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The economic history of Panama during the 19th century is generally 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. [ABSTRACT FROM AUTHOR]

Between 1853 and 1885, the governing principle of federalism was practically unquestioned by Colombian elites. Despite the abundant historiography on the period, what federalism meant to different actors, and the politics of its institutionalization, have not been systematically addressed. This article reviews this historiography searching for clues with which to answer these questions. It first describes the gap in the historiography regarding the problem. Then it examines the topic from the perspective of the literature on state formation. Third, it examines the most current explanations regarding the adoption of federalism. The article ends with a discussion of where we stand on the question and offers some perspectives. [ABSTRACT FROM AUTHOR]