- Colon City is a port city located on the Caribbean coast of Panama. It is situated at the entrance of the Panama Canal and plays a significant role in international trade and shipping. Colon City is known for its free trade zone, which is the largest in the Americas and is a popular destination for shopping and commerce. The city has a rich history and is home to various cultural attractions, including historic buildings, museums, and festivals. However, Colon City also faces challenges such as poverty, crime, and a deteriorating infrastructure.