A man, a plan, a canal

Panama was the engineering miracle that changed the world by dividing a continent.

You know the Volkswagen TV ad in which a dentist persuades his patient to open wider by mentioning how inexpensive a Golf is? The Panama canal is a bit like that. When you first glimpse the superstructure of a cruise liner floating serenely above a tropical rain-forest atop the Continental Divide, see if your jaw doesn't plummet into the tightly knotted undergrowth that binds the waist of Panama. The deep scar that the canal has carved through Central America makes the Channel Tunnel seem mere macaroni beneath the surface of the earth.

The isthmus's importance was sealed one day in 1513, when Vasco Nunez de Balboa led a straggle of Spanish colonists on a 27-day march from the Atlantic across to the Pacific. He was beheaded shortly afterwards, which diminished the thrill. But the journey pinpointed the shortest distance between the Atlantic and Pacific oceans, and Panama became the world's short cut.

Under Spanish rule, the isthmus was the transhipment route for all the riches of Peru and Bolivia - gold and silver were hauled across the spine of the Americas by mule to waiting galleons. But it was the growing prosperity of the US that created the canal. For much of the 19th century, the journey from the US eastern seaboard to the West Coast required a long and dangerous voyage around Cape Horn or a messy boat-and-rail journey across Central America. The transcontinental railways helped, but the growth in world trade made it imperative to link the Pacific to the Atlantic.

The first attempt, a grand projet orchestrated by Ferdinand de Lesseps - the man who built the Suez canal - cost 22,000 lives and ended in failure. American engineers took over the project. They realised that the key was to eradicate malaria along the course of the canal, so that Chinese, Indian and African labourers imported for the task would live long enough for it to be completed. They did, and it was, in 1914.

The "Big Ditch" also constitutes a link between two worlds - with all the terrifying power that represents. So the US felt obliged to appropriate the territory through which it passes. But 12 hours before 1 January, 2000, it will be handed back lock, stock and reservoir to the people of Panama.

Let's hope they continue to reap its touristic as well as strategic potential. I have traversed Panama twice, each time along the Trans-Isthmian Highway (try saying that after half a dozen bottles of Soberana, the strong local beer that leaves you far from sober) which parallels the canal and gives access to the locks - themselves symphonies of engineering, harmoniously ushering ships across a continent.

Canal-watching is a spectator sport at Miraflores, the first set of locks after Panama City. From a grandstand, you watch the painful process of guiding a freighter through a lock only just large enough to hold it. The work is done by "mules", tiny railway locomotives that resemble escapees from a child's train set as they struggle to manoeuvre the ship towering above them.

While this spectacle unfolds, a tour guide bombards you with figures. In its 83 years of existence, the canal has carried 80,000 vessels. Fees are calculated according to displacement; hence the lowest was 36 cents, paid in 1928 by a lone swimmer who successfully paddled from one ocean to the other. Today the average ship pays $30,000 for what is described as a "quality transit service".

The canal is strung out between two of Central America's most atmospheric cities. Now this is a region where "atmospheric" is often used as a euphemism, and such is the case with Balboa and Coln - respectively Pacific and Caribbean termini of the canal. Coln is a creaky old place where worn- out or burnt-out buildings are outnumbered only by curious characters; this is not a city for amateurs.

Just along the coast, though, the town of Portobelo is a collection of colonial ruins in an improbably beautiful location. For a century or two, the natural harbour at Portobelo - where Columbus's ship once sheltered - was about the richest place in the world. Nowadays, it is a beautiful and calm haven. The warehouses were abandoned long ago, and the jungle is creeping up on the ruins. Portobelo these days trades only in lazy ambience.

In utter contrast, Balboa has the feel of an affluent American suburb - basically because that's what it is. The capital of the Panama Canal is pure small town US - full of neatly cropped lawns, gum-chewing all- American kids and scowling GIs. They are guarding an investment that reverts to its natural parent at noon on 31 December 1999, but until then generates a million dollars a day in tolls.

The Bridge of the Americas, carrying the Pan-American Highway, frames the mighty ships that jostle for the front of the queue through to the Atlantic, and marks a suitably grand entrance to the Pacific for vessels completing the southbound transit. This is truly one of the nodes of the world. Even if you stay on dry land, canals are excellent means to an end. And Panama, in all its jaw-dropping glory, is the finest means, with the finest ends, of them all.

Panama particulars

Getting there: there are no direct flights between the UK and Panama City. South American Experience (0171-976 5511) has flights on Cubana via Havana for pounds 501; Avianca via Bogot for pounds 531; or on Iberia via Madrid for pounds 1 more. All these fares include tax.

Further information: British passport holders do not require visas. Limited tourist information is available from the Consulate-General of Panama at Panama House, 40 Hertford Street,

London W1Y 7TG (0171-409 2255).