Panama

Panama, located at the narrow isthmus linking North and South America, is one of the world’s most strategically significant nations due to the Panama Canal, which connects the Atlantic (Caribbean Sea) and Pacific Oceans. Despite its small size, Panama wields global influence in maritime trade and logistics. The country’s service-based economy, cosmopolitan population, and dynamic financial system make it a leading economic hub of Central America. Since gaining independence from Colombia in 1903, Panama has evolved from a canal-dependent state to a modern, dollarised economy integrating regional and international markets.

Historical Background and Political Evolution

Panama’s colonial history began in the early 16th century when Spanish explorers established settlements that became vital to the transatlantic trade routes linking Spain and its American colonies. After declaring independence from Spain in 1821, Panama joined the Republic of Gran Colombia, a federation that also included Colombia, Venezuela, and Ecuador. When Gran Colombia dissolved in 1830, Panama remained under Colombian administration until its U.S.-backed secession in 1903.
That same year, the Hay–Bunau-Varilla Treaty granted the United States control over the Panama Canal Zone and the right to build and administer the Panama Canal, completed in 1914 by the U.S. Army Corps of Engineers. The canal revolutionised global maritime trade, providing a direct route between the world’s two largest oceans.
The Torrijos–Carter Treaties of 1977 marked a turning point, outlining the gradual transfer of canal sovereignty to Panama, completed on 31 December 1999. The 1980s brought political turmoil under General Manuel Noriega, whose authoritarian rule and involvement in drug trafficking led to the U.S. invasion of 1989 (Operation Just Cause). His removal restored civilian governance and prompted democratic consolidation.
In 1994, Panama abolished its standing military through constitutional reform, establishing the Public Forces for national security. Between 2007 and 2016, the nation executed an ambitious canal expansion project, doubling its transit capacity and enabling the passage of New Panamax ships.
Today, Panama operates under a stable democratic framework, balancing its historic ties with the United States and growing engagement with Asia, particularly China.

Physical Geography and Environment

• Area: 75,420 sq km
• Borders: Costa Rica (348 km) west, Colombia (339 km) east
• Coastline: 2,490 km
• Highest point: Volcán Barú (3,475 m)
• Climate: Tropical maritime; high humidity with a rainy season from May to January
• Geographic features: Central mountain ranges, extensive river systems, and coastal lowlands

Panama’s central and western regions are densely populated, especially near Panama City and the Canal Zone, while the Darien Gap in the east remains sparsely inhabited and ecologically rich.
Land use (2022):

• Forest: 56.5%
• Agricultural land: 29.4%

Natural resources: Copper, mahogany, shrimp, hydropower potential.Environmental challenges: Deforestation, soil erosion, air pollution, and water contamination from mining and agriculture.
The country emits 23.46 million tonnes of CO₂ annually (2023 est.), primarily from petroleum use. Efforts to mitigate climate change include forest conservation and renewable energy projects.

Demography and Society

• Population (2024): 4.47 million
• Growth rate: 1.48%
• Median age: 31.5 years
• Urban population: 69.5%
• Life expectancy: 79.2 years
• Fertility rate: 2.35 children per woman

Ethnic composition: Mestizo 65%, Indigenous 12.3%, Black 9.2%, Mulatto 6.8%, White 6.7%.
Panama’s Indigenous peoples—Ngäbe, Kuna, Embera, Buglé, Wounaan, Naso, and Bri Bri—preserve distinctive cultural traditions and languages within autonomous comarcas (regions).
Languages: Spanish (official); English, Indigenous languages, and Panamanian English Creole (Guari Guari) are widely spoken.
Religion:

• Evangelical Christian 55%
• Roman Catholic 33.4%
• No religion 10%

Education and health:

• Literacy: 96%
• School life expectancy: 13 years
• Education expenditure: 3.9% of GDP
• Health expenditure: 9.7% of GDP
• Access to safe drinking water: 94.7%

Panama’s human development indicators are among the highest in Central America, though income inequality and rural poverty persist.

