The Casco Viejo — the "Old Quarter" founded in 1673 after Henry Morgan's pirates burned the original city to the ground — is the most rewarding neighbourhood in Panama City and, arguably, in all of Central America. It is a compact grid of colonial streets pressing up against the Pacific on a small peninsula, and it rewards wandering: Spanish and French colonial mansions in various states of glory and decay, small plazas shaded by mango trees, the cathedral towers rising above the rooftops, and glimpses of the modern skyline across the bay in every other direction.
The two main plazas are Plaza de la Independencia (where independence from Spain was declared in 1821, and where the Cathedral Metropolitana faces the square with its distinctive mother-of-pearl towers) and Plaza Bolívar, a quieter square with an outdoor café culture and the Church of San Francisco on one side. The single most distinctive artefact in the Casco is the golden altar in the Church of San José — a baroque marvel in hammered gold leaf, which according to local legend was painted black by a canny priest to disguise its value when Morgan's forces came looting. Whether or not the story is entirely true, the altar is extraordinary.
Twenty years ago the Casco was a crumbling slum. Successive waves of restoration, UNESCO listing, and gentrification have transformed it into Panama City's most fashionable address, and the displacement of original residents and the creep of boutique hotels is a real and ongoing tension. The neighbourhood is safe and lively, and the best restaurants in the country are here. Stay in the Casco if your budget allows; even if not, you will spend most of your evenings here.