THE PANAMA RAILROAD
When the United States acquired the properties of the new French Canal
Company it found itself in the possession of a railroad for which it
had allowed the canal company $7,000,000. This road, in the high tide
of its history, had proved a bonanza for its stockholders, and during
the 43 years between 1855 and 1898 it showed net profits five times as
great as the original cost of its construction.
When the United States took over the road someone described it as
being merely "two streaks of rust and a right of way." While the
Panama road as acquired by the United States in its purchase of the
assets of the new French Canal Company might have been all that this
phrase implies, it was none the less as great a bargain as was ever
bought by any Government, and probably the greatest bargain ever sold
in the shape of a railroad. It was not the rolling stock that was
valuable, nor yet the road itself; the real value was to be found in
the possibilities of the concession. Not only was this road destined
to render to the United States a service in the building of the Panama
Canal, worth to Uncle Sam a great many times more than its cost, but
it was also destined to yield a net profit from its commercial
operations which in 10 years would amount to double the price paid for
it. Since the Americans took it over it has been yielding net returns
ranging from a million and a quarter to a million and three-quarters
dollars a year. In these 10 years it has brought an aggregate profit
of some $15,000,000 into the coffers of the United States.
While $7,000,000 may have been a high price, judged from the
standpoint of the physical value of the road, it was a very reasonable
one, indeed, as compared with the price paid for it by the new French
Canal Company. This company, which sold it to the United States for
$7,000,000, paid the Panama Railroad Company $18,000,000 for it 23
years before. When the French Canal Company decided to undertake the
building of the canal, it found that the Panama Railroad Company held
concessions that were absolutely necessary to the construction of the
canal. The Colombian Government had granted the company the concession
to complete the road in 1849, and had agreed that no other
interoceanic communication should be opened without the consent of the
railroad. This gave to the railroad company the whip hand in trading
with the canal company and it was able to name its own price.
When the United States wanted to buy the rights and properties of the
new French Canal Company the shoe was on the other foot. There was
only one buyer--the United States; and it could choose between the
Panama and Nicaragua routes. If the United States did not buy the
property its principal value would have been what it was worth as an
uncertain prospect that at some future time a second Isthmian canal
might be built. That is why the United States was able to buy from the
French for $7,000,000 property that they had bought for $18,000,000.
After the United States acquired possession of the railroad, one
change after another took place--now in the location, now in the
rolling stock, now in directorate, and again in location--until almost
all that remained of the original road was its name. It is now built
almost every foot of the distance on a new location and the permanent
Panama Railroad is a thoroughly modern, well-ballasted, heavy-railed,
block-signal operated line of railway, built along the east bank of
the Panama Canal from the Atlantic to the Pacific. Nearly half of the
old right of way lies on the bottom of Lake Gatun, while the new line
skirts that artificial body of water along its eastern shore, at
places crossing its outlying arms over big bridges and heavy trestles.
The construction of this new line was attended with much difficulty
and probably no other road in the world has such a great percentage of
fills and embankments in proportion to its length. One embankment, a
mile and a quarter long and 82 feet high, required upward of 2,500,000
yards of material for its construction. The road is built about 10
feet above the water's edge, and more than 12,000,000 cubic yards of
material was required to make the fills necessary to carry the road
bed at this elevation.
When the United States took over the French property it was decided
that the canal work and the railroad operations should be maintained
as distinct activities. It was agreed that the Canal Commission
should have the right to haul its dirt trains over the Panama
Railroad, and in compensation therefor the commission undertook to
build a new road to take the place of the old line, which was in the
way of the completion of the canal.
The work of relocating the road was undertaken early in the
construction of the canal in order that it might be completed by the
time the old road had to be abandoned. It was built at a cost of
approximately $9,000,000, or close to $170,000 a mile. It is
interesting to note that the cost of this thoroughly modern railroad
was only about a million dollars more than the cost of the first
Panama road which has been built with rather less than usual attention
to grades, and with small rails and light bridges. The relocated
Panama Railroad was turned over to the railroad company in 1912.
How good a bargain the United States secured when it acquired the
Panama Railroad is shown by the fact that during the 10 years of canal
work the net earnings of the railroad company have reimbursed the
United States for the cost of the old road and the construction of the
new one, to say nothing of the invaluable aid rendered in the building
of the canal.
The relations existing between the Isthmian Canal Commission and the
Panama Railroad Company during the years of the construction of the
canal were somewhat peculiar. The Panama Railroad Company is as much
the property of the United States as the canal itself, yet the books
of the two organizations were kept as carefully separate and distinct
as though they were under entirely different ownership. The Panama
Railroad Company, being a chartered corporation, under the terms of
its ownership could engage in commercial business with all of the
facility of a private corporation. Money received by the Isthmian
Canal Commission from outside sources had to be covered into the
treasury and reappropriated for distinct and special purposes. On the
other hand, the railroad company could use its money over and over
again without turning it back into the treasury. This advantage of
operation was a useful one in conducting the road itself, and also in
the construction of the canal.
