Panama City on the Rise: Located on the Pacific Ocean entrance to the Panama Canal, this capital city is undergoing a massive transformation involving critical historic restoration and essential new development.

• Position: Panama City, Panama

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Guests checking in to Panama City's five-star Miramar InterContinental Hotel found something other than the customary fruit basket by their nightstand during the first months of 2009: complementary ear plugs. The ordinarily tranquil bayside setting had become a frenzy of nonstop construction activity as crews worked around the clock to complete a much needed traffic artery in one of the city's most congested districts. At night, the scene took on a surreal quality as laborers in hard hats toiled under stadium-size lighting grids. The thunder of jackhammers and trucks disgorging loads of fill obliterated the customary twilight chorus of crickets, frogs, and birds.

Such is the reality of Panama City today, where the pace of growth is so frantic the skyline seems to change by the minute. Long confined to a narrow strip of land hemmed in by Pacific Ocean, the Panama Canal, and the former Canal Zone; the city has struggled to exercise even minimally effective control over its haphazard urban development and chaotic traffic. The ability to expand into the former zone--Panamanian territory since it was handed over by the United States a decade ago--has relieved some growing pains. The former Albrook Air Force Base, for example, is now the site of the city's modern bus terminal and a large retail mall, while other former US facilities house a university campus, national police headquarters, and other governmental agencies. Usable land, however, is always at a premium. One striking case in point is Costa del Este, once a sanitary landfill; now home to one of the city's most exclusive residential developments.

And while it does claim some of the best infrastructure of any Latin American city--tap water is safe to drink, for instance--this cosmopolitan home to 1.2 million is often in such a hurry to get to its future that it rudely brushes aside its past. The traditional residential neighborhood of Bella Vista offers a painful example. Most of its lovely Spanish-style homes, once coveted by the city's elite, have gone under the wrecking ball to make room for a sea of look-alike high-rise apartment buildings.

Like Rio de Janeiro, Vancouver, and a small handful of other major metropolises, Panama City occupies a physical setting that is uncommonly imposing. The crescent-shaped Bay of Panama stretches invitingly between the bookend peninsulas of San Felipe and Punta Paitilla. The dome-shaped Cerro Ancón and its tangle of greenery offer an imposing backdrop to the city's oldest neighborhood. And the hiking trails of the Metropolitan Park, said to be the world's only rainforest located within a major city, offer the harried a quick escape from the rigors of city life. A flair for distinctive architecture--from grandiose artifacts of the Spanish colonial era, to wood-frame Caribbean plantation-style structures and sparkling skyscrapers--further contributes to the city's uniqueness.

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In 1970, when the population of Panama City was less than 400,000, The South American Handbook , the authoritative British-published travel guide, described the city as "a curious blend of Old Spain, American progress, and the bazaar atmosphere of the East. It is a city of beautiful homes, squalid slums now gradually disappearing, modern buildings, tawdry honkytonks, priceless treasures, and a polyglot population unequalled in any other Latin American city."

Today, many of those observations still ring true. From a stunning skyline that reminds many visitors of Miami and...