Panama City was founded on two separate occasions and in two different places. Its history begins in 1519, when Pedrarias Dávila founded the small village of Nuestra Señora de la Asunción de Panamá in a bay where today lie the ruins of Panamá Viejo. The opening of trails linking Panama City to both Nombre de Dios and the Fuerte San Lorenzo on the Atlantic coast made the isthmus a crucial transit point for goods being shipped between the two oceans. Because of its strategic location, Panama City gained the status of first European commercial trading post on the Pacific coast; the city was designated a Ciudad Real as early as 1521.
The city's development was hindered by Spain's decision to stop transporting goods across the isthmus, and by New Granada's declaration of independence. It was not until a rail link was established between Colón and Panamá (1855) and work was begun on the canal (1880) that the city finally began to thrive.
Modern-day Panama City has a population of 900,000 inhabitants and boasts a wide variety of architectural styles which reflect two distinct periods: the colonial era, from which several lovely buildings still exist in Casco Viejo; and the period coinciding with the opening of the canal and the railway between Colón and Panamá. The canal is a must-see, as are the superb islands and beaches located near the capital.