Part 2
The Panama Railroad
Chapter XIV
History of the Panama Canal
Ira E. Bennett, 1915

To gain breathing space by checking traffic until the company was prepared to handle it in full volume, the superintendent recommended the charging of a prohibitive rate.  He suggested $25 for the one-way journey for passengers between Colon and Panama, and more than fifty cents a mile per cubic foot for freight.  These rates were actually adopted, and remained in force for more than twenty years, but they did not keep away traffic, and thus the Panama Railroad Company became one of the greatest dividend-earners in the world, the stockholders receiving at one time as much as twenty-four per cent, per annum on their investment.  The construction accounts were closed in January, 1859, and showed that, instead of $1,000,000, it had in reality cost $8,000,000 to build this railroad of less than fifty miles.  But it had already earned $2,000,000 before the communication was open from sea to sea in 1855; by 1859 it had earned more than half enough to pay the entire cost of construction; and by January, 1865, its total profits were $11,340,000.  These figures will not be so surprising when we remember that the rates were exceptionally high, and that the company had a monopoly f the Atlantic trade of the entire west coast of North, Central, and South America.  It was a frequent occurrence to transport over the line in a single day 1,500 passengers, all the United States mail, and the freight of three steamships.

The railroad was thus beyond question a source of wonderful profit to its fortunate owners; but the government of New Granada had by contract the right to purchase, in 1875, for $5,000,000, this property which it had cost $8,000,000 to establish, and which was paying twenty-fur per cent dividend on that amount.  Some new arrangement was manifestly necessary.  Accordingly in 1867 Colonel Totten went to Bogota, and, in consideration of $1,000,000 in gold, cash down, of $250,000 a year, of promising to carry the New Granada mails free, and of guaranteeing to extend the road to certain islands in the Bay of Panama, he obtained for the company a new franchise for ninety-nine years with additional large grants of public lands.

In 1869, on the completion of the Union Pacific Railroad, the Panama Railroad lost its Californian trade, but still retained its trade with South and Central America, which was borne to it almost exclusively by the ships of the Pacific Steam Navigation Company.   This haulage, too, the railroad subsequently lost when, in consequence of a dispute, the Navigation Company was obliged to give up its shops and dockyards on the Island of Taboga, in the Bay of Panama, and send its ships by way of the straits of Magellan direct to England.  The affairs of the railroad were for some years thereafter in a languishing condition and its stock was greatly depressed, until in 1879 it sold out both its stock and its rights to the Compagnie Universelle du Canal Interoceanique for $18,000,000.  The railroad passed with the other assets of the Compagnie Universelle to the New Panama Canal Company in 1894, and from it to the United States in 1904, the valuation set upon it in the latter transaction being $7,000,000, the par value of outstanding stock.  Since then the railroad, re-located and modernized at an expense of $9,000,000, has been profitably worked by the United States government.

Today the United States owns at Panama one of the finest railroads in the tropical world.   It parallels the canal, and connects the principal cities of the Republic of Panama.   It is a modern, single tracked, five foot-gauge road, built on high ground in a low country.  It has embankments as high as 78 feet, which settled from twenty-five to sixty feet on the soft subsoil.

At places the engineers had to make the foundations of the embankments twice as wide as engineering practice demands, because of the immense weight of the fills.  There are 167 embankments in the forty-seven-mile road, and 160 cuts.  One of the embankments is three miles long.  The whole road required about 16,000,000 cubic yards of material for filling, or enough to make one fill all the way across the isthmus 9 feet high and 12 feet wide.  The reconstruction cost the United States nearly $9,000,000 or approximately $170,000 a mile.

And yet, the road earned its way in returns, to say nothing of the powerful support it gave to the work of digging the Panama Canal.  During the years between the acquisition of the road and the completion of the canal, it brought into the coffers of the United States a net revenue of upward of $15,000,000 -- enough to pay for the old road and to build a new one.

When the United States bought the road it was worse even than the proverbial two streaks of rust and a right of way.  The rails were the old fashioned hollowed out Belgian type, and the rolling stock was a nightmare of rust and ruin to the practiced railroad man.  Built at a time when circumstances demanded that it follow the lines of least resistance, it was a road that led through marshes and over hills with little attention to grading.

When the United States took over the road and the Canal Zone there was an attempt made to maintain the canal work and the operation of the railroad as separate and distinct enterprises, with the railroad lending what aid it could to the work of building the canal.  But it was soon found that this was unwise, as it gave rise to conflict between the railroad management and the canal commission.  It took a long time and the unwinding of much red tape to get matters through; and if there was not friction between the two enterprises, there at least was a lack of the spirit of "all things subsidiary to the building of the canal."

How to overcome the trouble and still to preserve the separate corporate existence of the Panama Railroad Company was a problem.  Separation was necessary because of the terms of the concessions under which the railroad was operated, and because, also, of the fact that a railroad could not very well be operated under a law which required all of its passenger and freight receipts to be turned into the federal treasury instead of into its own treasury.  At last the plan was hit upon of making the chairman and chief engineer of the canal president of the railroad, and the members of the commission its directors.  This arrangement worked admirably, since it complied with all the terms of the concession, retained for the railroad the advantages of a separate corporate existence, and yet made it as much a part of the canal construction organization as though it had no trace of a separate existence.

