The country of Panama has made significant political and economic progress since the 1989 U.S. military intervention that ousted the regime of General Manuel Noriega from power. The current President, Martin Torrijos, has faced significant challenges, including dealing with the funding deficits of the country's social security fund; developing plans for the expansion of the Panama Canal; and combating unemployment and poverty. The U.S. has close relations with Panama, and both countries currently cooperate on counternarcotics efforts, the security of the Panama Canal and the Panama-Colombia border, and negotiations for a bilateral free trade agreement. This report describes all of the above; the aforementioned U.S.-Panamanian negotiations for a bilateral free trade agreement is detailed in particular.

With four successive elected civilian governments, the Central American nation of Panama has made notable political and economic progress since the 1989 U.S. military intervention that ousted the regime of General Manuel Noriega from power. The current President, Martín Torrijos of the Democratic Revolutionary Party (PRD), was elected in May 2004 and inaugurated to a four-year term on September 1, 2004.