Slightly smaller than South Carolina, (29,762 square miles) Panama occupies the southeastern end of the isthmus forming the land bridge between North and South America. The culture, customs, and language of the Panamanians are predominantly Caribbean Spanish. Ethnically, the majority of the population is mestizo (mixed Spanish and Indian) or mixed Spanish, Indian, 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 in business and the professional sectors. More than half the population lives in the Panama City-Colon metropolitan corridor.
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 province. Vasco Nuñez 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 the Royal Road.
Panama's economy is primarily based on a well-developed services sector that accounts for 72% of GDP. Services include the Panama Canal, banking, insurance, government, and the Colon Free Zone -- the world's second-largest free trade zone after Hong Kong. Mining, tourism, and maritime services are projected sources of future growth.
U.S. State Department Background Notes, 12/1999