Panama City was founded in 1519 by the Spanish governor Pedro Arias de Ávila (Pedrarias) not long after Balboa first saw the Pacific. Although the Spanish settlement quickly became an important center of government and church authority, the city was ransacked and destroyed in 1671 by the English pirate Sir Henry Morgan, leaving only the stone ruins of Panamá Viejo.
Three years later, the city was reestablished about 8km to the southwest in the area now known as Casco Viejo. Although the city’s peninsular location meant that it was well defended, the destruction of the Caribbean port at Portobelo in 1746 dealt a heavy blow to the Spanish overland trade route. Panama City subsequently declined in importance, though it returned to prominence in the 1850s when the Panama Railroad was completed, and gold seekers on their way to California flooded across the isthmus by train.
After Panama declared its independence from Colombia on November 3, 1903 in the Parque de la Independencia, Panama City was firmly established as the capital of the new nation. Since the Panama Canal was completed in 1914, the city has emerged as a center for international business and trade.
The city’s only major setback in recent times occurred in 1989, when it was invaded by the USA to oust dictator Manuel Noriega from power. The capital suffered damage both from the invasion itself and from the subsequent looting, and several residential blocks of the El Chorillo district were destroyed by combat-ignited fire.
Today, Panama City is by far the wealthiest city in Central America, and residents are wholly optimistic about the future – and with good reason. Following the handover of the Canal in 1999, and the subsequent closure of American military bases in the country, Panama City is finally in charge of its own destiny. Furthermore, a spate of foreign investment and the recent referendum to expand the Panama Canal means that the capital is likely to continue its remarkable boom.