The treaty provided the United States with sovereignty over the Canal Zone. In exchange, the Republic of Panama received a $10 million payment and additional annual payments which began with the opening of the canal. In addition to this purchase from Panama, the United States bought the title to all lands in the Canal Zone, including a payment of $40 million to the French Canal Company for their properties.
Panama gained independence from Colombia with the assistance of the United States and was recognized as a separate state in 1903. Diplomatic relations were established on November 13, 1903 between the United States and Panama. Both countries signed the Hay-Bunau-Varilla treaty.