GOVERNMENT AND FINANCE. Panama, for merly a department of Colombia, declared itself an independent republic on November 4, 1903, and was recognized as such by the United States on November 13. A constitutional convention met on January 15, 1904, adopted the present Constitution, and elected Dr. Manuel Amador Guerrero the first President of the Republic. The President is elected for four years, and cannot serve two terms in succession. The Chamber of Deputies consists of 32 members, one for every 10,000 inhabitants, elected for four years. The republic is divided into seven provinces: Panama, Los Santos, Colon, Chiriqui, Veraguas, Coclé, and Bocas del Toro. The President appoints the governors of provinces as well as the four members of his cabinet. The budget for the two years 1907 and 1908 estimated the revenue for the period at $4,461,381, and the expenditures at $4,977,792. Of the $10,000,000 paid by the United States for the right to construct the Canal, $6,000,000 have been invested in the United States, and the remainder was expended on public improvements and used in the establishment of the above-mentioned real estate loan bank. The monetary unit is the gold balboa, equivalent to the American gold dollar. The peso, or half-dollar, and its subdivisions are silver coins.

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throughout nearly its entire length. The earn- United States, acting under treaty rights, which ings during the year, including the steamship gave it power to maintain an uninterrupted tranline operated in connection with the railroad, sit across the Isthmus, directed the commanders totaled $3,917,840, and the expenditures, $3,- of American warships stationed at Colon and 116,058, leaving a net profit of $801,782. In Acapulco to prevent the landing of Colombian 1907 a railway was being constructed by the troops for the purpose of putting down the revUnited Fruit Company, an American corpora- olution. The new Republic of Panama tion, from Almirante, a few miles by water from formally recognized by the United States on Bocas del Toro to Changuinola, where the com- November 13, 1903, and under a treaty ratified pany owns banana plantations, a distance of on February 23, 1904, the United States guarabout 13 miles; it was to be completed by Feb- anteed the independence of the Republic of ruary, 1908. In May, 1907, the government en- Panama, which in its turn granted to the United tered into a contract with the Compañia Nacional States in perpetuity the order, occupation, and des Transportes for the establishment of an auto- control of the Zone. a line ten miles in width, mobile service in Panama, Colon, and other cities. extending five miles on either side from the A bank, named Banco Hipotecario y Prendario, centre of the canal, with the proviso that the has been established for the purpose of lending cities of Panama and Colon should not be within money to farmers and landowners at low rates the grant. For this concession Panama was of interest. guaranteed $10,000.000 in gold coin, and $250,000 annually, beginning nine years after the exchange of ratifications, as in the case of Colombia, as mentioned above. The transfer of the French Panama Canal Company to the United States Government was completed in May, 1904. A commission charged with the construction of the canal had already been appointed, with General John A. Walker as chairman and John F. Wallace as chief engineer. In accordance with the recommendations of President Roosevelt, the Canal Commission was reorganized in March, 1905. Charles E. Magoon was appointed head of the first department, which dealt with the government of the Canal Zone; John F. Wallace was made head of the Engineering and Construction Department, and Theodore P. Shonts was made chairman of the commission and placed in charge of the Department of Finance and Supplies. These men were to constitute an executive committee to act in the intervals between the meetings of the full commission of seven members. Shortly after this reorganization Mr. Wallace resigned and was succeeded by Mr. Shonts. In September, 1905, a Board of Consulting Engineers was appointed by the President, to consider and recommend the best type and plan of canal. This board, consisting of thirteen eminent foreign and American engineers, reported in January, 1906, in favor of the sea level plan as opposed to a lock canal, by a vote of 8 to 5. The President transmitted the report to Congress, mending the minority lock, which was finally adopted by both houses of Congress in May, 1906. Immediately following, work tively begun. In November, 1906, President Roosevelt spent four days on the Isthmus, going over the entire route of the canal. On his return he expressed himself as well satisfied with the progress of the work, and on December 17 he sent to Congress an especially illustrated message outlining his views on the canal situation. In the early part of 1907 bids for the construction of the canal were invited from contractors. Bids were received from three firms of contractors, and of these the lowest was made by Oliver & Bangs, who proposed to do the work of construction for 6.75 per cent. of its actual cost. After an investigation into the reliability of these contractors, and their ability to perform the work, their bid was refused, and it was decided in April that the work of constructing the canal should be put into the hands of the engineering officers of the army. On January 29 Theodore P. Shonts, chairman of the Canal Commission, had resigned, and John

PANAMA CANAL. It may be of assistance to an intelligent understanding of the conditions prevailing in the work of the Panama Canal, and conditions of the Isthmus of Panama, in 1907, if a brief summary is made of the chief incidents in the project, from 1903, when the Government of the United States formally accepted the offer of the French Panama Canal Company to sell its rights to property for $40,000,000, to the present time. This offer was accepted subject to a ratification of the treaty with Colombia then pending before the Senate. This treaty was ratified on March 5, 1903. It provided that the United States should pay to the Republic of Colombia the sum of $10.000,000 in gold, for certain concessions on the Isthmus, and an annuity of $250,000, beginning nine years after the date of ratification. This concession authorized the Panama Company to transfer to the United States all its property and branches, including the Panama Railway, for 100 years with the privilege of perpetual renewal. There was considerable opposition in Colombia to the ratification of this treaty, and after repeated postponement, Panama, where great dissatis faction was felt at this delay, declared itself an independent republic on November 4, 1903. The