The situation of the Panama Railroad was an anomalous one.  Here was a trans-continental line owned by the United States Government, operating under a concession of the Republic of Colombia, connecting the principal cities of the Republic of Panama, and doing business under a charter of the State of New York.  Still further to add to the peculiarities of the situation, the government of Colombia claimed that when the concession of the railroad should expire its property would revert to Colombia.  If that were so, then, since the railroad owned the land on which the city of Colon is built, Columbia would reacquire the property rights of one of the cities that had thrown off the yoke of her dominion.

As matters stand today the United States owns the railroad and will continue to operate it.  Its operation will be more fully a part of the canal organization than heretofore.  The treaty with the Republic of Panama gives to the United States the right to take over the road and expressly provides that whenever the concession ceases from any cause the United States is to enjoy all the rights that Colombia would have enjoyed had Panama not revolted.  Under this treaty the United States will be the fee simple owner of the Panama Railroad when its concession ceases.  This will be ninety-nine years from the time the road was opened.

As noted, the operation of the railroad during the period of the construction of the canal was very profitable.  During that period it carried some twenty million passengers and many millions of tons of freight, with a new operating revenue of some fifteen million dollars.  In a single year it carried three million passengers and over a million tons of freight.  In addition to this it handled over its tracks about 40,000,000 tons of spoil a year, which served to make it the busiest line of railroad in the world.   Although the road was only forty-seven miles long it had several hundred miles of switch and other tracks to accommodate the vast amount of business handled over it.

The rates on the Panama Railroad fixed by the canal authorities were high in comparison with those in the United States, first class fares being at the rate of five cents a mile.   But the service was the best to be found in any part of the tropical world.   Second class fares were one-half the first class fares, and the second class passengers nearly trebled the first class passengers.  Especially was this true after each canal pay day.  The negro employees on the isthmus hugely enjoyed riding on the railroad trains, and they, with their families, added greatly to the traffic.

The difference between first and second class rates was sufficient to accomplish a separation of the races in travelling through the canal zone.

In addition to operating the railroad, the Panama Railroad  Company operated a line of steamships from New York to Cristobal.  This steamship line was a constant drain upon the finances of the railroad company, and was not able, during the whole time of its operation by the government, to make itself self sustaining.  But at the same time it afforded so many advantages in the prompt handling of freight, mail, and canal supplies that it was not thought wise to discontinue the service during the construction of the canal.  The steamship line made weekly sailings from New York and from Panama.   Some years its operation would show a deficit of more than a quarter million dollars, thus emphasizing the inability of American ships to compete with those of other countries under our American high-wage standards.  While the Panama Railroad Steamship Line was operating at a loss in a direct service, the United Fruit Line, with a large number of sailings from New York and New Orleans, with numerous ports of call, was operating at a fine profit.

When the matter of a permanent policy by the government towards the Panama Railroad came up, Chief Engineer Goethals recommended that the government go out of the steamship business, except for the carrying of its own supplies.  He advised further that arrangements be made to sell the steamships on hand, and to substitute for them specially built coal carrying steamers, with which the United States could carry its coal from Newport News and Norfolk to the isthmus.

A question of operation which still remains to be settled is whether the Panama Railroad shall continue to be operated by steam or whether it shall be electrified.   Sufficient water power is developed at Gatun Dam during ordinary seasons to furnish all of the power necessary for the operation of the canal machinery and for the Panama Railroad in addition.  But it has  not been decided whether sufficient power would be generated in dry seasons to run both the lock machinery and the railroad.   However, since there is an auxiliary steam plant at Miraflores, where fuel oil from the California fields can be had at a low rate, it is probable that this power could be used to supply any lack of current that low water might cause.  It is not improbable that the course ultimately decided upon will be to keep the present equipment of the Panama Railroad in commission so long as it lasts, and then to change over to electricity as the regular motive power of the railroad.

