Geography
Area: 78,200 sq. km. (30,193 sq. mi.); slightly smaller than South Carolina. Panama occupies the southeastern end of the isthmus forming the land bridge between North and South America.
Cities: Capital--Panama City (1.1 million). Other cities--Colon (193,263), David (135,378).
Terrain: Mountainous (highest elevation Cerro Volcan, 3,475 m.--11,468 ft.); coastline 2,857 km. (1,786 mi.).
Climate: Tropical, with average daily rainfall 28 mm. (1 in.) in winter.

People
Nationality: Noun and adjective--Panamanian(s).
Population (2004 estimate): 3.2 million.
Annual growth rate: 1.7%.
Ethnic groups: Mestizo (mixed Amerindian and European ancestry) 70%, Amerindian and mixed (West Indian) 14%, Caucasian 10%, Amerindian 6%.
Religions: Roman Catholic 84%, Protestant 15%, other 1%.
Languages: Spanish (official); 14% speak English as their native tongue; various indigenous languages. Many Panamanians are bilingual.
Education: Years compulsory--6. Attendance--95% for primary school-age children, 60% for secondary. Literacy--92.6% overall: urban 94%, rural 62%.
Health: Infant mortality rate--15.2/1,000. Life expectancy--75.0 yrs.
Work force (1.4 million): Commerce (wholesale and retail)--19.1%; agriculture, cattle, hunting, silviculture--14%; industries (manufactures)--8.8%; construction--7.7%; transportation, storage, communications--7.2%; public and defense administration--6.9%; other community and social activities--5.8%; hotels and restaurants--3.7%; financial intermediation--2.6%.

Government
Type: Constitutional democracy.
Independence: November 3, 1903.
Constitution: October 11, 1972; amended 1983 and 1994 and reformed in 2004.
Branches: Executive--president (chief of state), two vice presidents. Legislative--National Assembly (unicameral, 78 members). Judicial--Supreme Court.
Subdivisions: Nine provinces and five (Indigenous) territories.
Political parties: Former President Mireya Moscoso belonged to the Arnulfista Party (PA) (now known as the Panamenista Party). The PA in coalition with smaller parties held a slim majority in the National Assembly. The Democratic Revolutionary Party (PRD) was the primary opposition. Represented by its presidential candidate, Martin Torrijos, the PRD on May 2, 2004 won the presidency and a legislative majority and took power on September 1, 2004.
Suffrage: Universal at 18.

Economy
GDP (2006, nominal): $15 billion.
Annual growth rate (2004): 7.6%; (2005) 6.9%; (first 9 months 2006) 8.3%.
Per capita GDP (2005): $4,513.
Natural resources: Timber, seafood, copper.
Services (80% of GDP): Finance, insurance, health and medical, transportation, telecommunications, the Canal and maritime services, tourism, Colon Free Zone, public administration, and general commerce.
Agriculture and fisheries: Products--bananas and other fruit, corn, sugar, rice, coffee, shrimp, timber, vegetables, livestock.
Industry/Manufacturing (14% of GDP): Types--food and drink processing, petroleum products, chemicals, paper and paper products, printing, mining, refined sugar, clothing, furniture, construction.
Trade: Exports--$884.4 million: bananas, petroleum products, shrimp, sugar, coffee, and clothing. Major markets--U.S. 50.4%. Imports--$3.52 billion: capital goods, crude oil, foodstuffs, chemicals, other consumer and intermediate goods. Major suppliers--U.S. 34.1%. 2005 U.S. goods exports to Panama: $2.2 billion. 2005 U.S. goods imports to Panama: $327 million.

PEOPLE
Panamanians' culture, customs, and language are predominantly Caribbean Spanish. The majority of the population is ethnically mestizo or mixed Spanish, Indigenous, Chinese, and West Indian. Spanish is the official and dominant language; English is a common second language spoken by the West Indians and by many businesspeople and professionals. More than half the population lives in the Panama City-Colon metropolitan corridor.

Panama is rich in folklore and popular traditions. Lively salsa--a mixture of Latin American popular music, rhythm and blues, jazz, and rock--is a Panamanian specialty, and Ruben Blades its best-known performer. Indigenous influences dominate handicrafts such as the famous Kuna textile molas. Artist Roberto Lewis' Presidential Palace murals and his restoration work and ceiling in the National Theater are well known and admired.

More than 65,000 Panamanian students attend the University of Panama, the Technological University, and the University of Santa Maria La Antigua, a private Catholic institution. Including smaller colleges, there are 14 institutions of higher education in Panama. The first six years of primary education are compulsory, and there are about 357,000 students currently enrolled in grades one through six. The total enrollment in the six secondary grades is about 207,000. More than 90% of Panamanians are literate.

