Centre stage: Two decades of peaceful democratic transfers of power have allowed for further economic development

For millions of years the Isthmus of Panama has been the bridge adjoining the Americas, shaping the development of life on the continent. Its importance has been magnified in recent centuries, as it is also the shortest land route for maritime goods crossing from the Atlantic to the Pacific and vice-versa. As a result, the isthmus has played a vital role in dispersing native cultures and tribes in early history, aiding the flow of natural resources in colonial times and drastically altering global trade routes thanks to the existence of the country’s famed canal in modern times. Indeed, the Republic of Panama remains a natural point of transit – be it money through its international financial centre, goods through its canal or people through its expanding airport. Comparisons with Singapore’s ability to maximise the benefits of its role in facilitating the movement of goods, finances and people throughout Asia are not wide of the mark, even if Panama still has a long way to go before attaining such status. With the government spending on a multitude of infrastructure-related projects of all sizes – most notably the expansion of its canal – driving the nation’s pace-setting economic expansion, it certainly appears to be a historic period for the country. Yet appearances can be deceiving. Several obstacles hamper Panama’s seemingly clear path to development, including a struggling education system, the existence of stark inequalities in various rural areas of the country and a political system that belies its economic prowess.


As a historical point of transit and trade, the population of 3.8m as of 2012 features diverse ethnicities, having seen migrations of Asians, Africans and Europeans at various points throughout its history mix with indigenous Amerindian inhabitants. As a result the mestizo, or mixed, population represents 68% of the country, with descendants of white Europeans accounting for 15%, Afro-Panamanians 10%, Amerindians 6% and Asians 1%. The influence of centuries of colonial rule after the arrival of the Spanish has left an indelible mark, as Spanish remains the official language and Catholicism the dominant religion.

Geography & Climate 

For such a small country – roughly the size of the Czech Republic – Panama boasts a surprisingly diverse topography and biodiversity. It is strategically located at the southernmost point of Central America and bordered by Costa Rica to the west, Colombia to the east, the Pacific Ocean to the south and the Caribbean Sea to the north. The Cordillera de Talamanca, Serranía de Tabasurá and Sierra de Veraguas make up the central mountainous spine of the country often referred to simply as the Cordillera Central.

Most of the country’s near 500 rivers and streams flow from the central mountains (some of which are harnessed for electric power) while others make their way south to where a dense jungle known as the Darién Gap separates Panama from Colombia. The rainforest is the only break in the Pan-American Highway, which would otherwise run from Alaska to Patagonia. The varied landscapes of the country, ranging from jungles and mountains to beaches, combined with its location as a crossroads between the Americas, provide an enviable biodiversity with plants and animals from North, Central and South America. There is little variation in its tropical climate, which features a rainy season that lasts from May to December. Temperatures are on average higher, ranging between 24°C and 29°C, and seldom exceed 32°C. Generally, rainfall is heavier on the eastern Caribbean coast, though the country is located just outside the Caribbean Sea’s violent hurricane belt.


Since the formation of the isthmus over 3m years ago plants, animals and people have been able to freely flow back and forth between North and South America. The Monagrillo archaeological site dates back to 2500-1700 BC and contains some of the earliest evidence of human settlement such as a distinct style of pottery, maize cultivation and large funerary sites. Barriles, another historical site, is believed to have been occupied mostly from 300 to 900 AD. Before the arrival of Spanish colonists in the 16th century, Panama was settled by numerous Amerindian tribes such as the Cueva, Chibchan and Chocoan, many of whom were massacred or died due to diseases brought by the Spanish.

The era of Spanish colonisation officially began in 1538 when the construction of the Audencia Real de Panama was completed, cementing Spanish authority over the region, though throughout much of the colonial period Panama remained under the control of indigenous peoples resistant to colonial rule. Spanish presence on the isthmus served primarily as a means of transporting gold and silver from colonies in modern Peru and Colombia with the route over the isthmus dubbed El Camino Real (Royal Road) due to the vast wealth transported over it.

Independence & Military Rule

Spanish rule in Panama, which was concentrated in Azuero and Panama City, was initially a seat of power for all Spanish colonies in the area. However, following the burning of Panama City by the English in 1671, Panama was placed under the control of the Viceroyalty of New Granada and its capital Santa Fé de Bogotá in present-day Colombia. The movement for self-rule began in Azuero with a declaration of independence issued in the form of El Grito de la Villa de Los Santos (The Cry of the La Villa de Los Santos) on November 10, 1821. Independence movements in Veraguas and Panama City were entirely isolated from that of Azuero. However, the cry for independence would spark the relatively bloodless overthrow of Spanish colonial rule.

Despite vast differences among its peoples, Panama became part of Gran Colombia following its independence from Spain. After several failed attempts at secession, Panama finally separated from Colombia in November 1903, in no small part due to support from the US government. In return Panama agreed to the Hay–Bunau-Varilla Treaty, which established the 16-km-wide and 80-km-long area that later became the Panama Canal Zone in 1914 and gave the US sovereignty over the area.

