Panama Canal Railway
The Panama Railway also operated a significant shipping line, connecting its service with New York and San Francisco. It ran a Central American line of steamships linking Nicaragua, Costa Rica, San Salvador, and Guatemala to Panama City. The shipping service was greatly expanded when canal construction began. Ships included the SS "Salvador", SS "Guatemala", SS "Cristobel", and , which became the first of the ships to cross the completed canal in 1914.
In 1904 the United States took over the license to build and operate the canal. The choice to use locks and an artificial lake (Gatun) meant that the old railway route from 1855 had to be changed because it followed the Chagres River valley, which would be flooded by the lake. Also, the railway would be extended and altered continuously for the building process. The stock of the Panama Railway Company, vital in canal construction, was entirely controlled by the United States Secretary of War.
Panama Canal Railway
The principal incentive for the United States to build the rail line was the vast increase in passenger and freight traffic to California following the 1849 California Gold Rush. The United States Congress had provided subsidies to companies to operate mail and passenger steamships on the coasts, and supported some funds for construction of the railroad, which began in 1850; the first revenue train ran over the full length on January 28, 1855. Referred to as an when it opened, it was later also described by some as representing a "transcontinental" railroad, despite transversing only the narrow isthmus connecting the North and South American continents. For a time the Panama Railroad also owned and operated ocean-going ships that provided mail and passenger service to a few major East Coast and West Coast cities, respectively. The infrastructure of this railroad was of vital importance to the construction of the Panama Canal over a parallel route half a century later.