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F. Stevens, chief engineer, had been appointed posts, customs, loans, administration of estates, chairman to succeed him. Mr. Stevens, in his police, education, fire protection, and public turn resigned on March 4. Lieutenant-Colonel works. Under the authority conferred upon the George W. Goethals, of the army engineering President by law to legislate for the Zone, the corps, was appointed a member of the commis- five municipalities into which it was divided sion, and on April 1 became chairman and chief were abolished and administrative districts were engineer. Major D. D. Gaillard and Major Wil- created in their stead. The penal laws were liam L. Sibert, also of the engineering corps, amended and a new code of civil procedure was were made members of the commission. In 1907 put into effect. By an order issued on March the Canal Commission consisted of the follow- 13, 1907, the commissioners authorized and ening persons: George W. Goethals, chairman and acted, with the approval of the Secretary of chief engineer; Major D. D. Gaillard, Major War, ordinances relating to police, sanitation, William L. Sibert, H. H. Rousseau, Hon. Joseph and taxation, and matters formerly regulated by C. S. Blackburn, Colonel W. C. Gorgas, Jackson municipal ordinances. By virtue of this auSmith, and Joseph Bucklin Bishop, secretary. thority, the commission enacted ordinances reguThe commissioners were required to take lating the sale of liquor, and prescribing certain station on the Isthmus, where they could be in taxes in the Zone. Much attention was given direct touch with the work committed to their during the year to the subject of suitable graded charge. The work of the commission is divided schools for the benefit of the children in the into the following departments: Construction Zone, especially of Americans employed by the and Engineering, Colonel Goethals; Department commission. The average enrollment for the of Excavation and Dredging, Major Gaillard; year was 1643, and the average attendance 1138. Department of Lock and Dam Construction, Twenty-four schools were opened during the year Major Sibert; Department of Municipal Engi- at different points. neering, Motive Power and Machinery, and Building Construction, Civil Engineer Rousseau; Civil Administration, Hon. J. C. S. Blackburn; Sanitation, Colonel Gorgas; Labor, Quarters and Subsistence, Jackson Smith. The Department of Law and Government, which, prior to 1907, was under the general council in Washington, was subdivided and the civil government was transferred to the Isthmus.

LABOR. The skilled labor force of the Isthmus is recruited in the United States. This includes trainmen, steam shovel operators, firemen and mechanics. Clerks, stenographers, draftsmen, doctors and nurses are secured from the Civil Service Registers. The skilled force on June 30, 1907, amounted to 4404. The unskilled force is brought from the West Indies and Europe. Recruiting agents are stationed in Barbados and Martinique, and a representative in Paris, France, to keep in touch with European labor conditions and with European immigration. On June 30, 1907, there were 4317 Europeans and 14,606 West Indians employed. To maintain this force of laborers and also provide the Panama Railroad force with about 5000 laborers, 6899 Europeans and 10,947 West Indians were brought to the Isthmus. The erection of houses for the quartering of these employees, hotels, and other necessary buildings was an enormous undertaking, but was practically completed by the end of 1907.

PANAMA AND COLON. By the terms of the treaty made with Panama, the United States Government was under the obligation of repaving streets and constructing water works and sewer systems in the cities of Panama and Colon. During 1907 the sum of $1,741,943 was expended in this work, including work of a similar nature in the Canal Zone. For reimbursement for this work in the cities of Panama and Colon, the United States is entitled to collect such water rates as are sufficient for this purpose. As a result of the work in these cities, a practical transformation has been brought about in the sanitary conditions. The death rate now shows them to be among the healthiest cities in the world.

ISTHMIAN CANAL ZONE. The government of the Canal Zone is under the Department of Civil Administration. It includes the office of prosecuting attorney, and the division of revenue

SANITATION. By an executive order of November 17, 1906, sanitation was separated from the Department of Government, of which it was a division, and a new department was created under which the work of sanitation was carried on vigorously throughout 1907, increasing in amount and extent as new engineering construction was undertaken. Its chief efforts were made to protect employees against the malarial mosquitoes, and this was accomplished by draining and clearing the ground in the neighborhood of villages. The results of the sanitary work were attended with great success. There was no yellow fever originating on the Isthmus during the year, the only case which occurred being brought in from shipping. The death rate among employees for the fiscal year 1906-7 shows a marked decrease over the corresponding period 1905-6. Five new hospital buildings were constructed within the Zone during the year, and additions were made to seven previously existing wards. The hospitals now existing have a normal capacity of 1845.

PANAMA RAILROAD. The work of rebuilding the old line was completed during 1907, and the construction of a new double track from Gatun to Lyon Hill was nearly finished. Additional sidings and storage tracks, made necessary by the increased business due to commission dirt trains, were built. The amount of traffic has proved too much for the seventy-pound rails, and steps have been taken to increase them to ninety pounds. A large amount of new equipment was added during the year. This included ballast cars, box cars, stock cars, sand plows, etc.

EXPENDITURES. The total appropriation for the work of the canal from June 28, 1902, to July 1, 1907, was $79,608,568. This includes an appropriation for the year 1908, which amounts to $27,161,367. These appropriations were expended as follows: