Policy & History

The United States established diplomatic relations with Panama in 1903 following its declaration of independence from Colombia. That year, through the Hay/Bunau-Varilla Treaty, the United States was granted rights to a zone spanning the country to build, administer, fortify and defend an inter-oceanic canal. The Panama Canal opened in 1914. In 1977, the Torrijos-Carter Treaties were signed to set basic governing standards for the Canal through 1999 and guarantee its permanent neutrality. These treaties went into effect in 1979 and on December 31, 1999, Panama assumed full jurisdiction and operational control over the Canal.

Changes in Panama’s government and tensions over the canal led to the interruption of diplomatic relations several times during the 20th century. From 1987-1989, relations deteriorated sharply under the rule of Manuel Noriega. During Operation Just Cause in 1989, U.S. troops entered Panama and captured Noriega, who would not cede power following elections. Since the restoration of democracy, Panamanians have elected five presidents from three political parties in free and fair elections.

Panama’s location and role in global trade make its success vital to U.S. prosperity and national security. Panama’s key location along major land and sea transit routes makes it a critical partner in interdiction illegal drugs destined for the United States. While Panama’s economic growth rate is among the highest in the hemisphere – the country faces the challenge of making this growth more inclusive. It also faces added pressure for more fiscal transparency as it enforces recent anti-money laundering legislation. Increasing pressure from drug trafficking and organized criminal activity contributes to security problems that threaten to undermine Panamanian security, democratic institutions, and economic prosperity. Because of our shared history, cultural ties between both countries are strong.

U.S. assistance to Panama aims to ensure that it remains a secure, prosperous, and democratic country that continues to work with the United States as a principal partner in the region. The United States and Panama work together to advance common interests in improving citizen safety and strengthening the rule of law. They cooperate in many ways, including combating illegal drug trafficking and other criminal activity and promoting economic, democratic, and social development through U.S. and international agencies.

U.S. diplomatic engagement and foreign assistance in Central America is guided by the U.S. Strategy for Engagement in Central America (Strategy). In 2015, the United States announced the Strategy, a comprehensive and robust partnership with Central American governments to promote an economically integrated Central America that is fully democratic; provides economic opportunities to its people; enjoys more accountable, transparent, and effective public institutions; and ensures a safe environment for its citizens. The Strategy focuses on three overarching lines of action: 1) enhancing citizen security; 2) promoting good governance; and 3) promoting prosperity and regional economic integration. The Strategy is a multi-year effort for all seven Central American countries that builds off of previous successful partnerships and programs in the region.