnings in American politics, with Jimmy Carter at the helm. The first of these agreements set in motion the orderly transfer of the canal and a buffer to Panama's authority under the auspices of a joint Panama Canal Commission to be completed by December 31, 1999. The second document, called the Neutrality Treaty, authorized the U.S. to defend the canal's access for all nations.
The Panama Canal's opening ceremonies had been overshadowed by the start of World War I. This time precautions were taken to ensure that the transfer would be big news and not get sidelined by the media frenzy over the upcoming millennium. The ceremonial transfer of the canal took place seventeen days early to much fanfare at the Miraflores Locks, the Pacific canal entrance, on December 14, 1999.
It was former president, Jimmy Carter who led the American delegation, not President Clinton, Vice President Gore or Secretary of State Albright who were all either otherwise engaged or perhaps just avoiding a firestorm. High-profile conservatives back home had stirred up fears that the Hong Kong based company contracted to operate the Canal would lead to a Chinese takeover. Lawsuits and congressional attempts to block the treaties failed. As President Carter handed Panama's first female president, Mireya Moscoss, the symbolic transfer document, he said "It's yours."
Panama today is ruled by a democratically-elected president, Martin Torrijos, son of the former dictator. No U.S. soldiers now guard the canal, and all of the U.S. forts and military bases in the Canal Zone have closed. Thus far, fears about the canal's vulnerability have proved groundless, though since September 11, security measures have become more extensive and sophisticated.
Knowing conditions could change, the U.S. has the Bryan-Chamorro Treaty to fall back on. Under that 1914 agreement, the U.S. paid $3 million for the permanent right to build an inter-oceanic canal across Nicaragua, a move opposed by other Latin American countries that saw the treaty as another attempt at U.S. intervention. The treaty plans for the unthinkable—a Panama Canal off-limits to the U.S. and starting the construction of a canal to link the Atlantic and Pacific all over again.