THE BIGGEST LITTLE RAILROAD ON EARTH How the Panama Canal Railway became incredibly profitable, and why the canal expansion will only help • Story and photos by Peter A. Hansen Partners in trade: The Port of Balboa and the Panama Canal Railway are adjacent to each other on the Pacific side of the canal. The Miraflores Locks are visible in the distance at upper right. Inset: Mogul-type locomotives were the principal freight and passenger power from the days of the canal’s construction until the end of steam. Here, 2-6-0 No. 662 leaves Panama City in June 1930. Steam-era image: James H. Harrison collection © 2013 Kalmbach Publishing Co. This material may not be reproduced in any form www.TrainsMag.com 29 without permission from the publisher. www.TrainsMag.com Caribbean Sea Atlantic Intermodal Terminal PANAMA Colón Maintenance facility Map area CANAL Panama RAILWAY Gatún Locks (3 locks) Monte Lirio causeway Route realigned Monte Lirio siding Lake e Madden 1999 k a L n ú t a G FORMER CANAL PANAMA Isla Barro ZONE (1903-1979) r e Colorado iv R Gamboa siding s e r g a h C Culebra Cut 1.3% grade Paraíso Miraflores Pedro Miguel Locks Tunnel N (1 lock) Original (pre-canal) railroad Miraflores Locks Present (post-canal) railroad (2 locks) Abandoned in 1999 Pacific Corozal Intermodal 0 Scale 15 miles Terminal Panama City © 2014 Kalmbach Publishing Co., TRAINS: Rick Johnson and Robert Wegner Balboa La Boca 400 Profile 200 Feet 0 Gulf of Panama 0 5 10 15 20 25 30 35 40 45 miles Trucks are perpetually in motion, constantly cycling containers between the docks and pires, but he did have occasion to meet a lot sage. It was not without its rigors, however. ception. This “other PRR” was only 47 ditch. (The canal isn’t entirely a ditch: man- down as president and CEO of the Santa Fe the intermodal terminal on the Pacific side. of people in the Latin American business The jungle was dense, the weather was miles long, but once opened it charged $5 made Lake Gatún accounts for about half Railway three years earlier. Haverty and F40 No. 1863 has just arrived with a train. community. Some of them were pitching a steamy when it wasn’t teeming with rain, for a one-way passage across the Isthmus, its length, though the 9-mile Culebra Cut Lanigan had known each other for years. concept called the Alpha-Omega project, and frequently fatal tropical diseases were and that was for people who walked. It cost was a truly gargantuan work of excavation.) Each in his own way, they were important ome 3.5 million years ago, during which would have created a rail line be- an ever-present threat. $10 to ride in second class, an astounding The railroad remained active during the players in the intermodal revolution, and the Pliocene Epoch, an isthmus tween Atlantic and Pacific ports in South- Most of the people who got rich from $25 in first class, and ten cents a pound for days of U.S. control, since it was the prima- the new Panama Canal Railway would be rose up from the sea to separate ern Mexico. Similar projects were envi- the gold rush weren’t the argonauts them- baggage. (A dollar in 1855 had about the ry means of transporting goods and pas- all about intermodalism. the Atlantic and Pacific oceans. sioned in Nicaragua and Costa Rica, but selves; they were the people who provided same spending power as $30 today.) Atlan- sengers within the Canal Zone. Carload “Had it not been for Benedetti and Lani- The implications of this accident of Benedetti thought they all required too goods and services that the gold-seekers tic-bound traffic was just as profitable, freight is not a part of the modern rail- gan twisting my arm,” Haverty recalls good- geology went unremarked until much capital to be feasible. needed. The Panama Railroad and its since the railroad was the principal means road’s business model, but most industrial naturedly, “I never would have gone to Pan- 1513, when Spanish explorer Vas- And then he found the Panama Rail- founder, William H. Aspinwall, were no ex- of shipping gold to the eastern U.S. The buildings in the former Canal Zone have ama.” But the Mi-Jack men didn’t know Sco Nuñez de Balboa stood atop a hill in road. Mi-Jack was part-owner of a small railroad’s expenses were commensurately remnants of their old spur tracks. railroading like Haverty did, and they need- Panama and became the first European to container port in Cristóbal, a part of Colón high, however: Its initial construction cost ed him to provide a reality check. The rail- glimpse the Pacific. In the ensuing centu- on Panama’s Atlantic coast, and Benedetti was $8 million, and Panama’s jungle and ‘I DON’T