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Throughout the 19th century, United States involvement in the isthmus of Panama increased as it became the most convenient area in Central America for quick transoceanic transit. U.S. expansion westward accelerated after the Mexican–American War and the California Gold Rush, and transiting the isthmus provided faster access to the Pacific during a time when the American mid-west and western regions were difficult to traverse. This led to recurrent negotiations between the governments of the Republic of New Granada, of which Panama was a part, and the U.S. The focus of these early negotiations was for rights and protections concerning the free passage of goods and people through the isthmus. The most important treaty resulting from these negotiations was the Mallarino-Bidlack treaty of 1846 in which the Republic of New Granada recognized that the United States could intervene to guarantee the neutrality of the isthmus. This clause, originally meant to protect against foreign control over the isthmus, was eventually interpreted to permit U.S interventions to protect American interests against any dangers resulting from local disturbances or the many civil wars that plagued New Granada. Until the construction of the Panama Canal, the main concern for the U.S. on the isthmus was the protection of the Panama Railway that was completed in 1855. The frequent transit of foreigners along the railway and the perpetual presence of U.S. ships in Panamanian ports became common, and led to increased interaction between both local New Granadian Panamanians and U.S. citizens.
On the morning of April 15, 1856, the U.S. steamer John L. Stephens transported about 1,000 passengers to Panama City. However, the station was located at the waterfront and Panama City did not then have any wharfs where ships could dock. Therefore, ships like John L. Stephens had to dock on a surrounding island, in this case Taboga Island, and then be ferried to Panama City. The passengers could only be ferried during high tide and, on this particular day, the John L. Stephens arrived during low tide; therefore, the passengers had to sit and wait on high tide.
Most of the passengers were drunk by this time because many of them had visited the local cantinas before the trip. One American, Jack Oliver, walked around the station and encountered a vendor, José Manuel Luna, selling watermelon. Oliver grabbed a slice of the watermelon, which was priced at five cents per slice, and refused to pay for it. From here, accounts differ. The most accepted version states that the vendor yelled at Oliver and eventually pulled out a knife and threatened him. One of Oliver’s friends then tossed five cents at the vendor, but the vendor continued yelling at Oliver until Oliver pulled out a gun. At this point the vendor took off running, but another Panamanian, who saw the entire incident, grabbed Oliver’s arm and the two struggled for the gun. During this struggle, the gun went off and a bystander was wounded.
At this point, the riot was unavoidable as more Panamanians arrived and more shots began to be fired. Many Americans were beaten mercilessly, robbed, and many buildings were destroyed. When the police arrived later, one of them was hit by a bullet, which forced them to join in the riot.
Finally, a train arrived filled with armed railroad men, who were led by Randolph Runnels. The railroad men then fired at the mob and most of them ran for cover. Runnels then shouted to the mob to put down the weapons and come out with their hands over their heads.
In the end, Governor Aniño, submitted an official report that stated 15 Americans were dead and 16 wounded, and 2 Panamanians were dead and 13 wounded.
On July 18, the American commissioner, Amos Corwine, recommended in his report "[...] the immediate occupation of the isthmus." This raised a series of diplomatic controversies. Accordingly, the North American authorities attended to the report and in September 1856 American troops unlawfully invaded Panama disembarking in the isthmus and taking the railway station.
On September 19 of that year, a detachment of 160 soldiers took possession of the railway station. The city was calm and three days later, the troops moved back without having fired a single shot. This brief occupation was supposedly justified according to the U.S. government by a clause in the Agreement of 1846, by means of which, the United States was guaranteeing the neutrality of the isthmus, so that transit was not interrupted.
In response to the riot, the United States made the following proposals:
1. That the city of Panama and Colón had to be free cities and that they were governed under the sovereignty of Panama, and jointly they will control a strip of land twenty miles wide from ocean to ocean, with the railroad as the central line.
3. New Granada had to transfer its rights on the Panamanian Railroad to the United States
4. New Granada had to pay compensation for damages for the loss of life and the destruction of property.
Finally the government of New Granada accepted the terms and signed the Herrán-Cass Agreement. On September 10, 1857, the New Granada government established a sum compensation of $412,394 in gold for damages.
- 195,410 dollars for indemnifications derived from the riot.
- 65,070 dollars for new claims.
- 9,277 dollars for expenses of the commissioners
- 142,637 dollars for interests.
In turn, the United States used this incident as an excuse to exercise its prerogative under Article 35 of the Mallarino-Bidlack Agreement to safeguard the neutrality and free transit in Panama, and use of armed forces when the local government is deemed unfit. This motivated a series of American interventions in the isthmus during the 19th and 20th centuries, which at last irritated the xenophobia and the nationalistic feeling of the Panamanians.
According to the Gazette of the State of May 3, 1856, the dead persons were Lucas Prados and Apolinar N. of Panama; Robert Marks, of Pennsylvania; Octavio Dubois, a French citizen; N. Stokes, of the filibusters of William Walker; Alanson Sweet, of Maine; and another 12 whose the names are not known.