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Figure 2. The Isthmus and Surrounding Areas in the Fifteenth and Sixteenth Centuries

Church of Natá, built in 1522 believed to be the oldest church still in use on the mainland of the American
Courtesy National Archives

The period of free, though licensed, exploration gave way to a period in which the king exercised royal control by appointing governors and their staffs. All were to be paid from crown revenues expected from the royal profits on the colony. The king's representative was responsible for ensuring such returns he tracked all gold, pearls, and income from trade and conquest he weighed out and safeguarded the king's share.

Governors had some summary powers of justice, but audiencias (courts) were also established. The first such audiencia, in Santo Domingo, Hispaniola, had jurisdiction over the whole area of conquest. As settlement spread, other audiencias were set up. By a decree of 1538, all Spanish territory from Nicaragua to Cape Horn was to be administered from an audiencia in Panama. This audiencia lasted only until 1543 because of the impossibility of exercising jurisdiction over so vast an area. A new Panamanian audiencia, with jurisdiction over an area more nearly coinciding with the territory of present-day Panama, was established in 1563. The viceroy's position was revived for the rich empires of Mexico and Peru. After 1567 Panama was attached to the Viceroyalty of Peru but retained its own audiencia.

Beginning early in the sixteenth century, Nombre de Dios in Panama, Vera Cruz in Mexico, and Cartagena in Colombia were the only three ports in Spanish America authorized by the crown to trade with the homeland. By the mid-1560s, the system became regularized, and two fleets sailed annually from Spain, one to Mexico, and the other to southern ports. These fleets would then rendezvous at Havana and return together to Cádiz, Spain. In principle, this rigid system remained in effect until the eighteenth century. From the middle of the seventeenth century, however, as the strength and prosperity of Spain declined, annual visits became the exception.

Shipments of bullion and goods were to be delivered to Panama on the Pacific side for transport over the isthmus and return to Spain. Panama's own contribution to the loading of the fleet was relatively small. Gold production was never great, and little exportable surplus of agricultural and forest products was available. Nothing was manufactured in fact, Spain discouraged the production of finished goods. The colony's prosperity, therefore, fluctuated with the volume of trade, made up largely of Peruvian shipments. When the Inca gold was exhausted, great quantities of silver mined in Peru replaced gold in trade for 150 years, supplemented eventually by sugar, cotton, wine, indigo, cinchona, vanilla, and cacao.

Except for traffic in African slaves, foreign trade wa 2000 as forbidden unless the goods passed through Spain. Africans were brought to the colonies on contract (asiento) by Portuguese, English, Dutch, and French slavers, who were forbidden to trade in any other commodities. Spanish efforts to retain their monopoly on the rich profits from trade with their colonies provided a challenge to the rising maritime nations of Europe. Intermittent maritime warfare resulted in the Caribbean and later in the Pacific. The first serious interference with trade came from the English.

From 1572 to 1597, Francis Drake was associated with most of the assaults on Panama. Drake's activities demonstrated the indefensibility of the open roadstead of Nombre de Dios. In 1597 the Atlantic terminus of the trans-isthmian route was moved to Portobelo, one of the best natural harbors anywhere on the Spanish Main (the mainland of Spanish America).

Despite raids on shipments and ports, the registered legal import of precious metals increased threefold between 1550 and 1600. Panama's prosperity was at its peak during the first part of the seventeenth century. This was the time of the famous ferias (fairs, or exchange markets) of Portobelo, where European merchandise could be purchased to supply the commerce of the whole west coast south of Nicaragua. When a feria ended, Portobelo would revert to its quiet existence as a small seaport and garrison town.

Panama City also flourished on the profits of trade. Following reconstruction after a serious fire in 1644, contemporary accounts credit Panama City with 1,400 residences "of all types" (probably including slave huts) most business places, religious houses, and substantial residences were rebuilt of stone. Panama City was considered, after Mexico City and Lima, the most beautiful and opulent settlement in the West Indies.

Interest in a canal project was revived early in the seventeenth century by Philip III of Spain (1598-1621). The Council of the Indies dissuaded the king, arguing that a canal would draw attack from other European nations--an indication of the decline of Spanish sea power.

During the first quarter of the seventeenth century, trade between Spain and the isthmus remained undisturbed. At the same time, England, France, and the Netherlands, one or all almost constantly at war with Spain, began seizing colonies in the Caribbean. Such footholds in the West Indies encouraged the development of the buccaneers--English, French, Dutch, and Portuguese adventurers who preyed on Spanish shipping and ports with the tacit or open support of their governments. Because of their numbers and the closeness of their bases, the buccaneers were more effective against Spanish trade than the English had been during the previous century.

The volume of registered precious metal arriving in Spain fell from its peak in 1600 by 1660 volume was less than the amount registered a century before. Depletion of Peruvian mines, an increase in smuggling, and the buccaneers were causes of the decline.

Henry Morgan, a buccaneer who had held Portobelo for ransom in 1668, returned to Panama with a stronger force at the end of 1670. On January 29, 1671, Morgan appeared at Panama City. With 1,400 men he defeated the garrison of 2,600 in pitched battle outside the city, which he then looted. The officials and citizens fled, some to the country and others to Peru, having loaded their ships with the most important church and government funds and treasure. Panama City was destroyed by fire, probably from blown up powder stores, although the looters were blamed. After 4 weeks, Morgan left with 175 mule loads of loot and 600 prisoners. Two years later, a new city was founded at the location of the present-day capital and was heavily fortified.

