Panama Railroad

Future of the Panama Rail Road :

Once again, the future looks bright for the Panama Railroad. After years of neglect and disrepair having brought it to total ruin, like the Phoenix the Panama Railroad once again rises from its ashes.

Right from the beginning of its existence, the Panama Railroad has patiently waited for times to change and bring it back into business.

During construction of the railroad when all the money ran out, it was the gold rush that helped the railroad finance itself to complete the construction and make a profit. The completion of the transcontinental railroad in the US brought about a decline in the fortunes of the Panama Railroad. Its fortunes went up briefly during the French attempt to construct the canal, going up again with its acquisition by the US. The Railroad helped construct the Canal, but the Canal took away the very reason of the railroad's existence. Yet, for many years the Railroad managed to survive under the management of the US. After it was handed over to the Panamanian authorities, it was quickly brought to total ruin.

Now the Canal is getting old, its locks can no longer accomodate the large ships and sometimes even smaller ships have to wait for many days to go through the canal. Giving a whole new lease of life to the Panama Railroad.

After more than 18 months of negotiation, the Panama Canal Railroad Company, a joint venture partnership of Kansas City Southern Industries (KCSI) and MI-JACK, has won the concession to reconstruct and operate the interoceanic railway. The line will link the ports of Balboa and Cristobal and will be extended to the newly constructed port of Coco Solo. MI-JACK, a manufacturer and operator of inter-modal facilities, will team up with KCSI for this project. KCSI, in conjunction with consulting engineers Bridgefarmer Panama will design and construct the railroad. The estimated date for completion of the project is in the year 2000.

Each year nearly 14,000 ships transit the canal, with a transit time of 8-12 hours. Large ships unable to utilize the canal can now move materials from ocean to ocean via rail. The system will allow containers to be unloaded at port terminals and be trans-shipped over land in 1-1/2 hours, providing secure in-bond, port-to-port service.

Carlos Espino, director of the Panamanian Railroads, indicated that apart from some "very small deviations", the new line should follow the same route as the existing railroad. Surprisingly, no further blasting or excavation will be required to create the new route. Despite the original engineers' lack of technology, "the alignment is good", according to Dan Reagan, Chief Engineer of Bridgefarmer Panama. Although the current track is in very poor condition, Bridgefarmer engineers are using locomotives to make the preliminary geographic and topographic surveys. It will later be used to carry materials and personnel during the construction process. Mr. Reagan foresees no significant problems in the construction process, and commented that although the line is currently in the early planning stages, it will be completed "as quickly as possible".

Although many of the details of the proposed railway have yet to be decided upon, the concept is clear. The trains will be double stacked with containers and will run on a single track with passing sidings. The current estimate is that the railway would carry some 200,000 TEUs annually, although the possibility of a double track with a higher capacity still exists. The total cargo transit time, including loading, will be approximately 1.5 to 2 hours from Balboa to Colón.. The total time the train is in motion will be less than an hour, making it the most rapid mode of cargo transportation between the two oceans. The train terminals will be constructed adjacent to the port cargo facilities which will speed up cargo transfer from boat to train.

At the President's request, the terms of the concession mandate the provision of a passenger service. The passenger trains could make life easier for thousands of commuters who travel between Colón and Panama City every day. As a tourist attraction, the railway clearly has considerable potential for success. As it runs parallel to the Panama Canal and cuts through large tracts of rain-forest.

The priority for the company will be shuttling "containerized" freight across the isthmus. However, the firm also plans to initiate passenger service, in conjunction with a major cruise line, to take visitors on sightseeing trips along the canal. Commuter train service for the local populace is also envisioned.

Kansas City Southern Industries (KCSI) is a Class 1 railway holding company which is aggressively expanding its international presence. The company recently secured a US$1 billion concession agreement to build 5,000 km of railroad in Mexico.

Espino commented that although some residents of the areas through which the railway crosses have expressed concern, he feels that no insurmountable problems have arisen. The Mayor of Colón voiced concern that the railway would cross a main access road to the city and create traffic jams, and even threatened to reject the proposal. Despite this posturing, the problem should be eliminated with a highway overpass.

The company intends to modernize the roadbed and track to enable it to run trains at 65-100 kilometers per hour. The company plans to employ local Panamanian workers to repair the track, subcontract work out to Panamanian firms, and respect environmental concerns in the area, "so we can be as good corporate citizens as possible," Nadlman said. He said one of the environmental concerns is that the route passes through a national park, but that any changes to be made, such as straightening out a curve in the track, will be done in a way to minimize environmental damage.

During the bidding process, Kansas City Southern Industries and MI-JACK were the only group to bid exclusively for the railroad, while Bechel and Hutchinson bid for the combined port and the railroadprivatization. The terms of the concession agreement are the following; The Panama Canal Railway Co. will pay 5% of total income to the government until the total amount invested in the project (a minimum of $30 million) is recouped, and from then on 10% of the total income will be conceded. The term of the agreement is 25 years, with the option of renewal for a further 25 years.

The rainy season will hinder the construction schedule, as the initial 'dirt work' cannot be done in the rain. However, the infamous "El Niño", rather than putting a damper on the project, may lend a helping hand this year. The concurrent effects of El Niño may extend the summer through June or July, which would reduce the construction time considerably.

The Canal Railway project will have considerable impact in facilitating world trade The new railway and almost completed highway will complement the Canal.

The company plans to employ fewer than the 350 people currently working on the railroad, taking advantage of the latest computer technology to operate the system.

The project is a joint venture of Kansas City Southern Industries in Missouri, said Nadlman, who is the firm's assistant general counsel. Southern Industries, he explained, is a diversified holding company that includes among its assets the Kansas City Southern Railway Company, which operates rail lines in the southern United States, and also has formed joint ventures with Mexican firms to run rail lines from Mexico City to the cities of Nuevo Laredo, Veracruz, and Lazaro Cardenas. Southern Industries created the Panama Canal Railway Company to work with a Chicago, Illinois firm, Mi-Jack Projects, which specializes in inter-modal equipment, such as making and selling cranes for lifting containers from rail cars.

Nadlman said his company hopes to take advantage of the hundreds of thousands of freight containers that arrive on both sides of the isthmus each year and "our goal is to move a percentage of them via land rather than via canal or truck." His company, he said, was looking for opportunities in Latin America to expand, and "this opportunity was brought forward by our partners at Mi-Jack." "We have a clear strategic vision of what we want to do -- we want to shuttle containers back and forth" across the isthmus, Nadlman said."We saw a chance to develop an inter-modal business along the Panama Canal that was fairly small, fairly self-contained and seems to have a great potential opportunity." The U.S. government, he added, is not involved in the project.

See pictures of the reconstruction of the Panama Railroad here.



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