HAVE rooM FOR YOU ON TUesday’ road was so dilapidated that it took 4 hours ries, the Spanish dreamed of a canal, the met government officials who were inter- rivers were forever threatening to swallow “Dario is not only the father of the rail- for Haverty and Benedetti to ride from Bal- French tried to build one and failed, and fi- ested in privatizing the railroad. The line the tracks. Still, investors loved the railroad. road,” says Tom Kenna, Panama Canal boa to Colón, perched on the pilot deck of a nally the Americans succeeded. All of them had fallen into disuse and ruin, but the im- It recouped its initial investment within Railway’s president and director general, locomotive. Still, Haverty saw potential. He were on to something: There is money to be portant thing was that the right-of-way for seven years, the stock paid dividends as “he’s the most patient human being I’ve was so impressed that he took the idea to his made in uniting the world’s two great a land bridge already existed. Like flecks of high as 44 percent in the early days, and at ever met.” That trait would serve Benedetti board of directors at Kansas City Southern oceans. But the most reliably profitable way gold in the muck of a stream, it would need $295, its shares were once the most highly well as he methodically went about reviv- Railway shortly after he became its president to do so may be with trains instead of ships. to be cleaned up, but the riches were there. priced on the New York Stock Exchange. ing the railroad. If conjuring empires wasn’t and CEO in 1995. That’s how the Panama Enter Dario Benedetti. In the 1990s, he The analogy is an apt one, because the The Panama Railroad was the first a part of his job description, neither was Canal Railway became a partnership be- had become one more in a long line of Panama Railroad was a child of the Califor- transcontinental railroad, but the world building railroads. But he did know two tween KCS and Mi-Jack. dreamers. He was an international sales nia gold rush, completed in 1855. In the moved on when that other transcontinen- people who could pull it off, provided he The business model was unique in all manager with Mi-Jack Products, an Illi- mid-19th century, there was no easy way to tal, the Union Pacific-Central Pacific, was could get them interested. The first was his the world. Think of a giant “X,” with ships nois-based manufacturer of rubber-tire get to California from the eastern U.S. The completed in 1869. Panama’s railroad was boss, Mike Lanigan, founder and CEO of converging from Atlantic and Pacific, north gantry cranes that are used in ports and in- ’49ers either went overland, or by sea Cargo Operations Manager Jose Williams revived when the canal builders showed up, Mi-Jack. The second was Mike Haverty, and south, with the crux at Panama. A ship termodal terminals the world over. Strictly around Cape Horn, or across the Isthmus, monitors the movements of drays between since it was the only feasible way to carry who was running his own transportation originating in Hong Kong might carry con- speaking, it wasn’t his job to conjure em- which generally afforded the fastest pas- the intermodal terminal and the port. off the spoil from excavation of the big investment firm in 1994 after stepping tainers bound for several destinations in 30 Trains JANUARY 2014 www.TrainsMag.com 31 the Atlantic basin. At some point, that ship ship, and it took them a full day longer to vessel discharge. And that’s just Maersk. Panama Canal Railway to better suggest will dock, and its containers will be par- get to New York. The minute that started to Meantime, you have APL saying, ‘Wait a where it ran within the country. celed out among ships going to the various work, we knew we had something.” minute, I gotta have some of that.’ And Later skeptics would include the ocean Atlantic ports. Maersk Lines, for example, The cost advantages to the ocean ship- then you have MSC, Evergreen, and so on shipping companies, the same customers has an Atlantic transshipment center at pers can be eye-popping, both in terms of — to the point that the railroad is actually the fledgling Panama Canal Railway was Kingston, Jamaica. Why not unload the capital expense and operating cost. Again, picking who they’re going to have: ‘I don’t targeting. Kenna, who came to the railroad ship from Hong Kong on the Pacific side of Starling offers an example: “Let’s say you’re have room for you on Tuesday…’” from ocean carrier Hapag-Lloyd, admits the canal and use the railroad to get con- an ocean carrier, and you want to sail from that he didn’t get it at first.