Panama is an S-shaped tropical isthmus linking Central America and South America. It is bordered on the west by Costa Rica and on the east by Colombia. It is slightly larger in area than West Virginia.

THE PEOPLE - The country has 2.2 million people, 70 percent of them a mixture of Spanish and Indian descent. Fourteen percent are West Indian, 10 percent are Caucasian and 6 percent Indian. Spanish is the official language, but English is widely spoken. The main religion is Roman Catholicism.THE GOVERNMENT - The government is headed by acting President Manuel Solis Palma, who is to turn over power to the next elected president on Sept. 1. Panama's de facto leader is Gen. Manuel Antonio Noriega, the armed forces chief who engineered the ouster of President Eric Arturo Delvalle in February 1988. Delvalle had tried to fire Noriega, who was indicted in Florida on drug trafficking and money laundering charges. Noriega has denied the charges.

The United States, which has continued to recognize Delvalle, imposed economic sanctions against Panama in an effort to force Noriega from power.

THE CANAL - The 51-mile Panama Canal that connects the Atlantic and Pacific oceans was built by the United States from 1904 to 1914 on territory leased from Panama.

Treaties signed by then-President Carter and Torrijos in 1977 will transfer control of the canal and its defense to Panama on Dec. 31, 1999.

THE ECONOMY - Panama was a leading international financial center with about 120 banks holding an estimated $30 billion in assets. But a flight of capital caused by the political struggle over Noriega's rule has sharply reduced assets to about $8 billion, according to government figures.

U.S. officials have complained that secret bank accounts the country offered as business enticements helped make Panama a haven for illegally laundered drug money.