onsisted of incentives for U.S. business to export products to Panama, $150 million was to pay off bank loans and $65 million went to private sector loans and guarantees to U.S. investors. The entire Panama Canal, the area supporting the Canal, and remaining U.S. military bases were turned over to Panama on December 31, 1999, in accordance with the treaty signed two decades prior.
The politics of Panama takes place in a framework of a presidential representative democratic republic, whereby the President of Panama is both head of state and head of government, and of a pluriform multi-party system. Executive power is exercised by the government. Legislative power is vested in both the government and the National Assembly. The Judiciary is independent of the executive and the legislature. The branches are according to Panama's Political Constitution of 1972, reformed by the Actos Reformatorios of 1978, and by the Acto Constitucional in 1983, united in cooperation and limited through the classic system of checks and balances. Three independent organizations with clearly defined responsibilities are found in the Political Constitution. Thus, the Comptroller General of the Republic has the responsibility to manage public funds. There also exists the Electoral Tribunal, which has the responsibility to guarantee liberty, transparency, and the efficacy of the popular vote; and, finally, the Ministry of the Public exists to oversee interests of State and of the municipalities.
Administratively, Panama's major divisions are nine provinces and five indigenous territories (comarcas indígenas).
With unemployment rates at 8.8 percent, Panama has the second highest unemployment rate in Central America, after Belize. The population living in poverty is at 37 percent (est. 2006). However, the Panamanian economy grew 8.1 percent in 2006 and for the first time in ten years the public sector closed the year 2006 with a trade surplus of US$88 million. Furthermore, the GDP in 2006 reached US$26.04 billion.
Panama's economy is service-based, heavily weighted toward banking, commerce, and tourism, due to its key geographic location. The handover of the canal and military installations by the U.S. has given rise to new construction projects. The Martín Torrijos (son of Omar Torrijos) administration has undertaken controversial structural reforms, such as a fiscal reform and a very difficult Social Security Reform. Furthermore, a referendum regarding the building of a third set of locks for the Panama Canal was approved overwhelmingly (though with low voter turnout) on October 22, 2006.
The Panamanian currency is the balboa, fixed at parity with the United States dollar. In practice, however, the country is dollarized; Panama mints its own coinage but uses U.S. dollars for all its paper currency. Panama is one of three countries in the region to have dollarized their economies, the other two being Ecuador and El Salvador.
The high levels of Panamanian trade are in large part due to the Colón Free Trade Zone, the largest free trade zone in the Western Hemisphere. Last year the zone accounted for 92 percent of Panama's exports and 65 percent of its imports, according to an analysis of figures from the Colon zone management and estimates of Panama's trade by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
Panama fares decently in tourism receipts and foreign direct investment as a percent of GDP (the fourth-highest in Latin America in both categories) and Internet penetration (eighth-highest rate in Latin America).
Despite the large revenues from the Panama Canal and tourism, the World Bank reports that the Republic of Panama continues to have poverty–affected areas, 95 percent of which are from indigenous property, owing in part to lack of close governmental contact. 
Income inequality is also a big problem in this country. According to the Inter-American Development Bank, Panama has one of the worst levels of income inequality in the continent, even though it is one of the wealthiest countries in Central America