Kentucky's great statesman, Henry Clay, as Secretary of State in 1825 and as Senator in 1835, was interested farsightedly in plans for speedier communication at the Isthmus between the two oceans.  The independence of Panama from Spain by a bloodless revolution 1821 had placed the Isthmus in a new position for other European governments, or the United States, to negotiate terms for concessions.  The American people were jealous of foreign activities, but not aggressively active themselves in concrete efforts toward a canal.

De Witt Clinton, prominently connected with the Erie Canal, headed a company that sought government aid in its plans for a canal in Central America, but though Clay encouraged the idea nothing definite resulted.  The year following, or in 1826, Simon Bolivar, South America's great soldier and statesman, invited the United States, among other American republics, to an international conference in Panama with the object of forming a union for the promotion and defense of all American interests.

While nothing significant came of this congress, it is noteworthy as the first attempt to form what is now the Pan-American Union, or the bureau of American Republics, at Washington.  It assembled on June 22, 1826, but the United States representatives did not arrive in time to participate.

Panama had become a part of the confederation of New Granada after independence from Spain, and thenceforth lived the regular life of a turbulent province of what today is known as Colombia.  All the commerce between the coasts drifted across the isthmus at that point.  Little effort had been made to improve the passage, so that swifter and easier communication was the dream of every seaman or traveler.

Clay introduced a resolution in the Senate in 1835 authorizing President Jackson to appoint a commissioner to investigate the feasibility of a rail or water route at the isthmus.  Charles Biddle undertook the mission and secured a concession at Bogota, the capital of New Grenada, but he died before making a report.  President Van Buren interested himself in the project, but little came of American plans for the next ten years.

The ever alert French, in 1847, after securing a concession to build a railroad, allowed it to lapse.  It is significant that this French failure was followed, as in the case of trying to dig a canal, by a successful attempt by the Americans.

Three Americans, William H. Aspinwall, John L. Stephens and Henry Chauncey, of New York, taking advantage of the opening made by the French failure, obtained a concession from the Bogota government in 1849 for building a railroad across the Isthmus at Panama, with the important provision that no canal could be constructed there without the company's consent.

Their concession was for a period of forty-nine years after the completion of the railroad, but Colombia reserved the right, twenty years after its completion, to purchase the road for $5,000,000.  The unprecedented prosperity of the road immediately upon the beginning of its operation made this latter provision a bad stroke, as in 1975 Colombia could take it over at the fixed valuation.  The company began to seek an extension of the life of the concession, with Colombia, unfortunately for it, holding the ship hand.

Negotiations were concluded in 1967 whereby a ninety-nine year concession was obtained, but the terms were very hard.  A cash bonus of $1,000,000 had to be paid to Colombia, with an annual payment of $250,000 and the company agreed to extend the railroad out into the Pacific Ocean to some islands where deep water would enable large ships to dock.

Luckily for the American promoters, the discovery of gold in California in 1849 came just as they were seeking to flat their company.  The Isthmian route to California at once became heavily traveled and the eyes of the whole world, particularly of the United States, were again fastened upon Panama.

Our government in 1846 had concluded a treaty with Colombia which provided for the joint construction of a canal in Panama, and the stimulated interest in the Isthmian route in 1849 made this appear a fortuitous treaty, because it excluded any European power from that territory.  A controversy arose between the United States and England over the Nicaraguan canal route, culminating in a treaty between the two governments known as the Clayton-Bulwer treaty of 1850.  This treaty provided substantially the same as the Colombian treaty of 1846, that in the event of the construction of any canal in Central America, Great Britain and the United States guaranteed its neutrality and use on equal terms to all the world.

The addition of the territories of Oregon and California to the United States still further emphasized the need of quick communication between the Atlantic and Pacific.   The Panama Railroad, therefore, took hold upon the popular imagination.

Aspinwall and his associates pushed the construction of the road under James L. Baldwin, an American civil engineer of uncommon ability.  Labor of a desirable kind was not obtainable.  Many nationalities were tried, with a tragic failure on the part of the Chinese, who seemed unable to face the terrors of the jungle.  Hundreds committed suicide, and disease and accidents claimed other hundreds.  The life cost of the Panama Railroad in the five years it was building has been estimated at 6,000 persons.

The route selected started at an island near the coast on the Atlantic side, the site of the city of Colon, crossed the hills into the valley of the Chagres River and followed that valley to the continental divide, over which it passed with a maximum elevation of 263 feet above sea-level, and thence down to Panama on the Pacific side.  Treacherous swamps, almost impenetrable jungles, and formidable streams and mountains necessitated incredibly hard labor and continuous work from 1850 to January 28, 1855, when the first train reached Panama from Colon.  The line was forty-seven miles long, built of Belgian rails and on a gauge of five feet.

The standard gauge in the United States is four feet nine and a half inches, so that all locomotives and cars used on the Panama railroad have to be specially built with wheels set farther apart.  When it comes to disposing of surplus equipment after the canal is finished, the government will have to allow for the cost of modifying the rolling stock from the five-foot to the standard gauge.  It is estimated that the axles on locomotives may be shortened at the average cost of $750 a locomotive, and for cars, from $27 to $31 each.

