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Artefacts of indigenous peoples have been discovered in Panama dating back to around 2,500 BC. After that came the Chibchan, Chocoan, and Cueva peoples, but numbers are not believed to have been significant.

The history of Panama really starts with the arrival of the Spanish in 1501 in the form of Rodrigo de Bastidas on the Atlantic coast. By 1513 Vasco Núñez de Balboa had crossed the Isthmus of Panama and discovered another ocean which he named the South Sea, now known as the Pacific Ocean.

Balboa’s reports led Ferdinand II of Aragon to name the region Castilla Aurifica or Golden Castile. He appointed Pedro Arias Dávila as Governor and sent further ships into the region. Panama had become part of the Spanish Empire and would remain so until 1819.

Prior to 1819 Panama came under the jurisdiction of the Viceroyalty of New Granada in 1713 with its capital in Bogotá (Santa Fé de Bogotá), in what is now Colombia. By 1819 Spain’s powers were waning and Panama, along with other South and Central American regions gained its freedom and threw in its lot with Simon Bolivar’s Gran Colombia (1819–1830).

In 1830 Panama separated but then re-joined Bolivar’s territorial entity which, by then, had become the Republic of Gran Granada with a territorial span covering approximately modern day Colombia and Panama.

By the 1840s the new superpower of America was making its mark through the Monroe Doctrine and in 1846 the United States and New Granada signed the Bidlack Mallarino Treaty which allowed the U.S. rights to build railroads through Panama. By 1855 the Panama Railway, which stretched 47.6 miles across Panama linking the Atlantic Ocean to the Pacific Ocean, had been built.

As early as the 1530s the Spanish had investigated the idea of building a canal to join the two major oceans, the French had even started work in the 1880s but it was the United States which took on the work in 1902. The Americans quickly became embroiled in the local power struggle between the Colombian Conservative Party and its opponents the Liberal Party in what became known as the Thousand Days’ War. The war in Colombia threatened to involve the province of Panama and the Americans, keen to prevent further turmoil, encouraged a secessionist movement in Panama which resulted in the formal separation and creation of the country of Panama on 3rd November 1903.

Less than three weeks later the new Panamanian government signed the Hay–Bunau-Varilla Treaty on 18th November 1903 allowing for the construction of the canal and U.S. sovereignty of a 10 miles wide strip of land on either side of the canal. The canal was finally completed on 15th August 1914.

Although the first democratic elections were held in 1904 they were dominated by an elite group that reflected the old Colombian parties. The Porrista Liberal Party (PLP) and Chiarista Liberal Party (PLCh) fought for control between themselves, often with the American government having to intervene, at least up to the 1930s.

The period up to 1968 was especially turbulent with constitutional crises in 1918, 1948 and 1955 as well as an ever more powerful military overthrowing governments in 1941, 1949, 1951 and 1968. Dr. Arnulfo Arias Madrid was especially unfortunate in that he was elected president on three occasions, 1940, 1948 and 1968 and lasted just a few months each time.

In 1968 Brigadier General Omar Torrijos, the Commander of the Panamanian and National Guard took over after a coup d’état in October 1968. A military junta was established with Omar Torrijos as military leader and subsequently as ‘Maximum Leader of the Panamanian Revolution’. The Torrijos regime was harsh, but at the same time it carried out a lot of populist measures such as land redistribution. Torrijos is best known for negotiating the Torrijos-Carter Treaties which were signed on 7th September 1977 and which gave back sovereignty of the Panama Canal in stages to Panama by the end of 1999.

From 1974 there were elected presidents once more but they were figureheads with Torrijos holding the power. General Torrijos died in a plane crash in August 1981 and was replaced by Gen. Manuel Noriega as head of the Panama Defense Forces (PDF) and he took over power.

Although Noriega cooperated with the United States over the Iran-Contra Affair relations between the two countries deteriorated and the U.S. froze support for Panama in 1987. In February 1988 General Noriega was indicted in the U.S. courts on drug-trafficking charges and following further problems over the 1989 presidential election United States troops invaded Panama on 20th December 1989.

Guillermo Endara who had been elected in the 1989 presidential election but then ousted by Noriega was re-installed as President of Panama.

Noriega eventually surrendered on 3rd January 1990, was put on trial in the United States and given a 40 year sentence for drug trafficking, racketeering, and money laundering. He has since returned to Panama and is currently serving a 20 year sentence.

President Endara’s term of office was not especially successful and was clouded by corruption allegations. He did, however, make one major change to life in Panama by reforming the Panamanian military into a police force under civilian control.

Other than in 2004 when the Democratic Revolutionary Party (PRD) won 41 of the 78 seats in the National Assembly, no party has held a majority in the National Assembly since 1989. Parties tend to form alliances around the two traditional parties. They are the centre-left PRD whose presidential candidate won in 1994 and 2004, and the centre-right Panameñista/Arnulfista Party whose presidential candidate won in 1999 and 2009.

The President and Vice President are elected on the same ticket by popular vote for five year terms.

The unicameral National Assembly has 71 members elected by popular vote to serve five year terms.

The Transparency International Corruption Perceptions Index (CPI) 2016 places Panama at joint 87th out of 176 countries with a CPI 2016 score of 38 (where 100 is least corrupt).