September 16, 2010

For the most current version of this Note, see Background Notes A-Z.

PROFILE

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 (1.7 million, metropolitan area). Other cities--Colon (204,000), David (179,674).
Terrain: Mountainous (highest elevation Cerro Volcan Baru, 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 (May 2010): 3,322,576.
Annual population growth rate: 1.503%.
Ethnic groups: Mestizo (mixed African, Amerindian, and European ancestry) 70%, Amerindian and mixed (West Indian) 14%, Caucasian 10%, Amerindian 6%. Origins--36.5% African, 37.6% indigenous, and 25.9% Caucasian.
Religions: Roman Catholic 84%, Protestant 15%, other 1%.
Languages: Spanish (official); 14% speak English as their native tongue; various indigenous languages. Many Panamanians have a working knowledge of English and many professional college-educated Panamanians in Panama City are bilingual.
Education: Years compulsory--primary grades 1-6, or through age 15. Attendance--95% for primary school-age children, 62.2% for secondary, 34.9% for tertiary. Literacy--92.6% overall; urban 94%; rural 62%.
Health: Infant mortality rate (2010)--11.97 deaths/1,000 live births. Life expectancy--77.61 yrs.
Work force: 1.392 million: Commerce (wholesale and retail)--17.9%; agriculture, cattle, hunting, silviculture--15%; construction--9.8%; industries (manufactures)--18%; transportation, storage, communications--6.9%; private home domestic services--5.8%; public and defense administration--5.6%; hotels and restaurants--5.4%; other community and social activities, teaching--4.9%; real estate activities, business, and rentals--4.8%; social and health services--3.5%; financial intermediation--2.0%.
Unemployment (2009): 7%.
Poverty rate (2006): 28.6%.

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), vice president. (A second vice presidential slot was abolished starting with the 2009 electoral cycle.) Legislative--National Assembly (unicameral; 71 members, reduced from 78 to 71 members for May 2009 elections). Judicial--Supreme Court.
Subdivisions: Nine provinces and five (indigenous) territories.
Political parties: Panamenista Party (formerly the Arnulfista Party (PA); Democratic Change (CD); National Liberal Republican Movement (MOLIRENA); Democratic Revolutionary Party (PRD); Patriotic Union (UP).
Suffrage: Universal at 18.

Economy
GDP (2008 est.): $25.04 billion.
Annual growth rate: 5.6% (2010 projected); 2.4% (2009); 11% (2008); 12% (2007).
Per capita GDP: $11,900 (2009 est., purchasing power parity); $10,900 (2007); $9,900 (2006).
Natural resources: Timber, copper, gold.
Services (67% of GDP): Finance, insurance, health and medical, transportation, telecommunications, Canal and maritime services, tourism, Colon Free Zone, public administration, and general commerce.
Agriculture (6.2% of GDP): Products--bananas, corn, sugarcane, rice, coffee, shrimp, timber, vegetables, livestock.
Industry/manufacturing (14.2% of GDP): construction, brewing, cement and other construction materials, sugar milling.
Trade (2009): Exports (goods)--$821 million in exports, with salmon/tuna as the largest dollar amount, followed by beef, watermelon, shrimp, and pineapples. Export partners (as a percentage of total export value in 2009)--U.S. 42%, China (P.R.C.) and Taiwan 5.3%, Costa Rica 7.3%, Sweden 5.4%, Netherlands 6.5%, Spain 6.2%. Imports (goods)--$7.8 billion was imported in 2009: petrol and fuel oils capture the largest percentage by weight (21%) and in dollar amount (8.5%). Capital goods, foodstuffs, chemicals, and consumer and intermediate goods are the remaining imports. Import partners (2009)--the top five countries include the U.S. 29%, Costa Rica 5.2%, Mexico 4.5%, China 4.2%, and Japan 3.6%. U.S. exports to Panama (2009)--$4.3 billion: primarily oil and capital- and technology-intensive manufactured goods. Panama exports to U.S. (2009)--$350 million: primarily seafood and repaired goods.
Foreign direct investment (2009): $1.8 billion.

