Panama is a Central American nation that connects Costa Rica and South America by way of Colombia. Much of the country’s narrative is tied to a connector of another kind: the Panama Canal, a hub of global trade and transportation that joins the Atlantic and Pacific Oceans through the Caribbean Sea.
Construction of the canal began immediately after Panama’s secession from Colombia at the turn of the 20th century. The two nations, along with Ecuador and Venezuela initially, claimed joint independence from Spain in 1821. The massive project was financed and built by the United States in return for a claim to sovereignty over land on either side of it, effectively splitting Panama in half.
Exclusive control of the waterway and its perimeter was passed to Panama in 1999, the culmination of a decades-long process, and expansion of the canal was approved in 2006. The $5 billion expense was completed in 2016, two years late and overbudget. While the project is expected to increase economic activity, doubts have been raised about its safety and effectiveness.
Despite a wealth of natural resources - from copper to wood and shrimp - Panama’s U.S. dollar-based economy is largely service-driven, primarily from activities around the Panama Canal and the Colon Free Trade Zone for manufacturing. Scarce regulation on tax-exempt offshore banking has attracted large amounts of foreign investment and beautiful landscapes bring tourists.
Panama has had trouble transferring the benefits of a rapidly growing economy effectively to its people, despite substantial spending on social programs and public works projects, like the addition of a metro system in capital Panama City in 2014. About one-quarter of the population lives in poverty and access to education and clean water, while increasing, is low, especially in rural areas.
Most affected by the country’s economic inequalities is the large indigenous population who have had the hardest time improving their economic status. About 12 percent of the population is Native American, with another two-thirds identifying as mestizo, or mixed Amerindian and white.
Dictator Manuel Noriega was overthrown in 1989, but issues with money laundering and drug and human trafficking remain. Panama’s government, now a constitutional democracy, continues to be criticized for corruption.
Panama is a member of the United Nations General Assembly, as well as the Organization of American States, the Latin American Economic System and many international financial institutions.
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