Aluxury cruise liner glides through tropical rainforest, its white superstructure towering over the treetops. Passengers sip cocktails and gape at the teeming wildlife a few feet from their air-conditioned cabins.

For the monkeys, parrots, iguanas, and myriad other species native to Panama, this curious spectacle is becoming more frequent as the 90-year-old canal, one the great engineering wonders of the modern world, cranks up its tourist appeal.

The 51 mile (82km) waterway is still a great trade route, and still one of the world’s best maritime short-cuts. It links the Pacific and Atlantic oceans, and brings San Francisco nearly 8,000 nautical miles closer to New York. But the canal is losing business, because supertankers are too fat for its locks, and rival canal schemes are being mooted in other parts of Central America.When the US handed control of the canal over to Panama in 2000, cynics muttered that it was more to do with the canal’s declining importance than post-colonial goodwill. But that was a minority view. The handover was deeply unpopular in the US, where the canal was still seen as the first and greatest triumph of the American will to succeed where other nations had failed. Yet as we’ll see, when it came to digging Panamanian mud, words like “success” and “failure” were often rendered meaningless in the struggle to survive. As for attempts to pin down precise start and finish dates for the project - well, where to start?

In the beginning...

In 1490 European explorers were trying to find a quicker route to the Orient. Christopher Columbus thought he could do it by sailing west instead of east and ran into the Americas. In 1513, the Spanish conquistador Vasco Nunez de Balboa stood on a peak in Darien and became the first European to gaze on the Pacific Ocean. Balboa had discovered the narrowest point of the Isthmus of Panama, where the oceans are separated by just 50 miles (80km) of land. Within a decade, Spanish forces were using Balboa’s route to take gold from Peru and Ecuador overland to the Caribbean coast, and so back to Spain.

In the 1530s, King Charles V of Spain ordered the first feasibility study for a canal to speed up this process, but 20 years later his son Phillip II was finally convinced the development was impossible.

Anything is possible

Fast forward to the 1850s, and again it was gold - this time Californian gold - that re-ignited canal fever. The Americans built a single-track railroad across the isthmus, which helped to demonstrate that a canal was possible and essential, as the demand for transit was rocketing.

In France, the diplomat turned entrepreneur Ferdinand de Lesseps was drumming up support for a canal at Suez. It was completed in 1869 to universal adulation and sliced weeks off journeys between Europe and the East, but the Frenchman considered it was only half the job. The Panamanian Isthmus was still intact.

Ferdinand de Lesseps was convinced that the only sort of waterway worth building in Panama was a sea-level one, with no flights of locks, as at Suez. He pushed for this model in Panama, against expert advice. Such were his powers of persuasion that the public, politicians, money men and even engineers who knew better, signed up for the sea-level canal. In 1881, work began.

The Americans had set up an Isthmian Canal Commission to study the relative merits of six possible canal routes. Most favoured a much longer Nicaraguan solution, partly because it was much closer to the US, and partly because of the nature of Panama itself.

Although the shortest route, Panama had a reputation as a land of pestilence and depravity. Its climate was dreadful, with an eight-month rainy season. Its chief river, the Chagres, had an alarming tendency for flash-flooding. It also had too much geology, with the proposed canal route passing through 17 rock formations, six faults and five volcanic cores. The spinal cord of mountains running through central America would have to be sliced through at the lowest point, Culebra - nearly 91 metres above sea level.

None of this could deter Ferdinand de Lesseps, who raised the necessary millions, chiefly from small investors. Most of the first year was spent clearing jungle from the canal’s path. In June 1881, the first canal employee died of yellow fever, and soon after two engineers died of malaria. By the end of the first year 60 had died, most from one or other of these diseases. By 1883, the death toll had risen to 1,300, and by 1884 one in five workers would succumb. Disease killed the daughter, the son, and the wife of the new director of works, Jules Dingler. It killed clerks in offices and nuns in the hospitals, as well as the workers digging the canal.

Disease, floods, and mud slides slowed progress to the extent that, by 1888, it was apparent that the sea-level canal was beyond reach. Under pressure from shareholders, Ferdinand de Lesseps agreed to change plans to build a lock-canal and engaged France’s tower-building hero, Gustave Eiffel, to design giant steel lock gates.

But the change came too late, and Ferdinand de Lesseps’s Compagnie Universelle du Canal Interoceanique was dissolved. His son and others, including Gustave Eiffel, were disgraced and charged with fraud. They were eventually acquitted, but the word “panama” became a synonym for “fiasco”.

American intervention

An attempt to revive the French effort in the 1890s again failed for financial reasons. More than 20,000 workers had already died in the failed French attempt to build the Panama Canal.

