The Hay-Banau-Varilla treaty was the treaty which allowed for United States control over the area on which the Panama Canal was to be contructed. The circumstances of the treaty itself serve as a perfect example of Theodore Roosevelt's "Big Stick" or "Gunboat" diplomacy. Upon failure of the Hay-Pauncefote treaty with Columbia who, at the time, controlled the area of Panama, Roosevelt sent in US troops to prevent movement of Columbian fighters into Panama. Soon thereafter, Roosevelt recognized Panama as an independant country and began the dealings for the canal.

The terms of the treaty were for a 10 mile wide canal building zone in return for a down payment of 10 million dollars and $250,000 per year to begin on the 9th anniversary of the treaty's ratification. Said Roosevelt in response to the criticism of his hasty actions, "I took Panama and let Congress debate it later." In the long run, the Panama Canal obviously helped not only trade but also military as the need demonstrated in the situtation in the Philippines during the Spanish-American War.

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