Tensions between Panama  and the United States flared up repeatedly through much of the 20th century. Again and again, especially in the early days of the republic, the United States intervened in the domestic affairs of the country. Because of the strategic and economic importance of first the Panama Railroad and then the Panama Canal , the United States insisted on reserving the right to play a hand in the destiny of the isthmus in treaty after treaty.
Tensions occasionally erupted in violence. When the Panamanian national legislature met in 1947 to consider a treaty that would allow the United States to continue to use military bases outside the Canal Zone, 10,000 protesters took to the streets and clashed with Panama’s National Police, with deaths on both sides. The legislature rejected the treaty unanimously. Violent anti-U.S. demonstrations flared up again in 1958 and 1959.
The most infamous incident, though, was termed the Flag Riots of 1964. The United States had agreed to fly the Panamanian flag alongside the U.S. one in a few places in the Canal Zone, even though some feared (and others hoped) this would throw U.S. sovereignty over the zone into doubt.
In an attempt to avoid controversy, the governor of the Canal Zone decided to take down some flagpoles in the zone altogether. One of these spots was Balboa High School. A group of high school students objected to this, and before the pole could be removed, they raised a U.S. flag themselves.
When a group of Panamanian college students heard of this, they organized a march to the high school and attempted to lower the U.S. and raise the Panamanian one. A scuffle broke out, during which the Panamanian students claimed their flag had been torn.
What happened after that will probably forever be a source of passionate debate, depending on one’s sympathies and prejudices. What everyone can agree on is that rioting, looting, and destruction followed, mostly along Fourth of July Avenue, which separated Panama City  from the Canal Zone. In the end, two dozen people were killed and millions of dollars of property destroyed.
The Panamanians who died are officially considered martyrs in Panama, and January 9 is still a national day of mourning in their honor. Fourth of July Avenue was renamed Avenida de los Mártires.
In the wake of this terrible clash, President Lyndon B. Johnson announced that the United States would undertake negotiations with Panama on an entirely new canal treaty.