Panama, located on an isthmus that connects North and South America, was originally settled by the Spanish during the 16th century. The country broke away from Spanish rule in 1821, and became part of the country known as Gran Colombia for a period of time before becoming part of the Republic of Colombia later in the 19th century.
With encouragement from the U.S., Panama seceded from Colombian rule and became independent in 1903. A year later, the U.S. (under a treaty it signed with the Panamanian government) started building the Panama Canal, which was completed by 1914. That same treaty also gave the U.S. the right to control the canal (and the land around it) in perpetuity. From that time until 2000, the U.S. exerted effective military control over the Panama Canal (establishing military bases there at the time), turning it over to the Panamanian government that year.
Because of the U.S. presence in Panama during much of the 20th century, the local economy became dollarized – which it still is, despite its independence from the U.S. Much of Panama’s economy consists of international trade, and banking. Real estate and tourism are starting to play a growing part of the local economy (by 2011, 2 million tourists visited Panama – generating an estimated US$2.5 billion in revenues). As evidenced by Panama City’s skyline, there has been a boom in construction of condo tower apartment buildings for a number of years.
The population density is evident along the coastal region of the Gulf of Panama, particularly on the Azuero Peninsula, and in the metropolitan areas of Panama City and Colón. A high degree of urban development in recent years has attracted a growing urban population, currently representing 59% of the total country population.