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 widely admired.

As of 2009, more than 105,000 Panamanian students attended the University of Panama, the Technological University, the Autonomous University of Chiriqui (third-largest in the country), and the University of Santa Maria La Antigua, a private Catholic institution. Including smaller colleges, there are 88 institutions of higher education in Panama. The first 6 years of primary education are compulsory. As of 2007, there were there were about 445,000 students enrolled in grades one through six. The total enrollment in the six secondary grades for the same period was about 260,000. 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. The earliest known inhabitants of Panama were the Cuevas and the Coclé tribes, but they were decimated by disease and fighting when the Spanish arrived in the 1500s.

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 trans-isthmian 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. In April 1988, President Reagan invoked the International Emergency Economic Powers Act, freezing Panamanian Government assets in all U.S. organizations. In May 1989 Panamanians voted overwhelmingly for the anti-Noriega candidates. 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 Noriega eventually surrendered to U.S. authorities. He completed his sentence for drug trafficking charges in September 2007. In August 2007, a U.S. federal court in Miami found Noriega extraditable to France to serve a sentence imposed there after an in absentia conviction for money laundering. Noriega was extradited to France in 2010 after exhausting all his appeals in U.S. courts, and was sentenced to a 10-year prison term.

Rebuilding Democracy
Panama's Electoral Tribunal moved quickly to rebuild the civilian constitutional government, reinstated the results of the May 1989 election on December 27, 1989, and confirmed the victory 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 was a major improvement 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 military dictatorships. 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 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 September 1, 1999, Mireya Moscoso, the widow of former President Arnulfo Arias Madrid, took office after defeating PRD candidate Martin Torrijos, son of the late dictator, in a free and fair election. During her administration, Moscoso attempted to strengthen social programs, especially for child and youth development, protection, and general welfare. 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 legislative majority in the National Assembly in 2004. Under Torrijos, Panama continued strong economic growth and initiated the Panama Canal expansion project.

In May 2009, Panama held general elections and selected Ricardo Martinelli as president. President Martinelli assumed the presidency on July 1, 2009 and promised to promote free trade, establish a Panama City metro system, reform the health care system, and complete the expansion plan for the Panama Canal.

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 appointed judiciary. The judicial branch is organized under a nine-member Supreme Court (each judge is appointed for a 10-year term) 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.

Principal Government Officials
President--Ricardo MARTINELLI
Vice President and Minister of Foreign Affairs--Juan Carlos VARELA
Ambassador to the United States--Jaime E. ALEMAN
Ambassador to the Organization of American States--Guillermo COCHEZ

Panama maintains an embassy in the United States at 2862 McGill Terrace, NW, Washington, DC 20008 (tel: 202-483-1407), and consulates in Washington DC, Honolulu, Houston, Miami, New Orleans, New York, Philadelphia, San Juan, San Diego, and Tampa.

NATIONAL SECURITY
As of July 2010, the Panamanian Security Forces consisted of the Panamanian National Police (PNP), the National Frontier Service (Servicio Nacional de Fronteras or SENAFRONT), the National Aero-Naval Service (Servicio Nacional Aero-Naval or SENAN), and the Institutional Protection Service (SPI--a secret service equivalent). A constitutional amendment passed in 1994 permanently abolished the military.

The lead criminal investigative entity is the Judicial Investigative Directorate (DIJ). Previously under the nominal direction of the autonomous Attorney General and known as the Technical Judicial Police (PTJ), the DIJ is now part of the PNP though it maintains investigative links with the Attorney General's office.

ECONOMY
Panama's economy is based primarily on a well-developed services sector that accounts for nearly 70% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, tourism, and medical and healthcare.

