Panama and the United States: The End of the Alliance

2. The Railroad Era

The Railroad Era Shots rang out across the Panama City waterfront and the smell of gunpowder hung in the sultry air. Dozens of Americans holed up in the Panama Railroad station imagined that they would not live to see another day. An argument over a slice of watermelon earlier in the day had provoked a riot in which dark-skinned Panamanians had attacked American travelers waiting to board a steamer for California . The incident, the so-called Watermelon War of 15 April 1856, showed that the prosperity everyone had expected in Panama after the completion of the Panama Railroad the year before had not trickled down to the workers, many of whom were left jobless by the modern new facilities. The riots could be seen as a harbinger of future troubles caused by unequal sharing of profits from Panama's international crossing. They were the first spat in the LLS,-Panamanian alliance. The Boom Years, 1848-1855 While the diplomats fought for position in Central American affairs, the discovery of gold in California produced an uncontrollable westward rush of people and supplies from the U.S. Atlanticseaboard that nearly inundated Panama. The timing could not have been more propitious for the holders of the mail contracts. The new steamships and docking facilities seemed made to order for the gold rush. For the next two decades hundreds of thousands of westward migrants embarked in eastern ports and paid extravagant fees to be taken to California. U.S.-Panamanian relations were forged during the gold rush. Overnight the California traffic shifted Panama's trade from its traditional Europe-South America orientation to East Coast-West Coast vectors, It flooded Panama with U.S. citizens, merchandise, capital, 24 2 25 The Railroad Era and culture and drew in those of other nationalitiestoo. It produced a huge demand for improved overland transport in Panama and supplied the profits to justify building the Panama Railroad, It attracted migrants from Panama's rural areas into the terminal cities in search of money and adventure. It deepened the Panamanians' belief that they would one day enjoy great prosperity because of their location on a major maritime route. One historian calls the coincidental gold rush across Panama and the consolidation of a laissez-faire regime in Bogota "two revolutions in one/'1 William Aspinwall, who had established the steamship mail service up the west coast from Panama to Oregon in 1848, was a respected New York businessman whose fortunes derived from commerce. Not simply a speculator, Aspinwall was a visionary who had invested in steamships because he believed in the inevitabilityof booming trade with the West Coast,2 The annexation of California and the gold rush fully justified his vision. In 1848 he and some associates obtained an agreement from the Colombian government to take over a lapsed concession to a French firm to build a railroad in Panama. The following year they incorporated in New York as the PanamaRailroad Company and began to raise capital after Congress failed to provide a subsidy. Finally, in May 1850, they concluded a contract with Bogota regarding terms agreed to in 1848, The railroad concession of 1848 was a decisive event in U.S.-Panamanian relations, because it established ground rules for the conduct of private business on the isthmus during the followingdecades. The company gained the exclusive right to build and operate a railroad, highway, or canal across Panama, along with complementary steamboat service if desired. The concession ran for forty-nine years, but Colombia had the option to buy out the company after twenty, thirty, or forty years, for the sums of $5 million, $4 million, or $2 million dollars, respectively. The company received without charge all public lands needed for operation of the railroad plus 250,000 acres of public land anywhere in the isthmus. The ports at either terminus of the railroad were to be free of trade restrictions. The railroad alone would set tolls for service but would pay 3 percent of its dividends to Colom- 26 PANAMA AND THE UNITED STATES bia. This contract was very generous, but in view of the obstacles the company faced, it was probably fair. It also reflected terms offered to the French concessionaires (except a halving of the period from ninty-nine to forty-nine years) and to railroads in the UnitedStates. In the spirit of laissez faire, the railroad acquired the power to organize and operate...