Under Spanish rule from 1501, Panama was a pivotal trade route and collection point for Spanish commerce from the New World. This abundance of transient wealth also attracted many foreign pirates and buccaneers, such as Henry Morgan and Sir Francis Drake. Throughout the colonial period, Panama belonged to the Vice-Royalty of New Granada. The region achieved independence in 1821, as a region of Gran Colombia, which also included Colombia Venezuela, Ecuador, Peru and Bolivia. However, when Gran Colombia collapsed in 1830, Panama became part of modern Colombia. Unhappy with this status, the Panamanians
found an ally in the United States, which had strategic interests in the region – specifically, the construction of an Atlantic-Pacific link. A deal was signed with the Americans in 1846, allowing for the construction of a railway. But it was not until 1903 and the achievement of full independence that the Americans embarked on the construction of the Panama Canal. Colombia withheld recognition of the new state until 1921, when the USA agreed to pay compensation of US$25 million.
The Panama Canal Zone became an American Protectorate. The canal was completed on 15 August 1914, although Panama remained under effective American control until 1939. The country’s domestic politics were reasonably stable until the 1968 military coup, led by General (later Brigadier-General) Omar Torrijos Herrera. He held effective power, despite surrendering the presidency during his later years, until his death in plane crash in 1981. Four years earlier, the Americans had agreed to turn over the canal to full Panamanian control at the turn of the century.
During most of the 1980s, the country was run by Torrijos’ former intelligence chief, now the Head of the Armed Forces, Manuel Noriega. The General’s policies and his personal activities - including alleged involvement in drug trafficking - produced very strained relations with the USA. American development aid and military assistance were cut but with little effect. US intervention became more likely after the Panamanian presidential election of May 1989. This was won by the principal opposition candidate, Guillermo Endara Galimany, who took 62 per cent of the vote. However, the election was almost immediately annulled. After an attempted coup in October 1989 – believed to have had US backing – Endara was quickly crushed by Noriega’s forces. The only means of getting rid of the troublesome dictator was military intervention. So, in December 1989, US President George Bush authorized an invasion of the country. After a few days of fierce fighting, US forces secured control of the country and the capture of Noriega, who had taken refuge with the Papal Nuncio. As Noriega was flown to the USA – where, in April 1992, he was tried, convicted and sentenced to 40 years of imprisonment – Guillermo Endara was installed as the head of a new administration drawn from the ADOC coalition, which had won the May 1989 election. After a slow start caused by chronic lack of finance, the Endara Government gradually started to put the country back on its feet. Early discontent was reflected in a number of coup attempts during 1991 and 1992, although all were easily subdued.
Endara’s term ended in 1994. At the Presidential election held that May, the victor was Ernesto Perez Balladares, backed by a three-party center-left coalition under the banner of Pueblo Unido. Five years later, Panamanians reverted to the conservative bloc, which took control of the national assembly, where a four-party coalition is in government. Mireya Elisa Moscoso Rodriguez, the leader of the largest party in the coalition, the Partido Anulfista, also won the Presidential race. Moscoso thus became Panama’s first female President and presided over the defining event in recent Panamanian history – the return of the Panama Canal Zone to Panama under the terms of the agreement negotiated by the Panamanians and the US Carter administration in 1980. (The prospect of Noriega enjoying unrestricted control of the canal had been an important reason behind the US invasion.) Despite obvious US irritation at the unusual phenomenon of ceding territory to a foreign Government, the Americans pulled out on schedule in a low-key ceremony in December 1999.
After this the Moscoso government were subjected to a string of violent street protests against Government corruption and mismanagement of the country’s social security fund. And in May 2004 Martin Torrijos (son of the former military leader Omar Torrijos who had been instrumental in negotiating the 1977 treaty with the US to handover the Panama Canal) defeated ex-President Guillermo Endara in the Presidential elections. Torrijos took office in September that year and pledged to pursue a free trade agreement with the US.
Government Both the unicameral 71-member legislature (Asamblea Legislativa) and the executive president are elected for five years. The President appoints a Cabinet of Ministers.
Economy Panama has a relatively prosperous economy based on agriculture, light industry, revenues from the Panama Canal and the service sector. Over half the land area is given over to agriculture. The country has significant reserves of timber, particularly mahogany, and good fishing stocks. Further revenue is obtained from tolls levied on ships passing through the Panama Canal and a plethora of ‘offshore’ companies.
Other important sources of revenue include the Colón Free Trade Zone established near the Canal, an ‘open’ shipping registry and a rapidly growing tourist industry. Reforms during the 1990s saw the privatization of many state enterprises, overhaul of tax and social security systems, and the removal of price controls and import tariffs. Annual growth in 2006 was 8.1%, while inflation was 1.1%. Unemployment was 8.8% in 2006.
Panama is a member of the Inter-American Development Bank. A free trade agreement with the USA was agreed in 2006.
