At the time, it was the first permanent European settlement on the Pacific Ocean, replacing the two cities of Santa María la Antigua del Darién and Acla.

From 1520 some Genoese merchants ruled the commerce of Old Panama (Panamá Viejo) on the Pacific Ocean for a century, thanks to a concession given by the Spaniards, who had the Republic of Genoa as allies.

Either Morgan and his army started a fire that burned the city or the Captain General Emanuel Gonzalez Revilla ordered the explosion of the gunpowder magazines.

These contemporary accounts both strongly support the story that it was burned by its inhabitants; indeed there was no incentive for the English to set it alight as they had not had chance to loot it.

Morgan's attack caused the loss of thousands of lives (his report stated 400 Spanish casualies) and Panamá had to be rebuilt a few kilometres to the west on a new site (the current one).

Henry Morgan was arrested but, after proving he knew nothing of the recently completed Treaty of Madrid which ended hostilities between England and Spain, was subsequently freed and later rewarded.