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 all of whom regularly plundered ships carrying treasures.
Throughout the colonial period Panama belonged to the Vice-Royalty of New Granada. The region achieved independence in 1821 as a part 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 its lack of status the Panamanians found an ally in the United States of America who had strategic interests in the region – specifically, the construction of an Atlantic-Pacific link. A deal was signed with the USA in 1846 allowing the construction of a railway. It was not until 1903 and the achievement of full independence that the USA embarked on the construction of the Panama Canal following a failed attempt by the French to complete this huge engineering project. Colombia withheld recognition of the new state of Panama until 1921 when the USA eventually agreed to pay compensation.
The Panama Canal Zone became an American Protectorate. The canal was completed on 15 August 1914, although Panama remained effectively under 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 power despite surrendering the presidency during later years until his death in a plane crash in 1981. In 1977 Panama negotiated the beginning of the handover of the Canal Zone to them from the USA. Canal Photos courtesy of www.panama-guide.com
During most of the 1980s, the country was run by Torrijos’ former intelligence chief, now the Head of the Armed Forces, Manuel Noriega. Although installed in office largely because of his support from the USA, the General’s policies and his personal activities - including alleged involvement in drug trafficking - produced very strained relations with the USA. Development aid and military assistance were cut but this had little effect in curtailling his activities.
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 by a coup in October 1989 and Endara was quickly crushed by Noriega’s forces. At this point the USA decided the only means of getting rid of their previously backed but now troublesome dictator was through military intervention. So in December 1989 the US President George Bush authorised an invasion of Panama.
After a few days of fierce fighting with large numbers of Panamanian citzens killed, injured and made homeless, the US forces secured control of the country. Noriega was flown to the USA – where in April 1992 he was tried, convicted and sentenced to 40 years imprisonment. Guillermo Endara was sworn in as head of the new administration at the US Military Base in the Canal Military Zone. He was part of the coalition which had won the May 1989 election. After a slow start caused by a chronic lack of finance the Endara Government gradually started to put the country back on its feet but still had to resist a number of coup attempts during 1991 and 1992.
Endara’s term ended in 1994. At the Presidential election held that May, the victor was Ernesto Perez Balladares, who became the countries first non-violent openly elected leader in recent history. Terms for handing over the canal were finalised during these years and large efforts were made to end government corruption. In 1999 Mireya Elisa Moscoso Rodriguez, won the Presidential race and became Panama’s first female President. She presided over the defining event in recent Panamanian history – the return of the Panama Canal Zone to Panama. The prospect of Noriega enjoying unrestricted control of the canal had been an important reason behind the US invasion and despite US irritation at having to give up territory to a foreign Government the Americans pulled out on schedule in a low-key ceremony in December 1999.
Moscoso’s government was subjected to a string of street protests against Government corruption and mismanagement of the country’s social security fund. 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 USA.
Economy
Panama has a relatively prosperous economy based on agriculture, light industry, revenues from the Panama Canal and the service sector. There is also increasingly a market for Eco-Tourism with large unspoilt tracts tracts of land on both the Caribbean and Pacific coasts and the interior. About half the land area is given over to non intensive agriculture. The main cash crops are sugar cane, coffee and bananas, while the main food crops are rice, maize and beans. Commercial cattle farming is also prominent. The country has significant reserves of timber, particularly mahogany, and good fish stocks, shrimp being a major and valuable export earner. Local industries include food processing, clothing, paper and building materials.
Panama also exports petroleum refined from imported crude oil. Further revenue is obtained from tolls levied on ships passing through the Panama Canal (which came under full Panamanian control in 2000) and from registration fees for a plethora of ‘offshore’ companies exploiting Panama’s strict banking and commercial secrecy laws (although the Government has recently instituted measures to permit disclosure in suspected cases of money-laundering).
Other important sources of revenue include the Colón Free Trade Zone established near the Canal through which 30 per cent of all Panamanian trade passes, an ‘open’ shipping registry, and a rapidly growing tourist industry now worth more than US$500 million annually. A major reform programme undertaken during the 1990s saw the privatisation of many state enterprises, reform of the tax and social security systems, and the removal of price controls and import tariffs. Current annual GDP growth is 6 per cent and inflation is around 2 per cent; the official unemployment rate is 12.6 per cent and probably in reality much lower. Panama is a member of the Inter-American Development Bank. About 50 per cent of two-way trade is with the USA and Japan with Europe and other Latin American countries taking up most of the rest.