Traveller's Guide To: Panama

Panama's history is inextricably linked to the world's most spectacular short cut, joining the Pacific and Atlantic Oceans. Yet this slender serpentine isthmus, squeezed between Costa Rica and Colombia in the tropics, has a whole lot more to offer visitors.

Diverse natural landscapes, from cloud-forested highlands to palm-fringed islands and steaming jungle, as well as Central America's most dynamic and cosmopolitan capital city, provide ideal settings for a host of activities, including hiking, white-water rafting, scuba diving and surfing. You can also experience unique indigenous cultures, party all night, or unwind and escape the crowds.

Panama is the same size as Scotland. Its small area, combined with an efficient, inexpensive transport system (at least in the west and centre) means that you can enjoy the epicurean delights of sophisticated city living in the capital, and a couple of hours later find yourself lounging on the powdery sands of a tropical beach or tramping through rainforest along the Camino Real – the conquistadors' original booty trail. Spanish heritage is just one of numerous cultural influences in Panama, which also derive from the vast migrant workforces who built the railroad and canal between the oceans, fused with traditions of the eight indigenous peoples that survived the Conquest.

The well-preserved colonial forts and imposing customs house at Portobelo make a worthwhile day-trip from the capital. You may find it hard to imagine how this now-deprived town was one of the richest ports in the "New World" during the 17th century. Its rich spoils, bound for the coffers of the Spanish Crown, attracted the interest of pirates and buccaneers such as Henry Morgan (he of rum fame) and Sir Francis Drake – whose submerged coffin supposedly lies offshore.

Across the isthmus on the Azuero Peninsula, in the quaint towns of Guararé, Parita, Las Tablas and La Villa, Spanish colonial heritage is at its most visible and vibrant. There are terracotta-tiled houses and whitewashed churches, plus cattle-ranching and colourful folk festivals, accompanied by foot-tapping melodies, flamboyant traditional costumes and lashings of seco, the country's national tipple (distilled from sugar).

Colonialism did not end when the Spanish left. Everything in Panama is defined in terms of its relation to the canal that connects the world's greatest oceans. Until a decade ago the canal plus a strip of territory on either side was administered as an outpost of the US, and tension with America has been a feature of Panama since the country was born in 1903 (before that, it was a region of Colombia).

Today, you spend US dollars with locally minted coins to maintain the fiction that the Panamanian Balboa is a distinct currency.

In 1989, Operation Just Cause saw 27,000 heavily armed US troops land in Panama City to topple the dictator, Manuel Noriega, whose connections with Colombian cocaine cartels and involvement with the CIA had become an embarrassment to the US government. Though most Panamanians were glad to be rid of Noriega, the huge civilian casualties and destruction of vast chunks of the city did little to improve Panamanian-US relations.

One effect of the conflict is that American tourists have been slow to take advantage of Panama's many alluring dimensions, making the country much less developed than neighbouring Costa Rica. Outside the capital and the tourist hotspots of Bocas del Toro and Boquete, English is rarely spoken.

Sara Humphreys is the author of the new Rough Guide to Panama (£16.99). See roughguides.com.

Capital attractions

Panama City is home to one in three of the country's 3.3 million people. This sprawling coastal metropolis is Central America's most cosmopolitan capital, by virtue of its status as Latin America's premier financial and banking centre, and its location at the Pacific entrance to the canal.

The very first colonial settlement, Panamá La Vieja, is in partially restored ruins – it was sacked by the Welsh buccaneer Henry Morgan in 1673. Two years later the Spanish established a "new" Panama City 8km south-west, on a rocky promontory jutting into the bay. This heavily defended site, called San Felipe (more commonly known as Casco Viejo), was off limits for years in the latter part of the 20th century, but is now blossoming again and is on the Unesco World Heritage List.

There are several excellent places to stay, from $12 hostel bunks in the Hospedaje Casco Viejo (hospedajecascoviejo.com) or Luna's Castle Hostel( lunascastlehostel.com) to a sumptuous apartment in a restored colonial mansion, Los Cuatro Tulipanes (from $140; loscuatrotulipanes.com). You step out on to cobbled streets and leafy plazas dotted with cafés and ancient churches, and lined with grand buildings. One of them has been converted to the fascinating Museo del Canal Interoceánico ( museodelcanal.com), which tells the story of the canal.

Outside Casco Viejo, Panama City is bedevilled with horn-honking traffic, but amid the mayhem you will find an array of fancy accommodation, restaurants and nightlife dotted in and around the glittering skyscrapers. Do not expect to find a bargain Panama hat (they are from Ecuador); but Panama produces a fine array of its own palm-woven headgear, most notably in the central provinces of Coclé and Herrera. Other indigenous crafts available in shops and markets are watertight, coiled baskets made by the Wounaan and Emberá, beaded Ngöbe jewellery and the embroidered molas of the Kuna.

