Panama City, first founded on 15 August 1519 by Pedro Arias de Ávila (2.5 miles east of its present location), lasted for 152 years. Old Panama suffered many adversities: major fires (1539, 1563, twice in 1644, 1671), earthquakes (1541, 1641), rebellions (1544, 1550) and slave revolts (1549, 1554, 1580–1581), and attacks by corsairs Sir Francis Drake (1596) and Henry Morgan (1671). During the Morgan attacks, the retreating forces of Governor Juan Pérez de Guzmán set fire to some buildings, which engulfed the city in a blaze that completely destroyed it. Between this fire and an epidemic that swept the city that year, 4,000 people died. Of the survivors, all but 300 left the city. An earlier epidemic in 1652 had already killed 1,200 people.
As a transit point to other parts of the Spanish Empire, the old city became an important commercial center. By 1610 it contained five hundred houses and commercial establishments that were distributed in three plazas and eleven streets. It also had six convents and one cathedral. By 1670 it had one thousand houses and ten thousand inhabitants.
On 21 January 1673, Antonio Fernández de Córdoba y Mendoza founded the new Panama City about seven miles west of its previous site. The new city was heavily fortified for defense against pirate attacks. At its founding, Panama City had about 900 inhabitants. With greater commercial activity, the population increased to 1,600 by 1675 and to 20,000 by 1700. However, as the Spanish Empire grew weaker, commercial activity declined. The city also suffered major fires in 1737 ("the big fire"), 1756, and 1781. By 1790 the city's population had declined to 7,000.
After independence and during the years when Panama was a part of Colombia (1821–1903), the city went through two periods of boom and bust. During the California gold rush (1848–1869), Panama City became a transit point between New York City and San Francisco. A railroad was built linking Colón on the Atlantic side to Panama City. The population increased to ten or twelve thousand, and hundreds of thousands more passed through the city to California. The city went through a period of bust until 1881, when a French company began digging an interoceanic canal. This activity stimulated more construction and commercial activity, and the city grew to 24,000. But by 1889, the canal company was bankrupt and the city's fortunes declined again. By the end of the century, Panama City lacked drinking water, a working sewage system, and good schools.
The construction of the Panama Canal under U.S. supervision (1903–1914) revitalized the city. Streets were paved, the sewage system was improved, and garbage was collected. Belisario Porras (president 1912–1916, 1918–1920, 1920–1924) began a period of urban development and renewal. Between independence (1903) and World War II, Panama City became a great urban center, although it remained essentially a satellite of the Canal Zone. The population grew faster than housing, creating a crisis that led to strikes in 1925 and 1932 protesting high rents and unsanitary conditions.
In 1944 the Bank of Urbanization and Rehabilitation was created to help solve the housing problem. It financed new buildings, renovated old areas, facilitated credit, and undertook the construction of the satellite city of Vista Hermosa. Since the 1960s, Panama City has become one of the world's most important financial centers, due largely to the country's liberal tax and commercial laws. Most of the world's major banks and financial institutions operate branches in the Panamanian capital.
Panama City, which had an estimated population of 829,391 in 2006, is divided into four administrative units, each with its own characteristics. San Felipe, founded in 1673, includes the nucleus. Most of the colonial monuments are found here. The population is mainly white and mestizo. Santa Ana encompasses the area that grew outside the city walls. With El Chorrillo, it is the most densely populated sector. Its population is mostly black and mestizo. El Chorrillo, which dates from the construction of the canal, is the newest area. It is densely populated, mainly by blacks and mestizos. Finally, Calidonia, which also originated with the canal construction and the accompanying arrival of Antillean black laborers, has a mostly black population.
In December 1989 U.S. military forces occupied Panama City. By blaring recordings of Jimi Hendrix in front of the Papal Nuncio where President Manuel Noriega was holed up, they were able to drive him out and install a new Panamanian government.
Angel Rubio, La Ciudad de Panamá. Panamá: Banco de Urbanización y Rehabilitación, 1950.
John F. Shafroth, Panamá la vieja. Panamá: Imprenta Nacional, 1952.
Luis E. García De Paredes, Mudanza, traslado y reconstrucción de la ciudad de Panamá en 1673. Panamá: Consejo Municipal de Panamá, 1954.
Benito Reyes Testa, Panamá la vieja y Panamá la nueva. Panamá: Sección de Textos Escolares y Material Didáctico del Ministerio de Educación, 1958.
Juan Bautista Sosa, Panamá la vieja, 2nd ed. Panamá: Imprenta Nacional, 1959.
Reina T. De Araúz, Marcia A. De Arosemena, and Jorge Conte Porras, eds., Antología de la Ciudad de Panamá. Panamá: Instituto Nacional de Cultura de Panamá, 1977.
Furlong, William L. "Panama: The Difficult Transition Towards Democracy." Journal of Interamerican Studies and World Affairs 35, no. 3 (Autumn, 1993): 19-64.
Juan Manuel PÉrez