The Railroad and the Construction of the Panama Canal.

In 1876, a French company planned to dig a Canal across the isthmus. This would destroy the already hurting railroad. At Paris the “Societe Internationale du Canal Interoceanique” was formed. The leader of the group was Ferdinand de Lesseps, the man responsible for building the Suez Canal in Egypt. The financial backers put a price tag of $214 million on a Canal even before visiting the site.

The French engineer arrived in Panama and the first thing he did was build a $150,000 mansion near the crest of the Divide. 1,000 snow shovels were then shipped to this tropical area.

From the very beginning the company and the future Canal were plagued by troubles, most being financial problems. Lesseps was forced to go back to his countrymen several times to garner funds, often as loans and once as a lottery.

When huge piles of supplies accumulated at the wharves, de Lesseps asked the Panama Railroad to haul the freight across the Isthmus, but was amazed at the exorbitant freight rates. It would be cheaper just to buy the railroad. Yankee entrepreneurs sold the French the stock valued at $70 for $250. The Panama Railroad cost the French $25 million and the sale was completed in 1879.

Improvements on the railroad were being made. New ties, new rails, more ballast and bridge repairs came in 1882. In 1886 the amount of freight hauled was greater than ever – 320,928 tons. Passenger tickets were introduced to replace cash fares. In 1886 a record 799,264 passengers were carried.

Graft and corruption continued until the French spending spree could not continue. On February 5, 1889 the Canal Company went bankrupt and work on the Canal stopped, but the railroad was in good condition.

Through political finagling between France, Colombia and the U.S. on June 28, 1902 the United States bought the Canal Company from the French for $40 million. During this time the people of Panama wanted to be free of domination by Colombia. The Panamanians revolted and according to an 1846 treaty between the U.S. and Colombia, the U.S. armed forces could be sent to maintain order along the railroad. With the presence of the U.S. troops the Colombians withdrew. Panama celebrated its independence on November 4, 1903. In December, the U.S. Congress ratified a treaty with the new Republic of Panama creating a ten-mile-wide Canal Zone controlled by the U.S.

In May 1904, President Roosevelt appointed an Isthmian Canal Commission to build the Canal. The railroad was under the jurisdiction of the Commission, and John F. Stevens was named chief engineer.

The Canal was to be dug where much of the railroad lay. The rails would have to be moved while handling the enormous amount of traffic produced by Canal’s construction. The entire railroad south of Gatun was moved. Surveys began in 1906 and the actual relocations started in June 1907. On the swampy land between Gatun and Gamboa it was necessary to build 167 embankments from 58 to 74 feet high. There were 16 million cubic yards of dirt used in the fills in the area where the artificial Gatun Lake was created (at that time the world’s largest man made lake) by damming the Chagres River.

The relocation cost $9 million, $1 million more than the entire railroad had cost 65 years earlier. The move was completed on May 25, 1912 and the old railroad was abandoned in 1913.

While Canal construction was underway, freight and passenger business continued, except in 1910 when an embargo was placed on large, bulky items, which could interfere with Canal work. The Canal opened on August 15, 1914.

When the “Big Ditch” (the Panama Canal) began operations, freight business on the railroad almost disappeared except on occasions when the waterway was blocked by landslides. Local freight also left the rails when a highway across the isthmus was completed in April 1943. The railroad had lost most of its importance as a link in world commerce.

Excerpted from the National Railway Bulletin, Volume 64, Number 5, 1999.