About the CBI

September 2005
Background Note: Panama

Flag of Panama is divided into four, equal rectangles; the top quadrants are
white (hoist side) with a blue five-pointed star in the center and plain red;
the bottom quadrants are plain blue (hoist side) and white with a red
five-pointed star in the center.

PROFILE

OFFICIAL NAME:
Republic of Panama

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 (827,828). Other cities--Colon (140,908), David
(102,678).
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: 1.31%.
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--20.95/1,000. Life expectancy--72.14 yrs.
Work force (1.1 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--Legislative 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). The PA in coalition with smaller parties held a slim majority in
the Legislative 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 (2004 estimate): $13.83 billion (nominal).
Annual growth rate (2003): 4.3%; (2004 estimate): 6.2%.
Per capita GDP (2004 estimate): $4,320.
Natural resources: Timber, seafood, copper.
Services (77% of GDP): Finance, insurance, health and medical,
transportation, telecommunications, the Canal and maritime services, tourism,
Colon Free Zone, public administration, and general commerce.
Agriculture (5% of GDP): Products--bananas and other fruit, corn, sugar,
rice, coffee, shrimp, timber, vegetables, livestock.
Industry/Manufacturing (8% of GDP): Types--food and drink processing,
petroleum products, chemicals, paper and paper products, printing, mining,
refined sugar, clothing, furniture, construction.
Trade (2004 figures do not include the Colon Free Zone or CFZ): 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%. 2004 U.S. goods exports to Panama: $1.9 billion.
2004 U.S. goods imports to Panama: $316 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) lock
canal, which today is one of the world's greatest engineering triumphs. 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 thuggish 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.

National elections were held again on May 2, 2004. The PRD's Martin Torrijos
won the presidency and a PRD legislative majority in the National Assembly.
Torrijos was inaugurated on September 1, 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.

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, 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.

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, medical
and health, and other business.

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.
The Government of Panama is also seriously considering undertaking a major
$4-7 billion expansion of the Panama Canal, but a national referendum,
required by Panama's Constitution, has not yet been scheduled.

GDP growth for 2004 was approximately 6.2% compared to 4.3% in 2003. Though
Panama has the highest GDP per capita in Central America, about 40% of its
population lives in poverty.

Panama has bilateral free trade agreements with El Salvador and Taiwan.
Panama is continuing free trade negotiations with the four remaining Central
American countries and Mexico, although many of these are on hold. Panama is
also negotiating bilateral free trade agreements with the United States and
Singapore. From March 2001 to February 2003, Panama served as host for the
Free Trade Area of the Americas negotiations.

FOREIGN RELATIONS
Panama is a member of the UN General Assembly and most major UN agencies and
has served three terms as a member of the UN Security Council. 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 with the U.S.
maritime agreements on counter terrorism and counter narcotics, and a stolen
vehicles agreement. The Panamanian Government also has been paying increasing
attention to other maritime security issues. 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 and an agreement with the Overseas Private Investment Corporation
with the United States. Although money laundering remains a problem, Panama
passed significant reforms in 2000 intended to strengthen its cooperation
against international financial crimes, and the conclusion of the Speed
Joyeros case in April 2002 marked the dismantling of a major money-laundering
network with scores of arrests in several countries.

President Martin Torrijos has continued in the footsteps of his predecessor,
Mireya Moscoso, in supporting the U.S. in the fight against international
terrorism. 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.

Principal U.S. Embassy Officials
Ambassador--William A. Eaton
Deputy Chief of Mission--Luis Arreaga-Rodas
Counselor for Political Affairs--Richard S. Sacks
Counselor for Economic Affairs--Timothy P. Lattimer
Counselor for Public Affairs--Eugene C. Santoro
Counselor for Management--David J. Savastuk
Consul General--Susan Alexander

The U.S. Embassy in Panama is located at Avenida Balboa y Calle 38, 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 0945, APO AA
34002. E-mail: Panamaweb@state.gov

Other Contact Information
American Chamber of Commerce and Industry in Panama
Estafeta Balboa
Apartado 168
Panama, Republica de Panama
Tel: 507-269-3881
Fax: 507-223-3508
E-mail: amcham@pan.gbm.net

U.S. Department of State
Office of Central America and Panama Affairs (CEN-PAN)
2201 C St. NW
Washington, DC 20520
Tel: (202) 647-3330
Fax: (202) 647-2901

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://www.ita.doc.gov