It's been nine years since the Panama Canal was returned to sole Panamanian rule following almost a century of U.S. control. Since that time, Panama a slim slice of a nation wedged between the Pacific and the Caribbean has quietly emerged as Central America's must-discover hidden gem. And no wonder. With its mix of the eco (dense tropical rain forests), urban (a Miami-like skyline) and aquatic (crystalline diving sites), Panama is an all-in-one destination where the dollar is legal tender and still manages to go a long way.
Nowhere does it stretch further than in the Casco Viejo, Panama City's quaint, compact, colonial-era Old Town. Dating from the early-16th century and surrounded on three sides by the Pacific, the Casco as it is affectionately known by locals was named a UNESCO World Heritage Site in 1997 and served as the backdrop for much of the action in the latest James Bond film Quantum of Solace. The Casco's appeal is clear: grand cathedrals, fountain-filled plazas, timeworn cobblestone streets, even a bullet-scarred Presidential palace, which was attacked during the 1989 U.S. invasion. And now its mélange of Spanish, French, neoclassical and Caribbean architecture is being lovingly restored by farsighted investors. (See a special report on James Bond.)
While most of the development is still to get under way, a clutch of Casco cafés, hotels and cultural sites have already had their makeovers. The most eye-catching is the Canal House Hotel (www.canalhousepanama.com), an elegantly renovated late 19th century mansion where actor Daniel Craig stayed during the three-month Bond shoot. The hotel's three guest rooms are named after the Canal's massive locks Miraflores, Pedro Miguel and Gatun and each has a wrought-iron balcony with views of the Casco's Cathedral Plaza and surrounding red-tiled roofs and cobblestone alleyways.
At the heart of the Casco are three squares: Plazas Bolivar, Herrera and Independencia, the site of the city's dramatic 17th century cathedral. Moments away you'll find numerous Casco newcomers places like Indigo (www.indigopanama.com), a North African–inspired restaurant and lounge, and Ego Café, tel: (507) 262 2045, with its adventurous Panamanian-Mediterranean menu. You can sample rich ice creams and sorbets from basil to Earl Grey at Granclement, tel: (507) 228 0737; browse through intricately carved wooden crafts at Karavan Gallery, tel: (507) 228 5161; and take home one-of-a-kind pieces by local artists from Casa Gongora, tel: (507) 506 5836, a gallery and museum in one of the Casco's oldest surviving buildings, which dates from 1756.
End the day with a sunset stroll along the promenade on the Pacific to see Panama both old (Las Bovedas, a 17th century Spanish fort) and new (Frank Gehry's Museum of Biodiversity, which is still under construction but rising rapidly) before heading to the recently opened Pony Club (www.limoncillo.com) for dinner. Panamanian chef Clara Icaza has worked at Manhattan hot spot Aquavit, and her nuevo-Panamanian menu includes signature dishes such as Turkolimano (grilled jumbo prawns, tomato and feta with lemon-ouzo vinaigrette) and squid risotto in a broth of octopus and roasted red pepper, all served in a pale-wood dining room and accompanied by an ambitious wine list. After dinner, it's just a short drive back to the Casco Viejo and its many historic glories.
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