The buccaneer scourge rapidly declined after 1688 mainly because of changing European alliances. By this time Spain was chronically bankrupt its population had fallen and it suffered internal government mismanagement and corruption.

Influenced by buccaneer reports about the ease with which the isthmus could be crossed--which suggested the possibility of digging a canal--William Paterson, founder and ex-governor of the Bank of England, organized a Scottish company to establish a colony in the San Blas area. Paterson landed on the Caribbean coast of the Darién late in 1698 with about 1,200 persons. Although well received by the Indians (as was anyone not Spanish), the colonists were poorly prepared for life in the tropics with its attendant diseases. Their notion of trade goods--European clothing, wigs, and English Bibles--was of little interest to the Indians. These colonists gave up after six months, unknowingly passing at sea reinforcements totaling another 1,600 people. The Spanish reacted to these new arrivals by establishing a blockade from the sea. The English capitulated and left in April 1700, having lost many lives, mostly from malnutrition and disease.

In Spain Bourbon kings replaced the Hapsburgs in 1700, and some liberalization of trade was introduced. These measures were too late for Panama, however. Spain's desperate efforts to maintain its colonial trade monopoly had been self-defeating. Cheaper goods supplied by England, France, and the Netherlands were welcomed by colonial officials and private traders alike. Dealing in contraband increased to the detriment of official trade. Fewer merchants came to the Portobelo feria to pay Spain's inflated prices because the foreign suppliers furnished cheaper goods at any port at which they could slip by or bribe the coastal guards. The situation worsened only five of the previously annual fleets were dispatched to Latin America between 1715 and 1736, a circumstance that increased contraband operations.

Panama's temporary loss of its independent audiencia, from 1718 to 1722, and the country's attachment to the Viceroyalty of Peru were probably engineered by powerful Peruvian merchants. They resented the venality of Panamanian officials and their ineffectiveness in suppressing the pirates (outlaws of no flag, as distinct from the buccaneers of the seventeenth century). Panama's weakness was further shown by its inability to protect itself against an invasion by the Miskito Indians of Nicaragua, who attacked from Laguna de Chiriquí. Another Indian uprising in the valley of the Río Tuira caused the whites to abandon the Darién.

The final blow to Panama's shrinking control of the transit trade between Latin America and Spain came before the mid- eighteenth century. As a provision of the Treaty of Utrecht at the end of the War of the Spanish Succession in 1713, Britain secured the right to supply African slaves to the Spanish colonies (4,800 a year for 30 years) and also to send 1 ship a year to Portobelo. The slave trade provision evidently satisfied both countries, but the trade in goods did not. Smuggling by British ships continued, and a highly organized contraband trade based in Jamaica--with the collusion of Panamanian merchants--nearly wiped out the legal trade. By 1739 the importance of the isthmus to Spain had seriously declined Spain again suppressed Panama's autonomy by making the region part of the Viceroyalty of New Granada (encompassing present-day Colombia, Venezula, Ecuador, and Panama).

In the same year, war broke out between Britain and Spain. A British military force took Portobelo and destroyed it. Panamanian historians maintain that this attack diverted Spanish trade from the trans-isthmian route. The Seville-Cádiz monopoly of colonial trade had been breached by royal decrees earlier in the century, and precedent was thus furnished for the merchants of the Latin American colonies to agitate for direct trade with Spain and for intercolonial trade. After 1740 the Pacific coast ports were permitted to trade directly via ships rounding Cape Horn, and the Portobelo feria was never held again.

Relaxing the trading laws benefited both Spanish America and Spain, but Panama's economic decline was serious. Transit trade had for so long furnished the profits on which Panama had flouriabe rished that there had been no incentive to develop any other economic base. After the suppression of its audiencia in 1751, Panama became a quiet backwater, a geographically isolated appendage of New Granada, scarcely self-supporting even in food and producing little for export.

In 1793, near the close of the colonial period, the first recorded attempt at a comprehensive census of the area that had comprised the Panamanian audiencia was made. Incomplete and doubtless omitting most of the Indian and cimarrón populat- ion, specifically excluding soldiers and priests, the census recorded 71,888 inhabitants, 7,857 of whom lived in Panama City. Other principal towns had populations ranging from 2,000 to a little over 5,000.

Social hierarchy in the colony was rigid. The most prestigious and rewarding positions were reserved for the peninsulares, those actually born in Spain. Criollos, those of Spanish ancestry but born in the colonies, occupied secondary posts in government and trade. Mestizos, usually offspring of Hispanic fathers and Indian mothers, engaged in farming, retail trade, and the provision of services. African and Indian slaves constituted an underclass. To the extent possible, Indians who escaped enslavement avoided Hispanic society altogether.

The church held a special place in society. Priests accompanied every expedition and were always counselors to the temporal leaders. The first bishop on the mainland came with Pedrarias. The bishop's authority, received from the king, made him in effect a vice governor. The bishopric was moved from Darién to Panama City in 1521. The relationship between church and government in the colony was closer than in Spain. Both the Roman Catholic Church and the monastic orders gained great wealth through tithes and land acquisition.

Data as of December 1987