HISTORY
Panama's history has been shaped by the evolution of the world economy and the ambitions of great powers. Rodrigo de Bastidas, sailing westward from Venezuela in 1501 in search of gold, was the first European to explore the Isthmus of Panama. A year later, Christopher Columbus visited the Isthmus and established a short-lived settlement in the Darien. Vasco Nunez de Balboa's tortuous trek from the Atlantic to the Pacific in 1513 demonstrated that the Isthmus was, indeed, the path between the seas, and Panama quickly became the crossroads and marketplace of Spain's empire in the New World. Gold and silver were brought by ship from South America, hauled across the Isthmus, and loaded aboard ships for Spain. The route became known as the Camino Real, or Royal Road, although it was more commonly known as Camino de Cruces (Road of the Crosses) because of the abundance of gravesites along the way.

Panama was part of the Spanish empire for 300 years (1538-1821). From the outset, Panamanian identity was based on a sense of "geographic destiny," and Panamanian fortunes fluctuated with the geopolitical importance of the Isthmus. The colonial experience also spawned Panamanian nationalism as well as a racially complex and highly stratified society, the source of internal conflicts that ran counter to the unifying force of nationalism.

Building the Canal
Modern Panamanian history has been shaped by its transisthmian canal, which had been a dream since the beginning of Spanish colonization. From 1880 to 1890, a French company under Ferdinand de Lesseps attempted unsuccessfully to construct a sea-level canal on the site of the present Panama Canal. In November 1903, with U.S. encouragement, Panama proclaimed its independence and concluded the Hay/Bunau-Varilla Treaty with the United States.

The treaty granted rights to the United States "as if it were sovereign" in a zone roughly 10 miles wide and 50 miles long. In that zone, the U.S. would build a canal, then administer, fortify, and defend it "in perpetuity." In 1914, the United States completed the existing 83-kilometer (52 mile) canal, which is one of the world's greatest feats of engineering. The early 1960s saw the beginning of sustained pressure in Panama for the renegotiation of this treaty.

Military Coups and Coalitions
From 1903 until 1968, Panama was a constitutional democracy dominated by a commercially oriented oligarchy. During the 1950s, the Panamanian military began to challenge the oligarchy's political hegemony. In October 1968, Dr. Arnulfo Arias Madrid, twice elected president and twice ousted by the Panamanian military, was ousted for a third time as president by the National Guard after only 10 days in office. A military government was established, and the commander of the National Guard, Brigadier General Omar Torrijos, soon emerged as the principal power in Panamanian political life. Torrijos' regime was harsh and corrupt, but his charisma, populist domestic programs, and nationalist (anti-U.S.) foreign policy appealed to the rural and urban constituencies largely ignored by the oligarchy.

Torrijos' death in 1981 altered the tone but not the direction of Panama's political evolution. Despite the 1983 constitutional amendments, which appeared to proscribe a political role for the military, the Panama Defense Forces (PDF), as they were then known, continued to dominate Panamanian political life behind a facade of civilian government. By this time, General Manuel Noriega was firmly in control of both the PDF and the civilian government.

The United States froze economic and military assistance to Panama in the summer of 1987 in response to the domestic political crisis in Panama and an attack on the U.S. Embassy. General Noriega's February 1988 indictment in U.S. courts on drug trafficking charges sharpened tensions. In April 1988, President Reagan invoked the International Emergency Economic Powers Act, freezing Panamanian Government assets in U.S. banks and prohibiting payments by American agencies, firms, and individuals to the Noriega regime. When national elections were held in May 1989, Panamanians voted for the anti-Noriega candidates by a margin of over three-to-one. The Noriega regime promptly annulled the election and embarked on a new round of repression. By the fall of 1989 the regime was barely clinging to power, and the regime's paranoia made daily existence unsafe for American citizens.

On December 20, 1989, President George H.W. Bush ordered the U.S. military into Panama to protect U.S. lives and property, to fulfill U.S. treaty responsibilities to operate and defend the Canal, to assist the Panamanian people in restoring democracy, and to bring Noriega to justice. The U.S. troops involved in Operation Just Cause achieved their primary objectives quickly, and troop withdrawal began on December 27, 1989. Noriega eventually surrendered voluntarily to U.S. authorities. He is now serving a 40-year sentence for drug trafficking in Miami.

Rebuilding Democracy
Panamanians moved quickly to rebuild their civilian constitutional government. On December 27, 1989, Panama's Electoral Tribunal reinstated the results of the May 1989 election and confirmed the victory of opposition candidates under the leadership of President Guillermo Endara and Vice Presidents Guillermo Ford and Ricardo Arias Calderon.

