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Panama
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Definition Field Listing
Explored and settled by the Spanish in the 16th century,
Panama broke with Spain in 1821 and joined a union of
Colombia, Ecuador, and Venezuela - named the Republic
of Gran Colombia. When the latter dissolved in 1830, Panama
remained part of Colombia. With US backing, Panama seceded
from Colombia in 1903 and promptly signed a treaty with
the US allowing for the construction of a canal and US
sovereignty over a strip of land on either side of the
structure (the Panama Canal Zone). The Panama Canal was
built by the US Army Corps of Engineers between 1904 and
1914. In 1977, an agreement was signed for the complete
transfer of the Canal from the US to Panama by the end
of the century. Certain portions of the Zone and increasing
responsibility over the Canal were turned over in the
subsequent decades. With US help, dictator Manuel NORIEGA
was deposed in 1989. The entire Panama Canal, the area
supporting the Canal, and remaining US military bases
were transferred to Panama by the end of 1999. In October
2006, Panamanians approved an ambitious plan to expand
the Canal. The project, which began in 2007 and could
double the Canal's capacity, is expected to be completed
in 2014-15.
Panama's dollarized economy rests primarily on a well-developed
services sector that accounts for 80% of GDP. Services
include operating the Panama Canal, banking, the Colon
Free Zone, insurance, container ports, flagship registry,
and tourism. Economic growth will be bolstered by the
Panama Canal expansion project that began in 2007 and
is scheduled to be completed by 2014 at a cost of $5.3
billion - about 25% of current GDP. The expansion project
will more than double the Canal's capacity, enabling it
to accommodate ships that are now too large to transverse
the transoceanic crossway, and should help to reduce the
high unemployment rate. Strong economic performance has
reduced the national poverty level to 29% in 2008; however,
Panama has the second most unequal income distribution
in Latin America. The government has implemented tax reforms,
as well as social security reforms, and backs regional
trade agreements and development of tourism. Not a CAFTA
signatory, Panama in December 2006 independently negotiated
a free trade agreement with the US, which, when implemented,
will help promote the country's economic growth.
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