France’s failure could have been a spur to the fledgling world power, the US, but it didn’t really need one. An incident in 1901, when the fastest US warship, Oregon, took 67 days to sail from San Francisco to deal with an uprising in Cuba, underlined the need for a canal.

No one was more aware of this than Theodore “Teddy” Roosevelt, who instigated the political machinations that would deliver Panama out of Colombian rule and into US hands soon after he took over as President in 1901. As an impatient expansionist he could hardly wait, as he put it, to “make the dirt fly” in Panama. In fact, it took him two years to get the Senate to support Panama as opposed to Nicaragua, and to get the necessary treaty signed (the Hay-Bunau-Varilla Treaty of 1903) which gave the US the rights to build and control the canal. The Americans who arrived in Panama in 1904 discovered that, while the French had failed, their “failure had been magnificent”. They had excavated about 60 million cubic metres of soil, about a quarter of the final total.

The American canal plan was an adaptation of an idea presented, and ignored, in France 20 years earlier - to build, not a sea-level canal, but a “water bridge” over the central plain, with ships lifted and lowered by three huge flights of locks at the Atlantic and Pacific ends. The Chagres River would be dammed to form a massive artificial lake, the GatNon Lake, which would then act as a natural cistern, using gravity to feed the locks, to raise and lower ocean-going vessels two at a time.

Radically, it was to be an electric canal. The lock gates, sluices and valves, the locomotives used to ease giant ships into the locks - all were to be powered by motors made by the new General Electric corporation. They would use electricity from hydro-electric generators built into the GatNon Dam. The canal would be self-sufficient.

The Americans had a shaky start. Deaths from malaria and yellow fever were falling, but pneumonia increased, as did deaths from explosions. There were landslides in the Culebra Cut, the worst of which was in 1907 when a 50-acre slab of hillside crept down into the excavations.

After 1907, progress was spectacular. Dynamite was used to split the rock, then giant Bucyrus steam shovels moved in, scooping up eight tonnes of mud and rock per bucket. The dirt was flying, and much of it ended up in the sea off Panama City, to form new sea defences. In October 1913, President Woodrow Wilson tapped a key in the White House which, via an elaborate system of telegraph relays, set off the final charge of dynamite buried in a mud dyke in the Culebra cut, unleashing a cataract of water. The canal was completed.

Relinquishing control

In January 1914, an old crane ship, Alexandre La Vallee, became the first to go right through the canal, but no-one was watching. A grand opening ceremony was arranged for August 15, with the USS Ancon completing the first official transit, but a week earlier, First World War had broken out and few of the invited world leaders turned up.

In every other respect the canal was an immediate success. It had been completed ahead of schedule and below budget. It had already survived the shock of an earthquake without any damage. Everything worked perfectly and the world’s shipping fleets flocked to Panama. The locks had been built to accommodate the Titanic. Tragically, they never had to.

For the next six decades the canal flourished. The shipping industry pays tribute to the canal in its terminology: a “Panamax” vessel is built to squeeze the maximum possible tonnage through the Panama locks. Panama City became a commercial hub and a magnet for all forms of vice, while the US-run canal zone became a curious hybrid of military encampment and ideal American family suburb. While a commercial success, the fact that the US had the canal and this strange colonial outpost was a constant source of political friction, in Panama and internationally. There were frequent anti-American riots and once or twice the “strongmen” chosen to run the protectorate bit the hands of their US masters, leading, in 1989, to a US invasion to rid the country of out-of-control strongman Manuel Noriega.

By then, the US had already decided to give the canal to Panama, on the condition its neutrality would be guaranteed. President Jimmy Carter had signed the treaty in 1977, and the handover took place on December 31, 1999, with then President Bill Clinton conspicuous by his absence.

Fears that the canal would fall into disrepair under local control were unfounded. A billion dollar modernisation programme continues, with widening of the Gaillard Cut and deepening of the GatNon Lake as priorities.

There are plans to build new locks to take post-Panamax supertankers. But there are no plans as yet to build a monument to the estimated 30,000 workers - most whom were from the West Indies - who died in the 34 years of canal digging.

Shivers were sent down many American spines when contracts to build new container terminals went to Hutchison Whampoa of Hong Kong, but in fact the canal, under the new Panama Canal Authority, is being run for the first time as a purely commercial, capitalist enterprise. So while the threats from revived plans for a Nicaraguan canal - and other plans, such as “dry canal” rail-freight routes through Mexico, Honduras and Costa Rica - are real enough, the Panama Canal’s owners show every sign of fighting back.

