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.