There was another reason which led the canal authorities to advocate
the maintenance of the two organizations as separate entities. This
had to do with the concession rights. Under the terms of the
concession of the railroad company the property was to revert to the
Republic of Colombia in 1967, or at any earlier date should the
company cease to exist as such. While most authorities agree that with
the secession of Panama and the setting up of the new Government all
of Colombia's rights in the railroad company passed with the
territory, and while the treaty between the United States and the
Republic of Panama expressly provides that the United States shall
have "absolute title--free from every present or reversionary interest
or claim" in the railroad, the Republic of Colombia contends that it
possesses some rights with reference to the railroad and, not desiring
to complicate matters, the canal authorities thought it best to live
up to the letter of the treaty, in spite of Panama's express grant of
title free from reversionary interest or claim.
While it was deemed desirable to have the Panama Railroad operated as
a separate organization, it was equally important that it should be
operated in a way that its interests always would be subordinate to
those of the canal. It was decided that the best way to accomplish
this was to make the chairman and chief engineer of the Canal
Commission the president of the railroad company, and the members of
the commission its directors. The stock of the company is held in the
name of the Secretary of War, with the exception of a few shares held
by the directors to entitle them to membership on the board. There are
also a few directors chosen from other parts of the Government
service, but their activities are purely perfunctory.
In addition to the railroad, the Panama Railroad Company also operates
a steamship line between New York and Colon. This line was acquired
with other properties of the new French Canal Company as a part of the
Panama Railroad's holdings. There were only a few years during the
construction period when this steamship line did not show a loss. But
the advantages of having a steamship line for carrying the supplies of
the canal were so great, because of the special facilities that could
be provided, that the loss was more than compensated by them. During
the year 1912 the cost of operating this steamship line was $305,000
greater than the revenues derived from its operation. But, at the same
time there was a return of net earnings by the Panama Railroad of
over $2,000,000, at least a part of which was made possible by the
operation of the steamship line. Even after deducting the losses
sustained in the operation of the steamship company there was a net
profit of more than $1,700,000, which for a railroad of less than 50
miles in length is no small item.
As a matter of fact, Government ownership of railways as applied at
Panama is remarkably successful from the standpoint of the Government,
and partially so to the patrons of the railroad. Probably no railroad
in the United States could show net earnings per mile of line anywhere
comparable with those of the Panama Railroad.
The rates for passengers and baggage across the Isthmus were rather
high for first-class passengers, the fare for the 48-mile trip being
$2.40, or 5 cents a mile. The second-class rate was only half as much.
On the handling of freight the railroad had to divide the through rate
with the steamship companies of the Atlantic and the Pacific, but,
while the rates were high, judged by American standards, and the
percentages of profits very large, the service maintained was so
superior to that encountered on the privately owned railroads of the
Tropics that no one ever seriously complained of the charges.
One of the most important services rendered by the Panama Railroad
Company in the construction of the canal was in connection with the
commissary. It had more to do with the maintenance of a reasonable
standard of living cost on the Isthmus than anything else.
When the canal was nearing completion it became advisable to
determine what rôle the Panama Railroad should play after the
permanent organization went into effect. Should it be continued as a
separate entity distinct from the canal but controlled by the canal
authorities? Or should it be merged into the Canal Government and
operated purely as an auxiliary of the canal with no separate
existence? This matter was carefully weighed by the canal authorities
and the Government at Washington, and it was finally decided that the
best plan would be to operate them as separate entities, but to have
all the work done by single organization. Another question that arose
was whether the Panama Railroad Steamship Line should be operated as a
Government line after the completion of the canal. Recalling the fact
that the line never had been a profitable one, and that there was no
further reason why it should be continued in operation with an annual
deficit, the recommendation was made by the chairman and the chief
engineer that the ships should be disposed of and the line
discontinued.
As the tide of tourist travel set toward Panama, the serious problem
of taking care of thousands of visitors confronted the canal
authorities. There were times when every available facility for taking
care of lodgers was called into requisition, and still hundreds of
American tourists had to find quarters in cheap, vermin-infested
native hotels at Colon. Believing that the situation demanded a modern
hotel at the Atlantic side of the Isthmus, and having in mind the
success of the Government in the construction and maintenance of the
Tivoli Hotel at the Pacific side, it was decided by the Secretary of
War that the Panama Railroad Company should build a new hotel at
Colon, to be operated by that company for the Government. The result
was the beautiful Washington Hotel, in whose architecture one finds
the world's best example of northern standards of hotel construction
adapted to tropical needs.
