Almost immediately dividends on the original fifty thousand shares were paid, and soon amounted to twenty-four per cent, while large sums were carried to the sinking fund. In the early years of the Company's operation its stock came to be regarded as one of the very best investments in Wall Street. It ran up to more than one hundred per cent over par and had such stability that, although a stock dividend of forty per cent was declared to cover the amount of earnings that had gone toward the construction of the road, the shares sold the following day without decline. In fact, during the first ten years of its history, the road's prosperity was marvelous. The management, under the presidency of David Hoadley, was strictly honest, and conservative, perhaps to a fault. The business world became accustomed to look upon the Panama Railroad as one of the most prosperous enterprises in existence and one whose prosperity was fixed upon an unshakable foundation.

During the ten years ending with 1861 the total receipts exceeded $11,000,000. A large proportion of this sum was used in improvement, but quarterly dividends of six per cent were paid and the stock issue was raised to

seventy thousand shares, making the capital $7,000,000, whereas it had originally been $5,000,000. It was confidently expected by the public that the natural increase in traffic would result in corresponding increase in profits.

There were, however, two or three serious drawbacks to the continuance of the road's remarkable prosperity. The chief of these was the fact that the contract made with the Government of New Granada was for a very short period, when the character of the enterprise is considered. The concession was to expire at the end of forty-nine years from 1848, and it had been agreed that on the expiration of the first twenty years after the opening of the line, the Government of New Granada could take possession of it by making a payment of $5,000,000; or, if the Government should waive that option, at the end of thirty years it might secure the property by making a payment of $4,000,000; or at the end of forty years of $2,000,000. With the expiration of the term of the concession, the road and all its assets were to pass to the Government of New Granada free.

Before half of the first term had expired, the

enterprise had established itself as the best paying railroad in the world. The directors were fully alive to the advantage of securing unhampered possession of it, and the Government of Colombia, which had succeeded New Granada, was equally appreciative of the value of its reversionary interest in the property. There was no doubt about Colombia's availing herself of the first option to acquire the line and its appurtenances.

With this dread contingency in view, Colonel Totten and William Nelson were sent to Bogotá as representatives of the Company to negotiate a new contract at any cost. After several months of dickering, an agreement, superseding the old one, was signed by the interested parties in August, 1867. It was not as favorable as had been hoped for, but considering that Colombia clearly had the whip hand of the situation, the Company's representatives probably did as well as was possible.

The new franchise had a life of ninety-nine years from the date of its execution, but a number of additional obligations were imposed by it. One million dollars in gold was paid at once as a douceur, and the annual payment of $250,000 in gold was stipulated for during the

continuance of the concession. The Company was bound to "extend the railroad on the Pacific side to the islands of Naos, Culebra, Perico, and Flamenco; or other place in the Bay of Panama where there may exist a permanent depth of water for large ships." This was an onerous condition that could only be carried out at the expenditure of many millions. The contract also provided for the recession of the Island of Manzanillo, on which Colon stood. The original agreement conveyed it to the Company in perpetuity; under the later terms it was to be restored to the Government at the same time that the road should revert. There was also a provision for the carriage of Government troops and munitions free. This did not, at the time, appear to be of considerable consequence, but in later years it proved to be a heavy burden, as, for instance, in 1903, when, with only 4,633 first-class paying passengers, there were transported 6,601 troops who rode free.

When it became known in New York that the Panama Railroad had weighted itself with such heavy liabilities, the shares dropped from three hundred to eighty in a few days. This was the beginning of evil days. Other unfortunate cir

cumstances shortly arose. In 1862, Congress had passed an act authorizing a railroad and telegraph line across the continent. For years the project languished, but at length it was taken up by men of energy and determination with the result that in May, 1869, the last rail of the "Overland" was laid at Promontory Point.

This development robbed the Panama Railroad of the best of the California business on which its prosperity had been built up. But there remained an even richer source of profit in the trade of Central and South America. This was obviously the most desirable field for the directors of the road to cultivate, and an opportunity to secure a good hold upon it shortly occurred to them.

For some time the Pacific Steam Navigation Company had complained that their business on the Pacific Coast was hampered by the lack of adequate facilities afforded by the Panama Railroad, whose share in the division of rates for through traffic was unsatisfactory to the steamship company. When the loss of the California traffic became assured, Colonel Center, the superintendent of the railroad, probably acting without the authorization of