California gold-seekers used the railroad as far as it was built during the years immediately following 1850 and made the rest of the trip across the isthmus by muleback.   There were no buccaneers waiting to relieve them, as they had the Spaniards, of their treasure, but bandits and outlaws haunted the route with almost equal success.   Thus the railroad had an income from the start, and ten years after completion it was known as the best-paying property in the world.

The total cost had been $7,407,553, or about $158,000 a mile.  Dividends were paid every year from 1853 to 1892, and from 1901 to 1903, when it became United States property.  The largest year's earnings was in 1868 when 44 percentum was paid, or $4,337,668.48 in both dividends and undivided profits.  Total earnings from 1855 to 1898 were $94,958,890.36; operating expenses, $57,036,234.46; leaving for surplus and dividends, $37,922.655.  Rather eloquent figures as to the Isthmian freight and passenger traffic!

The great prosperity of the railroad suffered a serious set-back with the completion of the California overland railroad in 1869.  thenceforward the valuable bullion shipments avoided Panama as well as passenger and freight business.  The company's business shows a steady decline from that year, and some wooden-headed management contributed to the momentum.  Still it was a valuable property, and to the French a very expensive property, as they found in 1881, when they had to buy the railroad in order to obtain a concession to build a canal.

Colombia turned to the French, after negotiating fruitlessly with the United States over a canal concession, and the company headed by M. de Lesseps was granted a right of way provided the railroad would suspend the provision in its concession giving it the say-so as to water communication.  Freight rates were boosted on all French company shipments until in desperation they bought the road for $18,094,000, in 1881, paying considerably more than it was worth, or $250 a share for sixty-eight seventieths of the capital stock.

The French neglected the commercial possibilities even more than the American owners had, though dividends were earned during the life of the first company.  When the United States bought the interests of the French company, in 1904, the Panama Railroad was one of the properties transferred.  It was sadly run down, but under the Americans it was made over into a modernly equipped and operated system, though subordinated as a commercial proposition to the construction of the canal.  Chief Engineer Wallace suggested that it be double-tracked, or four-tracked, and up-to-date ocean terminals for handling a great freight business be built, with the idea of supplying cheap and swift transit pending the completion of the canal, but this view was abandoned by succeeding engineers, until in 1912 the Secretary of War cut down the amount of commercial business the road should handle so that canal shipments might have uninterrupted right of way.

Doubtless mahogany, ebony and other rare hard woods have not been used in cutting ties for other railroads, but the Americans have dug up ties of those woods that had been in the ground sixty years and still were in good condition.  The quaint hollowed out Belgian rails had to be replaced with heavy American types.  Such rolling stock as was used by the Americans was for light hauling.

Passenger rates dropped from $25 a one-way ticket in 1855 to $2.40 under the Americans today.  The trip from Colon to Panama is two hours and a half and the coaches are painted yellow because that color best stands the isthmian climate.  In the fiscal year ended June 30, 1911, the Panama Railroad under American control earned $2,398,177.88 from freight and $686,991 from passenger business.  The number of passengers carried during the year was 2,999,500, and in 1912 a larger traffic was recorded.

The plans for the canal as adopted by the Americans in 1906 played havoc with the right of way of the railroad, so in June, 1907, the work of relocating it back among the hills out of reach of Gatun Lake was begun.  After five years' work, or as long as it required to build the original line in 1850-1855, the new line was opened to traffic in 1912.  The full line, however, was used only for freight trains, as the Canal Zone towns mostly are on the old line, along the Culebra cut.

The twentieth century Panama Railroad has cost $9,000,000 as compared with the cost of the nineteenth century road, $7,000,000, an increase of $2,000,000 after a lapse of sixty years.  On the face of things the performance in 1850-1855 seems more creditable than in 1907-1912, because then a pathless jungle had to be conquered when the Isthmus was a death trap whereas now the Americans had a force of workers organized, they had the equipment on the ground with which to do the work and the entire resources of the canal organization as to quarters, subsistence, and medical attention were within easy reach.   Not considering the cost, the relocated line is a beautiful piece of engineering work.

The dream of a Pan-American Railroad has been entertained ever since steam locomotion came into use.  When several gaps are filled in, there will be railroad communication through Mexico, Guatemala, and Nicaragua to Costa Rica, when adjoins Panama.  The Republic of Panama has been planning an interior railroad system that would be part of an all-rail route from the United States to the canal.  Before many years it is likely that a bridge will span the canal in a railroad system that reaches from Canada through Panama to the mainland of South America, then down the West Coast to Valparaiso.

In connection with the railroad, the government has operated a steamship line to New York, from Colon, the fleet at present consisting of six ships, the Ancon, Cristobal, Panama, Colon, Advance, and Allianca.  These ships have transported the larger part of canal supplies from the Atlantic seaboard.   Canal employees get passenger rates of $20 or $30 for one-way trips when taking vacations, and other steamship lines grant smaller reductions.  The regular rate from New York is $75.  It is the only line to Panama that flies our flag.