During its 5-year term, the often-fractious Endara government struggled to meet the public's high expectations. Its new police force proved to be a major improvement in outlook and behavior over its predecessor but was not fully able to deter crime. Ernesto Perez Balladares was sworn in as President on September 1, 1994, after an internationally monitored election campaign.

Perez Balladares ran as the candidate for a three-party coalition dominated by the Democratic Revolutionary Party (PRD), the erstwhile political arm of the military dictatorship during the Torrijos and Noriega years. A long-time member of the PRD, Perez Balladares worked skillfully during the campaign to rehabilitate the PRD's image, emphasizing the party's populist Torrijos roots rather than its association with Noriega. He won the election with only 33% of the vote when the major non-PRD forces, unable to agree on a joint candidate, splintered into competing factions. His administration carried out economic reforms and often worked closely with the U.S. on implementation of the Canal treaties.

On May 2, 1999, Mireya Moscoso, the widow of former President Arnulfo Arias Madrid, defeated PRD candidate Martin Torrijos, son of the late dictator. The elections were considered free and fair. Moscoso took office on September 1, 1999. During her administration, Moscoso attempted to strengthen social programs, especially for child and youth development, protection, and general welfare. Education programs also were highlighted. Moscoso's administration successfully handled the Panama Canal transfer and was effective in the administration of the Canal.

The PRD's Martin Torrijos won the presidency and a PRD legislative majority in the National Assembly in 2004. Torrijos ran his campaign on a platform of "zero tolerance" for corruption, a problem endemic to the Moscoso and Perez Balladares administrations. Since taking office, Martin Torrijos has passed a number of laws making the government more transparent. He formed a National Anti-Corruption Council whose members represent the highest levels of government, as well as civil society, labor organizations, and religious leadership. In addition, many of his closest Cabinet ministers are non-political technocrats known for their support for the Torrijos government's anti-corruption aims. Despite the Torrijos administration's public stance on corruption, few high-profile cases, particularly involving political or business elites, have been acted upon.

GOVERNMENT AND POLITICAL CONDITIONS
Panama is a representative democracy with three branches of government: executive and legislative branches elected by direct vote for 5-year terms, and an independently appointed judiciary. The executive branch includes a president and two vice presidents. The legislative branch consists of a 78-member unicameral National Assembly. The Constitution was changed in 2004, however, and beginning with national elections in 2009, the executive branch will have only one vice president, and the membership of the National Assembly will be capped at 71. The judicial branch is organized under a nine-member Supreme Court and includes all tribunals and municipal courts. An autonomous Electoral Tribunal supervises voter registration, the election process, and the activities of political parties. Anyone over the age of 18 may vote.

NATIONAL SECURITY
The Government has converted the former PDF into the Panamanian Public Force (PPF), a "law enforcement focused" force that is subordinate to civilian authority, composed of four independent organizations: the Panamanian National Police (Policia Nacional de Panamá or PNP), National Maritime Service (Servicio Maritimo Nacional or SMN), the National Air Service (Servicio Aéreo Nacional or SAN), and the Institutional Protectional Service (Servicio de Protección Institucional or SPI). A constitutional amendment passed in 1994 permanently abolished the military.

Law enforcement units that are separated from the PPF, such as the Technical Judicial Police (PTJ), also are directly subordinate to civilian authorities. The PPF budget, in contrast to the former PDF, is on public record and under the control of the executive. The lead criminal investigative entity is the PTJ. It is nominally under the direction of the autonomous Attorney General. Reforms are pending to re-organize and re-direct the PTJ.

Principal Government Officials
President--Martin TORRIJOS
First Vice President--Samuel LEWIS Navarro
Second Vice President--Rubén AROSEMENA
Ministry of Foreign Affairs--Samuel LEWIS Navarro
Ambassador to the United States--Federico António HUMBERT Arias
Ambassador to the United Nations--Ricardo Alberto ARIAS
Ambassador to the Organization of American States--Aristides ROYO

Panama maintains an embassy in the United States at 2862 McGill Terrace, NW, Washington, DC 20008 (tel: 202-483-1407).

ECONOMY
Panama's economy is based primarily on a well-developed services sector that accounts for nearly 80% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, and medical and health.

A major challenge facing the government under former President Mireya Moscoso was turning to productive use the 70,000 acres of former U.S. military land and the more than 5,000 buildings that reverted to Panama at the end of 1999. In October 2006, Panamanians voted in favor of a $5.25 billion Canal expansion project to construct a third set of locks, which is expected to take eight to ten years to complete. The Government of Panama expects the project to be a transforming event for Panama that will provide 7,000-9,000 direct new jobs during the peak construction period of 2009-2011 and set the tone economically for years to come. The expansion is expected to be financed through a combination of increased tolls and debt.