The other big draw in Panama City is the Parque Natural Metropolitano, a precious tract of tropical forest within the city and just a 10-minute taxi ride from downtown. Seek out monkeys, agoutis and toucans, then put aside an hour to check out the fine pre-Columbian gold ornaments, ceramics and stone carvings at the nearby national anthropological museum. An easy 30-minute hike from the city centre, the summit of Cerro Ancó* boasts similar wildlife sightings and superlative views of the city and canal.

Bridging the gap

Emberá were once warriors and semi-nomadic hunter-gatherers, adept at pursuing their prey with poison-tipped arrows and blowpipes. Now they lead a more settled existence; several thousand live along the sinuous rivers of Panama's Darié* region.

A number of villages, most easily reached via the dilapidated provincial capital of La Palma or the trading outpost of Sambu, are now keen to share their traditional skills of basketry and woodcarving and knowledge of medicinal plants, and even their thatched, stilted wooden homes. Though parts of the Darié* closest to the Colombian border are no-go areas since Colombian paramilitaries, drug-traffickers and smugglers were added to the usual jungle hazards, there are still vast swathes of towering, cathedral-like rainforest, most notably in the Darié* National Park, that are safe to explore, with a guide.

Intrepid travellers can reach the park via the Afro-Dariénite area of El Real. Ancon Expeditions ( anconexpeditions.com), Advantage Panama ( advantagepanama.com) and Panama Exotic Adventures ( panamexoticadventures.com) operate memorable tours from Panama City.

The 'Big Ditch'

Nothing can prepare you for the visual splendour of the world's most important waterway. The Panama Canal is a gargantuan feat of human endeavour, tinged with ignorance and folly (it claimed the lives of an estimated 27,000 workers, predominantly from the West Indies). Completed in 1914 (and currently being expanded), it set the standards for 20th-century engineering, and remains a vital piece of infrastructure. About 14,000 vessels and 300 million tons of cargo pass through a year.

From the Pacific, the 77km waterway scythes through pristine jungle before gliding among the rainforest-topped islands of Lago Gatún – a vast reservoir roughly the size of Barbados. It finally spills out into the Caribbean through the Gatú* Locks just outside the crumbling city of Colón. Most visitors content themselves with a visit to Miraflores Locks Visitor Centre, a 15-minute ride from the city centre, where a museum offers an abbreviated history of the canal's construction.

Alternatively, consider a boat trip on Lago Gatú* spotting somnolent sloths, monkeys cavorting in the treetops and crocodiles lurking in the shallows, or speed across the isthmus alongside the waterway on the historic Panama Railroad ( panarail.com; the one-way transcontinental journey costs $22/£15 and takes an hour). But nothing beats travelling along the canal in a boat, making what is known as a transit. A $115 (£77) ticket with Panama Marine Adventures ( pmatours.net) will give you a partial transit, a four to five-hour trip, including meals and guided commentary.

Rainforest explorations

Almost half of Panama's territory is luxuriant rainforest that harbours a staggering level of biodiversity and endemism. The best way to explore is to venture into one of Panama's 14 national parks (entry $5-$20). The most accessible from Panama City (an hour's drive), and with the best-marked trails, is Soberanía in the canal basin. The more adventurous should consider exploring the cascading waterfalls, forested peaks and wildlife of more remote parks, engaging the services of a local guide or park ranger or signing up with one of Panama City's excellent tour operators (see Travel Essentials, below).

Though footprints in the morning mud are the nearest you are likely to come to an encounter with a jaguar or tapir, there are plenty of more visible animals. Several species of monkey hang out in the canopy. In the undergrowth you can spot agoutis, armadillos and peccaries snaffling around, plus myriad tiny fluorescent poison-dart frogs hopping around in the leaf litter.

Panama tops the birdwatching list for Central America, boasting 976 species at the last count. While ferreting in the undergrowth for some unremarkable rare endemic will excite only serious twitchers, even the most casual nature-lover cannot fail to be impressed by the glamour birds – parrots, macaws, toucans, hummingbirds and the endangered harpy eagle. Your best chance of sighting this imperious national bird is by visiting an Emberá village in Darién.

Island escape

Isla Coiba, a brooding presence in the Pacific Gulf of Chiriquí, was once synonymous with fear and brutality. It is 15 miles offshore, and until 2004 was a gruesome penal colony. Today, though, Coiba is an unlikely top attraction for nature-lovers. The island is surrounded by ocean brimming with spectacular sea life, including migrating whales, 760 species of fish ranging from delicate sea-horses to vast manta rays, plus numerous species of shark. Understandably, it makes an outstanding scuba diving and sport fishing destination.

You can still poke around the main prison's crumbling ruins, as well as explore the island's extensive natural treasures. Consider kayaking up mangrove-lined rivers; snorkelling among sea turtles in the shallows; or tramping through glorious rainforest on the look-out for endemic species such as the Coiba howler monkey and the dazzling scarlet macaw, now extinct on the mainland.

To fix up a trip to the island, head for the laid-back fishing village of Santa Catalina ( santacatalinabeach.com), also Panama's premier surfing destination.

