Federalism and Taxation in the Sovereign State of Panama, 1850-1886


The economic history of Panama during the 19th century is generaly unknown in Colombia and its financial accounts present a puzzle which is difficult to unravel. This investigation contributes to the elucidation of both problems; taking into account demography, geography and fiscal accounts as they appear in the budges of the State of Panama. The subsidiary hypothesis is that the federalist system that Colombia chose between 1855 and 1886 constituted an acceptable modus vivendi between the Panamanian elites and the Colombian political center. The strategic interests of Panama, however, were growingly compromised by the centralist political system that was put in place through the 1886 Constitution. The failure of the French initiative to build the Canal, the Colombian civil war of 1899-1902 won by the conservatives and the rejection of the Herrán-Hey treaty (which would have allowed the U.S to build the canal) all combined to convince the Panamanian elite to abandon Colombia at the hands of the American Empire.