Lying at the crossroads of the North and South American continents and the Atlantic and Pacific oceans, Panama is of immense strategic importance.
This has made it a target for intervention by the US, which in 1989 invaded Panama to depose a former ally, Manuel Noriega, and until 1999 controlled the Panama Canal.
Panama has the largest rainforest in the Western Hemisphere outside the Amazon Basin and its jungle is home to an abundance of tropical plants, animals and birds - some of them to be found nowhere else in the world.
Overview
However, it is for a feat of engineering, a canal connecting the Atlantic and Pacific oceans, that Panama is famous. Every year hundreds of thousands of people make the eight-hour journey through the waterway and it generates a proportion of the country's GDP.
The Panama canal is a conduit for global cargo
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Panama is widening the canal, which is more than 90 years old and operating almost at full capacity, to allow it to handle more and larger vessels. Work on the scheme, which was approved in a referendum in 2006, began in September 2007.
Offshore finance, manufacturing and a shipping registry generate jobs and tax revenues. Panama's services-based economy also benefits from the Colon free trade zone, home to some 2,000 companies and the second largest in the world. A free trade agreement with the US was reached in late 2006.
Bananas are the main cash crop, but the trade has been hit by disease and is vulnerable to tariff changes in the European export market.
Panama faces the challenge of shaking off its reputation as a major transit point for US-bound drugs and illegal immigrants, and as a haven for money-laundering.
It also needs to address social inequality. Elite families of European descent control most of Panama's wealth and power, while about 40% of the population live below the poverty line.
The canal, the natural attractions of its pristine forests and coastlines, and a lively, modern capital are fuelling a growing tourism industry.
Facts
- Full name: Republic of Panama
- Population: 3.3 million (UN, 2007)
- Capital: Panama City
- Area: 75,517 sq km (29,157 sq miles)
- Major languages: Spanish, English
- Major religion: Christianity
- Life expectancy: 73 years (men), 78 years (women) (UN)
- Monetary unit:
1 balboa = 100 cents
- Main exports:
Bananas, fish, shrimp, petroleum products
- GNI per capita:
US $4,630 (World Bank, 2006)
- Internet domain: .pa
- International dialling code: +507
Leaders
President: Martin Torrijos
Martin Torrijos, the son of former military leader Omar Torrijos, defeated his main rival, ex-president Guillermo Endara, to win May 2004's presidential elections. He took office in September of that year.
Martin Torrijos spearheaded a drive to modernise the canal
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Mr Torrijos pledged to modernise the Panama Canal, to tackle corruption, and to investigate alleged human rights violations under the rule of his father.
But his plans to reform the troubled social security system, including a proposal to raise the retirement age for public sector workers, have met with stiff resistance from unions and the Catholic Church. The government says the system is heading for bankruptcy.
A businessman and leader of the Democratic Revolutionary Party (DRP), Mr Torrijos drew support from his late father's reputation during his campaign. Omar Torrijos became a hero after negotiating the 1977 treaty with US President Jimmy Carter that led to the handover of the Panama Canal in 1999.
His father founded the DRP during his military rule, and Mr Torrijos has taken steps to reform the party by removing some of the veterans from his father's rule.
Mr Torrijos contested the 1999 presidential poll but was beaten by Mireya Moscoso.
Martin Torrijos has four years' ministerial experience as deputy minister of government and justice under President Ernesto Perez Balladares.
Born in 1963, he moved to the US as a teenager and was educated there. He holds degrees in economics and political science from a Texas university. To help to fund his education, Mr Torrijos managed a branch of McDonald's in Chicago.
Media
Panama's media are free to present news and comment. Laws which penalised "insults" against state officials were repealed in 2005.
Media rights organisation Reporters Without Borders noted in 2006 that political stability had stimulated the growth of "free and vigorous" media.
Broadcasting is dominated by the private sector. Corporacion Medcom operates the two most-popular TV networks. There are around 100 radio stations and several other TV networks.
The press
Television
Radio
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