Built of concrete and cement block, it is constructed in a modified
Spanish Mission style that makes it cool and comfortable at all times.
Its public rooms, from the main lobby to the dining-rooms, from the
ladies' parlor to the telephone and cable rooms, from the barber shop
to the billiard room, are large, airy, and most attractively
furnished. Its ball room, opening on three sides to the breezes borne
in from the Caribbean is a delight to the disciples of Terpsichore,
while its open-air swimming pool, said to be the largest hotel
swimming pool in the world, affords ideal facilities for those who
otherwise would sigh for the surf. Persons who have visited every
leading hotel in the New World, from the Rio Grande southward to the
Strait of Magellan, say that it is without a superior in all that
region and, perhaps, without an equal except for one in Buenos Aires.
Here one may find accommodations to suit his taste and largely to meet
the necessities of his pocketbook. The best rooms with bath cost $5 a
day for one, or $6 for two. Table d'hote meals are served at $1 each,
while those who prefer it may secure club breakfasts and a la carte
service. Anyone who has visited the Hotel Washington, situated as it
is on Colon Beach, where the breakers sweep in from the Caribbean Sea,
feels that Uncle Sam is no less successful as a hotel keeper than as
a builder of canals.
The Panama Railroad, under the American régime, has always looked well
after the comfort of its patrons. The coaches are of the standard
American type, and enough of them are run on every train to make it
certain that no patron need stand for lack of a seat. The most popular
trains carry from 8 to 12 cars. These trains are run on convenient
schedules, permitting a person to go and come from any point on the
road in any forenoon or afternoon. All coaches are supplied with
hygienic drinking cups, and in every way the Panama Railroad shows
that Uncle Sam is solicitous for the welfare of his patrons.
All the rolling stock on the Isthmus is built on a 5-foot gauge, this
having been the gauge of the original Panama Railroad. As the rolling
stock of the Canal Commission had to run over the lines of the Panama
Railroad, it also was built on the gauge. When this rolling stock is
disposed of it will be necessary to readjust the gauge to meet the
ordinary American standard which is 2-1/2 inches narrower. It has been
estimated that the engine axles can be shortened for $750 per
locomotive and those of cars at prices ranging from $27 to $31 per
car.
The first attempt to build the Panama Railroad was made in 1847, when
a French company secured a charter from the Government of Colombia for
a building of a road across the Isthmus. This company was unable to
finance the project and the concession lapsed.
In 1849 William H. Aspinwall, John L. Stevens, and Henry Chauncey,
New York capitalists, undertook the construction of the road. The
terms of the concession provided that the road would be purchased by
the Government at the expiration of 20 years after its completion for
$5,000,000. The loss of life in the construction of this road, serious
as it was, has been monumentally exaggerated. It is an oft-repeated
statement that a man died for every tie laid on the road. This would
mean that there were 150,000 deaths in its construction. As a matter
of fact, the total number of persons employed during the six years the
line was being built did not exceed 6,000. But among these the death
rate was very high. Several thousand Chinese were brought over and
they died almost like flies. Malaria and yellow fever were the great
scourges they had to encounter, although smallpox and other diseases
carried away hundreds.
The road was completed in January, 1855. Before the last rail was laid
more than $2,000,000 had been taken in for hauling passengers as far
as the road extended. The way in which the original 50-cent per mile
rate across the Isthmus was established is interesting. The chief
engineer encountered much trouble from people who wanted to use the
road as far inland as it went from Colon, so he suggested that a
50-cent rate be established, thinking to make it prohibitory. But the
people who wanted to cross the Isthmus were willing to pay even 50
cents a mile. Hence for years after the completion of the road the
passenger rate continued at $25 for the one-way trip across the
Isthmus.
The railroad proved to be such an unexpectedly good investment that
the Republic of Colombia began to establish its claim to acquire
ownership of the road at the expiration of the 2-year term, which
would take place in 1875. It was necessary therefore, that the
railroad company should take steps to save the railroad from a forced
sale with $5,000,000 as the consideration. Representatives were
dispatched to Bogota with instructions to get an extension of the
concession under the most favorable terms possible. As it was realized
that the Republic of Colombia held the whip hand in the negotiations,
the railroad company understood that if it wished to escape selling
its great revenue producing road for $5,000,000 it would have to meet
any terms Colombia might dictate. The result of this mission was an
agreement by the railroad that in consideration of an extension of the
concession for a term of 99 years it would pay to the Colombian
Government $1,000,000 spot cash and $250,000 a year during the life of
the concession. That annual payment was continued as long as the
Isthmus remained a part of the Republic of Colombia. Under the terms
of the treaty between the United States and the Republic of Panama it
was resumed again in 1913, to be paid by the United States to the
Republic of Panama throughout all the years that the United States
maintains and operates the Panama Canal.