STICKING out of the dense jungle like a giant yellow golf ball is the Canopy Tower Lodge. Once an American radar station used to intercept aircraft transporting drugs from South America, it is now one of Panama’s premier bases for bird-watching. Renovated into a hotel by a local entrepreneur, its 360-degree wrap-around deck is the ideal place for observing nothing more menacing than colourful keel-billed toucans.

The Canopy Tower is just one of many start-up enterprises that are cropping up throughout Panama as the country plays catch-up with its better-known neighbours. Others include the beachside cabins of Hacienda del Mar, Los Establos Boquete, set in the cloudforest of Boquete, and the private island eco- resort of Islas Secas. Until 1999 this small Central American country was a de facto colony of the US, best-known for its canal and the tinpot dictator Manuel Noriega. Now both the Americans and Noriega are history and Panama is coming to grips with a global economy beyond the comforting blanket of US protection.

Compared with its regional neighbours Costa Rica and Guatemala, Panama’s tourist infrastructure is tiny. But that’s not a problem for the guests at the Canopy Tower. They are here for one thing only — birds. In Panama that means an estimated 960 species, the country’s biggest draw for foreign visitors.

On my second morning I was up before the hummingbirds. With a place chosen on the Canopy’s observation deck, I had clear views over the treetops 40ft (12m) above the jungle floor. I wasn’t left alone for long, however. Soon the birding guests surrounded me, all armed with spotting scopes, cameras with huge lenses and binoculars. It looked more like a day at the races than a quiet morning in the jungle. But the excitement was palpable and the conversation subdued. The names of birds were quietly bandied about in awe, as if they were Hollywood stars. There was the rufous motmot, with its bright orange chest and black mask; the slaty-tailed trogon, the size of a large robin with vibrant plumage; and the ground-dwelling great tinamou — all names that meant nothing to me. Without a doubt, though, the bird we all hoped to see most was the rare resplendent quetzal, the holy grail of birding in Central America.

Holy or not, after a couple of eye-straining hours, I gave it up. Still, for a novice like me, seeing parrots and toucans in the wild was exciting enough. And for many of Panama’s visitors, birding is serious business. “This goes far beyond a hobby,” said Carlos Bethancourt, a Canopy Tower guide. “If the Americans, Canadians and Germans are a bit eccentric, then the English are insane. They never tire. They bird from sun-up to sundown, and still want more. I often spend the better part of my nights with them in a Jeep looking for owls.”

Tourism in Panama sits on a precarious fence that sways between the desire to take advantage of the rich pickings from mass-market tourism and the need to preserve as much biosphere as possible. Nowhere in the country does the clash between large developers and small eco-businesses get more heated than in the pristine environment of Bocas del Toro on the northwest coast.

Bocas, as the locals call it, is an archipelago made up of hundreds of coral atolls and sandy-beached islands, only six of which have any significant populations. It has been called the new Galapagos because of its abundant bird and marine life, and, like its South American counterpart, it is potentially under threat from over-development. However, unlike the Galapagos, the development is not so much to service growing numbers of tourists but to accommodate thousands of pensioners fleeing the high prices amd cold weather of North America and Europe.

“There are huge condominium projects being built on Bastimentos Island,” said Melanie Belanger, of Ancon Expeditions. “The problem is (the developers) don’t care about the environment. To get construction equipment in, they will have to destroy large chunks of the coral reef.”

Face down in the warm blue waters of the Caribbean, listening only to the rhythm of my breathing through a snorkel, it was difficult to get my head around the economic and environmental problems of mere mortals. Just a few feet below me were cities of coral in all colours, shapes and sizes, while trigger and parrot fish commuted between one outcrop and another. My only hope was that the Panamanian Government has the strength to keep development in check and realise that it’s the country’s state of nature that is its ultimate resource.

Probably the first group to understand the power of the tourist economy was the indigenous people of the Kuna Yala archipelago, which comprises 365 islands, 49 of which are inhabited. The Kuna have been self-ruled since 1930 and fiercely protect their autonomy, keeping firm control over visitor numbers to the region.

To all intents and purposes each inhabited island is a franchise, all banking on the saleability of the Kuna culture. On arrival visitors pay a fee from £1.75 to £3 to village elders, and one photograph equals one dollar — no exceptions.

Farther north, in the highlands of Chiriquí Province, lies the picturesque town of Boquete, the centre of Panama’s adventure travel and coffee industries. In the fertile volcanic soil of the surrounding valleys some of the world’s best beans are grown, but in the past few years many plantations have disappeared, replaced by housing projects aimed at pensioners moving to the area.

Still, not everyone views development with a gloomy eye. John Collins, owner-operator of the Finca Lerida, one of the few remaining coffee plantations, is quietly optimistic. “The downside is the price of land has doubled,” he said. “But with the increased number of residents there has been a significant rise in tourism. As a result Boquete has boomed in the past five years.” The boom has resulted in a rapid increase in ventures taking advantage of Chiriqu í’s natural mountainous attributes: hiking, birding and whitewater rafting.

“The minute I came to Boquete and hiked the surrounding mountains I saw the potential,” said American Charlie Hearn, of Panama Rafters. “There are few places I’ve been to in the world where you can raft a river with class five rapids in an environment that is so pristine and so warm.”

What residents such as Collins hope for is balance. They want to see tourism grow, but in a moderate and planned way. “Our goal is to make tourism sustainable,” he said. “To make a living and at the same time protect the environment.”

NEED TO KNOW

Journey Latin America (020-8747 8315, www.journeylatinamerica.co.uk) organises tailor-made holidays to Panama. A 12-night tour taking in Panama City and the Canal, Boquete and the Bocas del Toro archipelago starts at £2,041pp. This includes international and domestic flights, transfers, 12 nights’ accommodation with some meals and guided excursions. A three-day extension to the San Blas islands costs from £224pp, including domestic flights and full board.

Reading: Panama (Bradt Guides, £13.99).

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