GDP growth in the first three quarters of 2006 topped 8%, surpassing the robust growth seen in 2005, which was 6.9%, and 7.6% in 2004. Though Panama has the highest GDP per capita in Central America, about 40% of its population remains mired in poverty.

Panama has bilateral free trade agreements with El Salvador, Taiwan, and Singapore. Panama is exploring free trade negotiations with Mexico and other Latin American countries. In December 2006 the U.S. and Panama concluded negotiations of a Trade Promotion Agreement with the understanding that it is subject to further discussions regarding labor. This agreement will promote economic opportunity by eliminating tariffs and other barriers to trade of goods and services. To enter into force, the agreement needs to be approved by both nations' congresses. As President Bush's Trade Promotion Authority ("fast track") is due to expire June 30, 2007, the agreement would need to be submitted to the U.S. Congress by then to be eligible for congressional consideration under the "fast track" provisions. Also in December 2006 the Panamanian National Assembly ratified unanimously the Panama-Chile Free Trade Agreement.

FOREIGN RELATIONS
Panama is a member of the UN General Assembly and most major UN agencies and started its fourth term as a member of the UN Security Council in January 2007. It maintains membership in several international financial institutions, including the World Bank, the Inter-American Development Bank, and the International Monetary Fund.

Panama is a member of the Organization of American States and was a founding member of the Rio Group. Although it was suspended from the Latin American Economic System--known informally both as the Group of Eight and the Rio Group--in 1988 due to its internal political system under Noriega, Panama was readmitted in September 1994 as an acknowledgment of its democratic credentials.

Panama also is one of the founding members of the Union of Banana Exporting Countries and belongs to the Inter-American Tropical Tuna Commission. Panama is a member of the Central American Parliament as well as the Central American Integration System. Panama joined its six Central American neighbors at the 1994 Summit of the Americas in signing the Alliance for Sustainable Development, known as the Conjunta Centroamerica-USA or CONCAUSA, to promote sustainable economic development in the region.

U.S.-PANAMANIAN RELATIONS
The United States cooperates with the Panamanian Government in promoting economic, political, security, and social development through U.S. and international agencies. Cultural ties between the two countries are strong, and many Panamanians come to the United States for higher education and advanced training. About 25,000 American citizens reside in Panama, many retirees from the Panama Canal Commission and individuals who hold dual nationality. There is also a rapidly growing enclave of American retirees in the Chiriqui Province in western Panama.

Panama continues to fight against the illegal narcotics and arms trade. The country's proximity to major cocaine-producing nations and its role as a commercial and financial crossroads make it a country of special importance in this regard. The Panamanian Government has concluded agreements with the U.S. on maritime law enforcement, counter-terrorism, counter-narcotics, and stolen vehicles. A three-year investigation by the Drug Prosecutors Office (DPO), the PTJ, and several other law enforcement agencies in the region culminated in the May 2006 arrest in Brazil of Pablo Rayo Montano, a Colombian-born drug kingpin. Assets located in Panama belonging to his criminal cartel were among those seized by the Government of Panama following his indictment by a U.S. federal court in Miami.

In the economic investment arena, the Panamanian Government has been successful in the enforcement of intellectual property rights and has concluded a Bilateral Investment Treaty Amendment with the United States and an agreement with the Overseas Private Investment Corporation. Although money laundering remains a problem, Panama passed significant reforms in 2000 intended to strengthen its cooperation against international financial crimes.

In January 2005, Panama sent election supervisors to Iraq as part of the International Mission for Iraqi Elections to monitor the national elections.

The Panama Canal Treaties
The 1977 Panama Canal Treaties entered into force on October 1, 1979. They replaced the 1903 Hay/Bunau-Varilla Treaty between the United States and Panama (modified in 1936 and 1955), and all other U.S.-Panama agreements concerning the Panama Canal, which were in force on that date. The treaties comprise a basic treaty governing the operation and defense of the Canal from October 1, 1979 to December 31, 1999 (Panama Canal Treaty) and a treaty guaranteeing the permanent neutrality of the Canal (Neutrality Treaty).

The details of the arrangements for U.S. operation and defense of the Canal under the Panama Canal Treaty are spelled out in separate implementing agreements. The Canal Zone and its government ceased to exist when the treaties entered into force and Panama assumed jurisdiction over Canal Zone territories and functions, a process which was finalized on December 31, 1999.