Mountain high

The Chiriquí Highlands offer cool breezes and spectacular verdant mountain scenery. The small, picturesque town of Boquete is the national capital of outdoor adventure and the best place from which to climb Volcá* Barú – Panama's highest point at 3,474m.

The summit's stellar panorama, taking in both Pacific and Caribbean coastlines, is ample reward for an otherwise unremarkable uphill slog, but superb hiking is to be had in the surrounding moss-clad cloud forests, replete with hummingbirds, orchids and – the Holy Grail of Boquete birding – dazzling emerald quetzals. For an adrenalin rush, you can fly Tarzan-like along a 12-line canopy ride or go kayaking or white-water rafting. A more leisurely spot of horse-riding will still get you into some splendid country. Boquete is also home to the world's best gourmet coffee estates.

On the western flank of the volcano, less touristy settlements offer similar outdoor pursuits, and are within reach of some real wilderness hiking. Cielito Sur (cielitosur.com; from $100 double B&B) and Los Quetzales Lodge ( losquetzales.com), whose accommodation ranges from dorm bunks ($18) to chalets (from $105) deep in the rainforest, make excellent bases.

Beach life

With over 1,500 islands and substantial belts of sand along the Pacific and Caribbean coastlines, there is no shortage of beaches so that even in high season it’s possible to have stretches of sand, or an entire island, to yourself.

While you can wallow in warm Pacific shallows only an hour’s drive from the capital, most visitors are drawn to the country’s two contrasting Caribbean beach scenes. The bohemian vibe and Afro-Caribbean culture of the Bocas del Toro (Mouths of the Bull) archipelago close to the Costa Rican border has for some years been a favourite of backpackers, lured by days soaking up deserted beaches, powerful surf and colourful coral, and nights partying under the stars. The sandy streets lined with attractive wooden buildings and bar-restaurants built over the water of Bocas Town on Isla Colón – the erstwhile centre of the country’s banana-boom era of the late 1800s – now attract a greater range of visitors and tours: a meander through wetlands in search of the shy manatee; a visit to a traditional Ngöbe village; or a nocturnal outing to spot nesting marine turtles.

Try the remote open-sided thatched beachside bungalows of Al Natural ( alnaturalresort.com) or the breezy hilltop ranchos of the La Loma Jungle Lodge ( thejunglelodge.com), both on Isla Bastimentos from around $200, per double, including meals and transfers.

For a totally different beach scene head east to the dazzling, white-sand beaches encircling postage-stamp-sized palm-topped islands in western Kuna Yala, a 400-island archipelago that stretches for almost 400km up to the Colombian border, home to Panama’s most culturally distinct and politically independent indigenous people, the Kuna. Coconuts from these islands once provided the Kuna’s main revenue, to be bartered with passing Colombian traders, but their picture-postcard appeal now brings in more money from tourists keen for a Robinson Crusoe experience (so often lacking running water, flush toilets or electricity). Swing in a hammock with a good book, or snorkel in the surrounding turquoise waters before enjoying a simple seafood supper and a night in a cane cabaña, being lulled to sleep by the waves. While there, don’t miss the opportunity to visit the densely populated coral outcrops on which the Kuna themselves live, and engage with their fascinating but sadly vanishing culture. The community-run cabañas on Digir (Isla Tigre) make a good starting point, or consider a six-day kayaking trip with Expediciones Tropicales ( xtrop.com), who employ Kuna guides and explore Digir’s surrounding islands and the rainforested mainland.

Travel essentials Panama

When to go

* Get planning now. Most travellers visit during the pricier hot dry season (late December to late April) although you can get drenched at any time of year on the Caribbean side. Stick to the Pacific lowlands, however, and the frequent, intense downpours of the rainy season (May to mid-December) still leave plenty of hot sunny spells to enjoy, and the otherwise parched Azuero Peninsula is at its most picturesque.

Getting there

* The main way to reach Panama City from Britain is aboard one of KLM's five weekly flights from Amsterdam, with connections from across the UK. In addition, Iberia flies to Panama City non-stop three times a week from its hub in Madrid.

* Plenty of routings via the US are feasible, although this usually involves a stressful encounter with American bureaucracy at New York, Atlanta, Houston or Miami.

* Several UK adventure firms feature Panama, often as part of wider Central American journeys. Explore (0845 013 1537; explore.co.uk) has an 11-day Pacific-to-Caribbean trip devoted to Panama; the price of £849 does not include flights. Departures are roughly monthly from December to April.

Getting around

* Panama has an efficient, inexpensive and generally comfortable bus system. The six-hour trip between the capital and the second city, David, costs $15. Even at busy times, you usually need not book ahead.

* Reliable Panama City tour operators include Ecocircuitos ( ecocircuitos.com), Ancon Expeditions ( anconexpeditions.com) and Sendero Panama ( senderopanama.com). They offer a variety of excellent single-day or multi-day excursions.