During the first half of the 20th century the country’s constitutional democracy was marked by the dominant rule of the oligarchy. However, by the 1950s Panama’s increasingly powerful military would begin to challenge the political elite. Less than two weeks after the inauguration of Arnulfo Arias Madrid as president in 1968, the National Guard staged a military coup led by Lieutenant Colonel Omar Torrijos Herrera and Major Boris Martínez on October 11, establishing in its place a military junta.

Torrijos converted Panama into a military dictatorship after transforming the constitution in 1972 – in the process eliminating political parties and establishing a 505-member legislation appointed by the military. Following the death of Torrijos in 1981, General Manuel Noriega swiftly filled his shoes and later amended the constitution once again to legally give the newly branded Panamanian Defence Forces a more overtly political role in governance.

Despite the existence of presidential elections Noriega remained firmly in control of both the military and civilian government, while the country became known as a centre for money laundering and drug smuggling. However, Noriega’s authoritarian style of leadership would lead to increased domestic and international opposition that eventually led to national civil disobedience in 1986, which would later prompt the US government to freeze economic and military aid and impose economic sanctions the following year. By 1989 the US government decided to use military force, launching Operation Just Cause to secure the Panama Canal Zone and reestablish democracy in the country. Noriega was ousted and tried in the US on charges stemming from his time in power.

Modern Politics

Even though some Panamanians supported the invasion, the subsequent behaviour of the US military during the operation and the damage caused has been condemned both domestically and internationally. Domestically, some fault the US for preventing the Panamanian people from ousting Noriega themselves and in the process inhibiting a smoother transition towards civilian rule.

President Guillermo Endara was the first leader to take office under the restored civilian government in 1989, beginning the first of a string of single-term presidents – Panama’s constitution does not allow for presidents to run for consecutive terms. Endara would serve a five-year term ending in 1994, at which point Ernesto Pérez Balladares assumed office under the restructured Democratic Revolutionary Party (Partido Revolucionario Democrático, PRD).

The PRD and Martín Torrijos, son of former military ruler Omar Torrijos, would go on to lose the 1999 election cycle to Mireya Moscoso, the widow of former President Arias Madrid and leader of the country’s oldest political party, the Panameñista Party (Partido Panameñista, PP). Moscoso’s administration oversaw the nationalisation and transfer of the Panama Canal, as well as the implementation of numerous social programmes, before passing the baton to Torrijos and the PRD in 2004. The Torrijos administration was arguably the first to acutely feel the full economic benefits of the Panama Canal, with economic growth beginning to gather momentum under his administration, and his government simultaneously began addressing the endemic problems of political corruption and transparency.

Administrative Policy 

In 2009 self-made business tycoon Ricardo Martinelli claimed victory in his second presidential campaign with his party Democratic Change (Cambio Democrático, CD) in a landslide victory. Martinelli has overseen the greatest period of economic expansion in the country’s history, instituted social programmes for the poor and begun a slew of major infrastructure projects, though not without some criticism, most notably led by his own vice-president, Juan Carlos Varela of the PP, with whom Martinelli allied in the 2009 elections. Their highly publicised spats over unproven charges and counter-charges have continued and could play a role in the outcome of upcoming elections in May 2014. The main contenders for the 2014 election include the incumbent vice-president, Varela of the PP; former mayor of Panama City and leader of the PRD, Juan Carlos Navarro; and Jose Domingo Arias representing the CD, running with Martinelli’s wife, Marta Linares, as his vice-presidential candidate.

Checks & Balances 

Panama is a constitutional democracy in which the president, who is designated both head of state and government, is elected to a five-year term. The unicameral legislature, dubbed the Asamblea Nacional, or National Assembly, is a 71-member legislature that is also elected to five-year terms. The current National Assembly consists of 26 members from the PRD, 22 from the PP, 14 from the CD and the remaining nine seats split among various smaller parties and independent candidates. Though all citizens are legally required to vote, in practice there are no penalties for not doing so. The 2009 elections saw a turnout of around 70%.

The judicial system consists of a Supreme Court, as well as 14 superior tribunal courts and a network of circuit and municipal courts beneath them. Supreme Court justices are appointed to 10-year terms by the Council of Ministers and are subject to approval by the National Assembly.

Judicial independence in Panama is low by international standards, as evidenced by its rank of 118th out of 148 in the World Economic Forum’s “2013-14 Global Competitiveness Index”. The country also scored low in other barometers of its political system, including favouritism in government officials’ decisions (88th) and public trust in politicians (94th). Meanwhile, businesses have cited corruption and an inefficient government bureaucracy as the two most problematic factors for investment in Panama.

Foreign Policy

As could be expected in a country featuring such an internationally important trade route, foreign relations have been significant aspects of successive administrations. With the country looking to boost competitiveness by creating logistic and manufacturing centres capable of adding value to goods moving through the canal before they reach their final destination, a great deal of focus has been placed on expanding free trade agreements with key international markets.

With little more than two decades of consecutive civilian rule and coming up on 15 years of control over one of the most vital waterways in the world, Panamanians are still working towards full realisation of the country’s potential. The country does not particularly fit the mould of either its neighbours in South or Central America. While macro economic progress is assured in the short to medium term, it may be threatened in the long term if overall governance is not improved, despite the business-friendly regulatory framework currently in place.

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