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Local traders engaged in smuggling until Spain shifted the official gold route to Cape Horn, and the area entered a period of commercial decline.
After independence from Spain and union with Colombia in 1821, the isthmus again became an important transit route. The United States completed a railroad across the area in 1855 to expedite movement to the gold fields in California.
After 1538, it was used as a land route to Spain's South American colonies and a transshipment point for Andean gold.
From 1568 to 1671 there was series of pirate raids, and in 1671 Panama City was sacked by buccaneers under the command of Sir Henry Morgan.
After failing to build a sea-level canal in the 1880s, the French sold their concession to the United States, which conspired with the elite in Panama City to declare independence when they could not obtain a favorable treaty from Colombia.
From 1903 to 1978, the United States controlled the Canal Zone, a five-mile strip on both sides of the canal.
Because the former Canal Zone abuts the old city on the north and west, the growing population was forced to fan out along the bay to the north and east.Outside the city walls was a neighborhood of free blacks living in thatched structures.Farther out were the cattle ranches and farms of the elite, which were staffed by slaves.They speak English, French, or an English patois at home and are mostly Protestant. The official language is Spanish, but English is used widely in business, especially banking and tourism, and by some people of African descent. Some coins bear the image of Urraca, an Indian chief who resisted the Spanish conquests, but most coins depict Vasco Nuñez de Balboa, the discoverer of the Pacific Ocean. Panama became an autonomous nation because of its function as the custodian of the transisthmus shipping route—the "path between the seas." It gained independence in 1903 as part of an American-sponsored revolt against Colombia that led to the signing of a treaty granting the United States the right to build the Panama Canal.The Spanish discovered and conquered Panama between 15.
The country is a natural land bridge connecting the South American continent with Central America.