As soon as the United States took over the canal property plans were laid for improving the railroad.   Chief Engineer Wallace wanted to make a three or four track road across the isthmus, but it was finally decided to develop the road just as the work of constructing the canal went forward.  Under this plan of development the old Belgian rails were replaced by the best ninety pound steel rails, while a double tracked road with curves straightened and grades lowered was substituted for the old line.  The rolling stock was changed and brought up to the best American standard, and with the engines and cars bearing the letters "P. R. R." one might have thought himself in a region where there was a tropical edition of the Pennsylvania Railroad.  It was necessary many times to change the location of parts of the road.  When the Gatun Dam and Spillway reached the elevation that permitted the water to be impounded in the Chagres Valley, more than half of the original Panama Railroad right of way was put under water.  But by that time the work of building the New Panama Railroad had reached such a stage as to  make possible the abandonment of the old road across the bottom of what is now Gatun Lake.  The new road now skirts the east bank of the lake, here and there crossing an arm of that great body of water.  Whereas the old road crossed the canal a number of times, the new one keeps to the left of the big waterway the entire distance from Colon to Panama.  The first section of the new road to be opened was the part from Gatun to Gamboa.  At the latter place trains were switched across the canal over the crest of the Gamboa dike.  From this point to Pedro Miguel the old line was used until the latter part of 1913, because all the principal towns were on that side of the canal.  From this point to Paraiso the new line was used.  Here the canal was crossed on a trestle and the run made into Panama over the re-location.   When the time came to blow up Gamboa dike the entire new line was thrown open, and all that was left of the old Panama Railroad was the name and a shuttle service from Pedro Miguel to Bas Obispo.  A floating trestle has been constructed above the locks at Pedro Miguel which permits trains to cross the canal and to keep up communication along the west bank of the waterway between Pedro Miguel and Bas Obispo, although after the abandonment of Culebra there will be very little use made of this line.

It was the intention of Colonel Goethals to run the new railroad through Culebra Cut on an offset in the bank some distance above the water line, but the slides made this out of the question.  It was then decided to make a detour from Paraiso to Gamboa which carried the railroad back of Gold Hill and the other hills which border the east bank of the canal.  This change in the alignment of the New Panama Railroad cost about a million dollars.

In addition to its work of doing a railroad and steamship business, and of furnishing trackage for the hundreds of thousands of dirt trains which had to  move in and out of Culebra Cut in the disposal of spoil, the Panama Railroad Company also operated the commissary through which the employees of the canal commission were protected from the exactions of native merchants, and through which they could buy at a very small per cent above wholesale prices.  This work will be described in another chapter and needs only to be mentioned here.  Still another activity of the railroad company was the operation of a hotel at Colon.  For years it operated the old Washington House.   This hostelry was better than the native hotels in Colon, but still left much to be desired both in size and in the character of its construction, especially in view of the demands of the large tourist traffic coming to the canal.  Realizing the need of a really good hotel President Taft ordered Colonel Goethals to use a part of the surplus of the railroad company for the building of a modern hotel at Colon fitted for the accommodation of the tourist traffic.  Colonel Goethals employed a good architect, and between them they designed a hotel that is, beyond question, the last word in tropical hotel architecture.  Built of concrete, in a modified Mission style, and fitted with every modern hotel convenience, it is conducted on a scale which puts it on a par with the best hotels of the United States.  Its wonderful ballroom, opening on three sides to the sea, is a thing of beauty and a joy forever.  This ballroom and the one at the Tivoli Hotel at the other side of the isthmus perhaps have more to do with protecting Americans at Panama from the ravages of homesickness than any other condition on the Canal Zone.

It is probable that the patronage of the hotel in the future will be such as to make profitable the establishment of golf links at Gatun.  In addition to this Gatun Lake will afford admirable fishing ground, and these things may make the isthmus an ideal tourist resort, to say nothing of their attractiveness to the passengers who pass that way on the ships of the world, and who will welcome a change during the day or two they must stay on the isthmus while their ships go through the canal, discharge cargo and take aboard supplies.  The railroad will give the passengers who want a change, but who are on ships that do not stop, an opportunity to see the sights of the isthmus while their vessels pass through the canal.  Passengers may take the cars and go across the isthmus in two hours, thus gaining the sights of the isthmus.  The railroad will also be operated in such a way as to permit the commissary laundry to render efficient services to passing ships.  A ship arriving at the Atlantic entrance from Europe can send its linen to the commissary laundry, which will launder it and send it to Panama in time to be taken aboard before the vessel leaves the Pacific end of the canal.

The Panama Railroad will be used in the future as an auxiliary in the operations of the big waterway.  Closely paralleling the canal, it will move on short notice supplies and equipment from one point to another where they are needed.  Built on high ground and in the most thorough manner, its cost of upkeep will not be heavy.  When it is electrified its cost of operation will be very low.  Under these conditions it will prove as useful to the completed canal as it proved to the construction forces in days gone by.  In the prompt maneuvering of troops in case of hostilities the road will be invaluable to the United States.

Some writers have said that the building of the old Panama Railroad at a cost of $7,400,000 was a more creditable engineering achievement than the building of the new road for $9,000,000, in view of the advance in railroad engineering and the improvement of railroad building machinery.  But this conclusion fails to take into consideration the tremendous amount of work done on the new road as compared with the old road.   There is more material in a single fill on the new line than there was in all of the fills of the old line.  There was as much excavation in a single three mile stretch of the new road as there was on the whole line of the old road; there is more steel in the rails of one mile of the new road than there was in three miles of the old road.  And so the comparison might be continued.  The fact is, that the new Panama Railroad was built under those same standards of efficiency that characterized the construction of the canal, and as it takes its place alongside of the canal as a part of Uncle Sam's great inter-oceanic highway, it will but emphasize the wonderful success of the Americans at Panama.

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