Another long-term problem is climate change. Can the canal’s water table cope with extra demands from enlarged locks, when the region’s rainfall has already suffered from deforestation and the El Ni$o effect? Will global warming cause the Arctic ice floes to recede enough to make a North Eastern passage from Europe, around Russia to Japan and China, a commercially viable shipping route? If so, it would cut about 6,000 miles (9,655km) off the voyage, and central American routes would lose a large chunk of trade very quickly. So, keep those tourists happy...

Changing hands

After successfully building the Suez Canal at sea level, Frenchman Ferdinand de Lesseps (top left), despite advice to the contrary, decided the same would do for the Panama Canal and began work in 1881. Seven years later he realised he was wrong and changed tactics to a lock system but it was too late. The canal was abandoned. The US, under the presidency of Theodore Roosevelt (middle), bought the project from the French and it was eventually completed in 1913. Building the canal cost the US government $375 million (this includes $40 million paid to the French and $10 million to Panama for building rights). Another US president, Jimmy Carter, decided in 1977 to give the canal to Panama, and control was eventually handed over on December 31, 1999 (left).

Tight squeeze

Cruise ships are just narrow enough to fit in the locks, such as this one at Gatun Locks. Each ship-passage uses 236 million litres of fresh water.

The canal flushes 9 billion litres of fresh water into the sea each year.

The canal is 51 miles (82km) long.

Lake district

Instead of cutting through Panama at sea level to create the canal, the massive Madden Dam was built to control the flow of the Chagres River and maintain the level of the GatNon Lake (above). The lake supplies the millions of gallons of fresh water required to operate the canal.

Many hands

More than 50,000 people were employed in the construction of the canal over 40 years. About 6,000 were white Americans, and about two-thirds were black West Indians. On average in 1883 they were paid $1 a day by the French - considered a good wage. In 1905, under the US, they were still paid $1 a day. Today, Panama nets revenue of $600million a year from the canal, which is about 7 per cent of its gross domestic product.

Original protection

The woven “Panama” hat actually originated in Ecuador and was known to the Spanish since the 16th century. Workers on the Panama Canal adopted the hat to protect them from the harsh sunlight, and it became known simply as “the Panama”.

Explosive stuff

But for a postage stamp, it could now be the Nicaragua Canal. On the eve of a crucial Senate vote on the canal route in 1903, the Panama lobby realised they were likely to lose, even though Nicaragua’s case had been weakened by reports of volcanic eruptions in the country, strenuously denied by the Nicaraguan government. So Philippe Bunau-Varilla, leader of the Panama faction, sent a letter to every senator, with a one-centavo Nicaraguan stamp pasted on to each. Stamps tend to highlight favourite national landmarks. The stamp featured Mount Momotombo “in magnificent eruption”.

Panama won the vote, 42 to 34.

Narrow vision

At 152m wide, the Gaillard Cut (formerly the Culebra Cut) is the narrowest point of the canal. It cuts through the lowest point of mountainous terrain, 91m above sea level. Construction was hindered by massive landslides, the largest of which, in 1907, dumped a 50-acre slab of hillside into excavations.

In the jungle

Panama’s landscape was the biggest obstacle to overcome. Not only did its tropical jungles house disease-carrying mosquitoes, it took almost a year to clear the thick jungle away from the canal’s path.

Before their time

In the 1530s King Charles V of Spain ordered the first feasibility study for a canal, in an effort to speed up the transport of gold from Peru and Ecuador. Twenty years later his son Phillip II was convinced it was impossible.

Plenty of lift

If travelling from the city of Panama, the Pedro Miguel locks (seen in the distance) allow entry to the Gaillard Cut, lifting the ship from the Miraflores Lake. There is one more set of locks to traverse in the eight to 12 hour journey:the Gatun Locks, on the far side of the Gatun Lake.

Lock and load

The huge steel lock gates, such as these at the Miraflores Locks, were designed by Gustave Eiffel. Each of the canal’s six pairs of locks is 305m long by 33.5m wide by 25.3m deep.

Big ideas

Steam shovels and trains assisted workers in 1910 during the construction of the Culebra Cut. But in the 1950s, it was felt a quicker method of widening the canal, to allow passage of US aircraft carriers during the Korean War, was needed. A scheme was devised to blast a new, wider sea-level canal using hundreds of controlled hydrogen bomb explosions to shift the rock. The so-called “Project Plowshare” was dropped in the early 1960s after public concerns about nuclear testing and the introduction of the 1963 Limited Test Ban Treaty.

Tonnage and tolls

A record 949 tonnes of cargo went through the canal in one day - July 3, 2003. About 14,000 ships go though the canal each year. The average toll paid is $28,000 (pound;15,000); the highest was $200,000 (pound;107,000), for the 90,000-tonne cruise ship Infinity. The lowest ever toll was 36 cents, paid by swimmer Richard Halliburton in 1928.