In October 2006, Panamanians voted overwhelmingly in favor of a $5.25 billion Canal expansion project to construct a third set of locks, which is expected to be completed in 2014. 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 increase economic opportunities for years to come. The expansion is financed through a combination of loans from multilateral institutions and current revenues. In July 2009, the Panama Canal Authority (ACP) awarded the contract to build the locks to an international consortium led by Spain’s Sacyr Vallehermoso. The locks will be 60% wider and 40% longer than the existing locks so the Canal can handle all but eight of the world’s container vessels, along with supersize tankers and bulk carriers of ores and grains.

GDP growth in 2009 was 2.4%, reflecting a slowing of the robust growth of 11.0% seen in 2008. Although growth slowed in 2009, due to the global economic downturn, it has improved in 2010 and is still one of the most positive growth rates in the region. Growth has been fueled by the construction, transportation, maritime, and tourism sectors and Panama Canal-related activities. As a result of this growth, government deficit as a percentage of GDP dropped to 43% in 2009, and government-issued debt is classified as the lowest rung of investment grade. A recent United Nations report highlighted progress in poverty reduction from 2001 to 2007--overall poverty fell from 37% to 29%, and extreme poverty fell from 19% to 12%.

Panama has bilateral free trade agreements (FTAs) in force with Chile, El Salvador, Taiwan, Singapore, Guatemala, Honduras, Nicaragua, and Costa Rica. Panama signed an FTA with Canada in May 2010, but it has not yet entered into force. Panama is exploring free trade negotiations with Mexico, Colombia, the Mercosur countries, the Andean Community, the European Union, and CARICOM. The U.S. and Panama signed a Trade Promotion Agreement (TPA) in June 2007. The agreement was overwhelmingly approved in July 2007 by the Panamanian National Assembly, but has yet to be ratified by the United States Congress. Once implemented, the agreement will promote economic opportunity by eliminating tariffs and other barriers to trade of goods and services and will provide a framework for any trade disputes.

FOREIGN RELATIONS
Panama is a member of the UN General Assembly and most major UN agencies. 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 1994 as an acknowledgment of its democratic credentials.

Panama is a member of the Central American Integration System (SICA). It is in the process of withdrawing from the Central American Parliament (Parlacen). 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, democratic, 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. In 2007, the U.S. and Panama partnered to launch a regional health worker training center. The center provides training to community healthcare workers in Panama and throughout Central America. About 27,000 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.

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.

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 that was finalized on December 31, 1999.

Principal U.S. Embassy Officials
Ambassador--Phyllis M. Powers
Deputy Chief of Mission--David Gilmour
Counselor for Political Affairs--Debra Hevia
Counselor for Economic Affairs--Andrew Plowman
Counselor for Public Affairs--David Searby
Counselor for Management--JoAnn Scandola
Consul General--Mark Fry

The U.S. Embassy in Panama is located at Edificio 783, Avenida Demetrio Basilio Lakas, Clayton, Panama City (tel: 507-207-7000). Personal and official mail for the embassy and members of the mission may be sent to: U.S. Embassy Panama, Unit 9100, DPO AA 34002. E-mail: Panamaweb@state.gov. The Embassy’s information for travelers is available at http://panama.usembassy.gov/american_citizens_service_unit.html.

Other Contact Information
American Chamber of Commerce and Industry of Panama
Apartado 0843-00152
Panama, Republica de Panama
Tel: 507-301-3881
Fax: 507-301-3882
E-mail: amcham@panamcham.com

U.S. Department of State
Office of Central American Affairs
2201 C St. NW
Washington, DC 20520
Tel: (202) 647-3482
Fax: (202) 647-2597

U.S. Department of Commerce
International Trade Administration
Office of Latin American and the Caribbean
14th and Constitution, NW
Washington, DC 20230
Tel: 202-482-0057
800-USA-TRADE
Fax: 202-482-0464
Home Page: http://trade.gov

[This is a mobile copy of Panama (09/16/10)]