Government and Political Institutions

• Official name: República de Panamá
• System: Presidential republic
• Constitution: 1972 (amended multiple times)
• Capital: Panama City
• Administrative divisions: 10 provinces and 4 Indigenous regions — Guna Yala, Ngäbe-Buglé, Naso Tjer Di, and Emberá-Wounaan

Executive:

• President: José Raúl Mulino Quintero (since 1 July 2024)
• Term: 5 years, non-consecutive
• Vice President: José Gabriel Carrizo

Legislature: Unicameral National Assembly (71 seats), elected through a mixed proportional system. Women hold 21.7% of seats.
Judiciary: Supreme Court of Justice — nine magistrates appointed for 10-year terms.
Major political parties: Democratic Revolutionary Party (PRD), Panameñista Party, Democratic Change (CD), Realizing Goals (RM), and several smaller movements.
Panama’s governance system features stable institutions and regular elections, though political patronage and corruption remain recurring concerns.

Economy and Finance

Panama hosts one of Latin America’s most dynamic economies, classified as upper middle-income. The nation’s service sector, particularly banking, shipping, and logistics, accounts for nearly 70% of GDP.

• GDP (2024): $86.26 billion
• Growth rate: 2.9%
• Inflation: 0.7%
• GDP per capita (PPP): $36,400
• Currency: Balboa (PAB, at par with USD); U.S. dollar widely used

Economic structure (2024):

• Services: 68.8%
• Industry: 26.3%
• Agriculture: 2.6%

Trade (2024):

• Exports: Copper ore, ships, refined petroleum, bananas, fish
• Imports: Petroleum, vehicles, ships, industrial chemicals
• Main partners: China, Japan, United States, Colombia, Ecuador

Merchant fleet: Over 8,100 vessels (2023), the world’s third largest under the “flag of convenience” system.
Social indicators:

• Gini coefficient: 48.9
• Poverty rate: 22%
• Current account balance: +$1.67 billion (2024)

While Panama’s economy thrives on logistics and finance, income inequality and limited rural development remain key obstacles to inclusive growth.

Infrastructure, Energy, and Communications

• Electricity coverage: 95% (urban 100%)
• Installed capacity: 4.48 GW
• Energy mix:
  • Hydropower – 47.8%
  • Fossil fuels – 38.2%
  • Wind – 6.9%
  • Solar – 6.8%

Transport:

• 77 airports, 12 major ports, 77 km of railways (linking Atlantic and Pacific coasts)
• Balboa, Cristóbal, Colón, and Bahía de las Minas serve as international maritime hubs
• Panama Metro (since 2014) — Central America’s first urban rapid transit system

Communications:

• Mobile penetration: >150%
• Internet usage: 78%
• Fixed broadband subscriptions: 809,000 (2023)

Panama’s digital infrastructure and logistics network are among the most advanced in the region, underpinning its role as a regional headquarters for multinational corporations.

Security and Law Enforcement

Panama abolished its military in 1994, relying on the Panamanian Public Forces for defence and law enforcement.
Components:

• National Police (PN)
• National Aeronaval Service (SENAN)
• National Border Service (SENAFRONT)

Total personnel: ~30,000Expenditure: 1.1% of GDP
SENAFRONT secures the Colombian border, combating narcotrafficking, illegal migration, and organised crime. Recent reports highlight the activities of the Tren de Aragua, a Venezuelan criminal group, in border regions.
The Panama Defense Force (PDF), formerly the country’s military, was disbanded after the 1989 invasion, marking a lasting shift toward civilian-controlled security.

Culture, Heritage, and Environment

Panama’s culture reflects a rich fusion of Indigenous, Spanish, and Afro-Caribbean influences. Its music, dance, and cuisine showcase this diversity, with tamborito and congo rhythms forming central cultural expressions.
National symbols:

• Flag: Red, white, and blue with stars symbolising peace and political balance
• Bird: Harpy eagle
• Anthem: Himno Istmeño (1925)

UNESCO World Heritage Sites:

• Panamá Viejo and its Historic District
• Coiba National Park
• Darién National Park
• Caribbean Fortifications (Portobelo and San Lorenzo)

Environmental policy prioritises biodiversity conservation, though pressures from urbanisation, mining, and canal shipping persist.

International Relations

Panama maintains an active foreign policy and a reputation as a neutral commercial hub. It belongs to the United Nations, Organization of American States (OAS), World Trade Organization (WTO), IMF, World Bank, and International Criminal Court (ICC). Regionally, it participates in SICA and CELAC.
The United States remains a principal partner, while growing ties with China and other Pacific economies reflect Panama’s diversification strategy. Diplomatic missions are based in Panama City and Washington, D.C., facilitating close bilateral cooperation in trade and security.