I answered the following question on Quora (the response appearing below has been further amplified):
What is the most likely reason President Carter signed over the Panama Canal to the Panamanians?
Vince Dhimos, lives in Panama City, Panama
There are three main factors in the handover of the Panama Canal to Panama by Jimmy Carter:
1—To quote Wikipedia: Demands for the United States to hand over the canal to Panama increased after the Suez Crisis in 1956, when the United States used financial and diplomatic pressure to force France and the UK to abandon their attempt to retake control of the Suez Canal, previously nationalized by the Nasser regime in Egypt.
In other words, the world started to warm up to the idea that France and UK should relinquish their claim to the Suez Canal, essentially because it was not located in their territory or vicinity. This made their ownership a form of colonialism and that ancient construct was losing support in the world. This set an international precedent that would naturally apply to the Panama Canal.
2—The murder of several teenagers at Balboa High School, founded for US sons and daughters of US service personal in the Canal Zone, on Jan 9, 1964. (Many of my details hereinafter are from the site of Panamanian newspaper La Crítica. Unfortunately, US outlets were not inclined to publish much detail on this embarrassing story).
The students were from another school but went to Balboa HS carrying a Panamanian flag, in protest of the fact that that school was illegally flying only the US flag and not the Panamanian flag. Now here’s a fact that seems trivial, but is instructive in retrospect: The school was required under a bilateral agreement, carrying the strength of US law, to fly both flags but was in flagrant violation. The decision to illegally fly only the US flag, was made by the US students, whose parents were certainly staunch US patriots. Thus the violence that ensued and that ultimately led to the transfer of the canal to Panama was in fact caused by high school kids.
(Moral: Be careful what you teach your kids. Blind nationalism can lead to a major loss for the country you think you are defending. I can’t help but think of the loss of US allies and the trust of the world due to the numerous sanctions and tariffs recently applied everywhere against almost all exporters to the US.)
The demonstrators demanded that their flag be hoisted together with the US flag. This was the point at which a wise decision could possibly have prevented bloodshed. Instead, the representative of the school insisted that they could not raise the flag on the flag pole (which had two sets of cords to accommodate 2 flags) but would be allowed to stand in front of the flag pole holding the flag and sing the Panamanian anthem. This was acceptable to some of the demonstrators but not to their leaders. Nonetheless, the demonstrators sang their anthem while the US students, steeped in the conviction that the Great USA is sovereign over all other nations, tried to drown out their voices by singing the Star Spangled Banner. After a lengthy heated discussion between the Panamanian students and the students of Balboa HS, mostly Americans (though some foreigners were admitted, upon paying tuition), the demonstrators later insisted, against the Balboa HS representative’s wishes, on hoisting their national flag. Panamanian guards at the school, loyal to the US, finally ordered the demonstrators to leave at gunpoint. In the ensuing struggle, a police officer struck the Panamanian flag with a night stick, causing it to tear, and was then punched in the face by a demonstrator. In the further confusion, the demonstrators reacted violently. Ultimately, some of the demonstrators were shot and killed. This bloody incident led to subsequent rioting throughout the country, extending as far as the city of Colon, 40 mile miles (80 by the circuitous land route) to the north of the site of the initial demonstrations. 20 Panamanians, who had entered the Canal Zone in contrvention of prevailing US law, and 4 Americans were killed. In this subsequent riot in the Canal Zone, one of the student organizers, Ascanio Arosemena, was shot to death as he was helping the wounded. The shooters were mostly US military. This student is now famous post-mortem in Panama, where Martyrs’ Day is celebrated every year and Ascanio’s martyrdom is commemorated in particular. A theatre not far from the initial protest was named for him. Panama briefly suspended relations with the US over these incidents. An avenue along the route from downtown Panama City to the scene is now named Avenida de los Mártires (Avenue of the Martyrs), one wall of which is prominently decorated with anti-US graffiti that perpetually reminds visitors and residents alike of the way their one-time benefactor treated Panamanians. A rather complete history of the incidents is found in this academic thesis.
3— Panama strongman Omar Torrijos. Omar, a high-ranking military leader, rose to power when he overthrew President Arnulfo Arias, who was unwilling to cooperate with the military. It happened on the 11th day of Arias’ third term. Deposing the oligarch Arias had become a de rigueur ritual. He had been deposed twice before. But don’t cry for Arias, folks. During his first term he started implementing the platform of a Nazi party in Panama. He adored Adolf Hitler, and to please his idol, he ordered the killing of a group of Jewish immigrants from Switzerland in the province of Chiriquí, forced foreign business people to transfer ownership of their companies to Panamanian hands, and divested black West Indians – all either the labourers who built the canal or descendants of them – of their citizenship. He also organized state visits to Berlin. Encyclopaedia Britannica writes of Arias, “During his dictatorial and corrupt second term, he replaced the constitution, dissolved the National Assembly and the Supreme Court, and was finally physically deposed by the national police.”
Partly as a result of the massacre described above, triggered by proud patriotic US high school students, popular strong man Omar Torrijos took up the cause of recovering the Canal Zone for Panama. He campaigned around the world for this cause and was ultimately successful in convincing Jimmy Carter to hand over the canal. It was a brash move on Carter’s part since a compromise agreement could probably have been reached, since Carter held all the cards. At any rate, the canal reverted to Panama on Nov 24, 1999 under the Torrijos-Carter agreement, long after Omar’s death.
Torrijos was loved by the people and is hated to this day by the US-backed oligarchs. He was an educated man but very much a man of the people, who loved to meet and socialize with his indigenous friends in the Comarcas (reservations for the indigenous). At the same time, aside from recovering the canal for Panama, he was a man of vision who initiated more infrastructure projects for the country than any president. He founded the Universidad Tecnológica, ie, the first higher school of technology in Panama; he was responsible for the construction of: a national stadium, a national swimming pool, a national gymnasium, later transformed into an arena where international sports events are held; major street and highway projects all over the country; rural aqueducts in areas with fewer than 500 persons;and numerous quite decent housing projects afordable for purchase by the poor; he initiated education reform and fought for the rights of (woefully underpaid) teachers to strike. This reform was vigorously opposed by the Catholic Church, which continues to run private schools and seriously underpays its teachers to this day (my wife is one of them). The Church charged that the notion of “reform” smacked of communism, probably in hopes that they US would intervene on their part; Torrijos also established a program to provide free text books for students.
Though Torrijos established relations with Cuba, when asked about which side of the political spectrum he sided with, he famously said “ni con la derecha, ni con la izquierda,” neither with the right, nor with the left. He was in almost every sense the Panamanian Putin.
Omar Torrijos died in a mysterious plane crash in 1981. When I first started coming to Panama, I would ask every taxi driver how Torrijos had died. They all said the CIA killed him, a common belief in the country. Indeed ex-CIA chief Bush Senior was vice-president by the time Torrijos was killed. It is not known for certain what caused his plane to go down, although the weather was bad when it took off.
However, after the 1964 murders and after the Bush Sr. invasion from Dec 20 1989 to Jan 31, 1990, which killed at least 4000, mostly civilians, the US lost much of its lustre here. US citizens are still treated with respect but the US government is not trusted by the grassroots — just mostly by the oligarchy, who have always dominated the presidency.