Is Panama the Americas' Hong Kong?

The groundbreaking at the Panama Canal on Sept. 3 won't involve the usual golden shovels; instead, dignitaries of the order of Organization of American States Secretary General Jose Miguel Insulza and former U.S. President Jimmy Carter will be treated to a large explosion. And while the detonation is officially meant to kick off a $5.25 billion expansion of the Canal that will include a third, larger set of locks, to many Panamanians the moment will symbolize the demolition of their nation's century-old image as a U.S.-created banana republic. "This may even transform Panama into a First World country," boasts maritime worker Juan Carlos Croston.

Croston was born in 1976, shortly before Carter and the late Panamanian strongman, Brigadier General Omar Torrijos, signed the 1977 treaty that transferred ownership of the Canal from the U.S. to Panama on Dec. 31, 1999. Many Panamanians consider that date "their real independence day," says Guillermo Chapman, who sits on the Canal's board of directors. Panama, in fact, was created in 1903, when the territory broke away from Colombia with more than a little help from the U.S., which wanted to build a canal across the narrow isthmus. The Canal was the country's reason for existence, and as long as it was controlled by Washington, Panama could never feel truly independent. Its dysfunctional political history, marked by brutal dictators like General Manuel Noriega, who now sits in a Miami prison, only exacerbated the inferiority complex of the tiny nation of 3.2 million people. (Noriega is scheduled for release on September 9, and could be extradited to Panama to serve prison time since he was already convicted in abstentia on murder charges there.)

Since taking charge of its prime asset, Panama has brought a new business efficiency to the 50-mile-long waterway, doubling the annual toll income of the Panama Canal Authority to $1.5 billion. That performance is a big reason Panamanians last year approved the expansion, which, when finished in 2014 (the centennial of the Canal's original completion), will allow the world's new supersize container vessels to transit the Canal, potentially raising revenue to $5 billion a year by 2025. Boosters hope that such gains would help turn Panama from a Caribbean backwater to the Hong Kong of the Americas by attracting myriad large-scale maritime and financial enterprises. Many of those domestic and foreign investments are under way, evidenced by the dozens of construction cranes and new skyscrapers towering over Panama City today.

It is this coming of age in the global economy that Monday's blast is intended to celebrate. "We are unique," says Ebrahim Asvat, a lawyer and first-generation Panamanian of Indian descent. "We are not like other Central American countries." Adds Authority Administrator Alberto Aleman, "We see the Canal with long lights. The decisions, mistakes and rewards are ours and only ours."

Much of Panama shares this newfound sense of pride and confidence. The Canal Zone, which during the 20th century had been a yanqui colonial and military enclave, has given way to resort hotels, new housing developments and an industrial district. An education- and technology-oriented "City of Knowledge" has supplanted the old headquarters of the U.S. Army South, while Howard Air Force base — the largest U.S. base in Latin America before the Canal handover — is under commercial development.

The question is whether Panama's nagging reputation for corruption will also be blown away by the ceremonial explosion. Some 40% of Panamanians still live in poverty — and, in a recent poll, only 22% of them indicated they believed the project would bring economic benefits to the wider population. President Martin Torrijos, son of Omar Torrijos, has pushed a number of anti-corruption measures — one anti-corruption prosecutor is currently investigating allegations of bribery on the Supreme Court — and has promised that the lion's share of revenues generated by the Canal's expansion will go to anti-poverty programs such as education reform.

But first the Canal has to produce that new wealth. Aleman insists the expansion "is exactly on schedule." Former Foreign Minister Jorge Ritter recalls the domestic political cost paid by President Carter for agreeing to hand back the Canal — one reason Panamanians are especially pleased Carter will attend Monday's event. "Carter will be assured," says Ritter, "that he made the correct decision. It has worked for the best."