British and American credit markets to their knees. Consequently Panama's banks have been shielded from the construction bust affecting their own country.

It seems extraordinary, but while the great American firms Citibank, Lehman Brothers, Bear Stearns and Merrill Lynch operated like two-bit casinos in the past decade, the Panamanians were models of financial prudence.

Back when these banks' clients were less savoury, their owners learned the importance of not jeopardising their investors' capital. The risks had been taken in amassing the money. The banks' role was not to lose it. The costs of doing so could be more painful than a lawsuit.

While firms around the world struggle to borrow money, the Panamanian government recently secured a multi-billion dollar round of financing, at generous terms, to expand the canal. Traffic along the canal may fall along with global trade, but it

remains effectively uncontested as the most cost-effective route between the Pacific and Atlantic Oceans.

Two decisions in the 1970s laid the path for Panama's current economic success. First it adopted Swiss banking laws, then the corporate laws of Delaware, the American state regarded as the friendliest to business.

Today, multinational corporations, from Hewlett Packard and Proctor and Gamble to Caterpillar have established major operations in Panama, finding it to be stable, sophisticated and accessible.

There is a new Frank Gehry-designed Museum of Biodiversity opening in Panama City, which its builders hope will become to the Panama Canal what the Opera House is to Sydney Harbour.

It is all a long way from December 1999, when the United States ceded control of the canal to Panama. "When it was first proposed that the world hand a major global asset to a little chicken-shit, Third World country, the presumption was they would fuck it up," says Bobby Eisenmann, the founder of Panama's leading newspaper La Prensa. "So when we didn't the reaction has been geometrically positive."