Panama forms the land link between the North and South American continents. It borders Colombia to the east, Costa Rica to the west, and the Caribbean and the Pacific Ocean to the north and south. The country forms an S-shaped isthmus, which runs east–west over a total length of 772km (480 miles) and is 60 to 177km (37 to 110 miles) wide. The landscape is mountainous with lowlands on both coastlines cut by streams, wooded slopes and a wide area of savannah-covered plains and rolling hills called El Interior between the Azuero peninsula and the Central Mountains. The Caribbean and the Pacific Ocean are linked by the man-made Panama Canal, cut into a gap between the Cordillera de Talamanca and the San Blas mountain range and stretching for over 65km (40 miles); the length of the canal is often referred to as 80km (50 miles) as this is the distance between deep-water points of entry. Only about a quarter of the country is inhabited. The majority of the population live either around the canal and main cities of Panama City and Colón (the two cities which control the entrance and exit of the canal) or in the Pacific lowlands and the adjacent mountains. 

Explored and settled by the Spanish in the 16th century, Panama broke with Spain in 1821 and joined a union of Colombia, Ecuador, and Venezuela - named the Republic of Gran Colombia. When the latter dissolved in 1830, Panama remained part of Colombia. With US backing, Panama seceded from Colombia in 1903 and promptly signed a treaty with the US allowing for the construction of a canal and US sovereignty over a strip of land on either side of the structure (the Panama Canal Zone). The Panama Canal was built by the US Army Corps of Engineers between 1904 and 1914. In 1977, an agreement was signed for the complete transfer of the Canal from the US to Panama by the end of the century. Certain portions of the Zone and increasing responsibility over the Canal were turned over in the subsequent decades. With US help, dictator Manuel NORIEGA was deposed in 1989. The entire Panama Canal, the area supporting the Canal, and remaining US military bases were transferred to Panama by the end of 1999. In October 2006, Panamanians approved an ambitious plan to expand the Canal. The project, which began in 2007 and could double the Canal's capacity, is expected to be completed in 2014-15.