PANAMA CITY -- Part old-world Havana, part cutting-edge culinary outpost, and part gentrification on steroids, the Casco Viejo just might be the most fascinating neighborhood in the Americas.

It features desperately poor slums next to million-dollar penthouses and neighborhood variety stores next to fusion restaurants run by celebrity chefs. And it all sits on a privileged spot at the edge of Panama City, surrounded by gorgeous views of the Pacific Ocean on three sides.

The neighborhood has received its share of hype over the past few years. Travel writers have mused that it might become the next South Beach. Real estate investors, thoroughly enchanted by its romantic balconies festooned with colorful flowers, have called it one of the hemisphere's best-kept secrets. So when a working trip to Panama City materialized, I jumped at the chance to stay in the Casco Viejo.

My first problem was finding a place to stay. Panama City is filled with hotels, but nearly all are crammed into the city's glitzy banking district, where American chains inhabit glass skyscrapers and where finding a room for less than $200 a night is an extreme sport. Lodging in the Casco Viejo is all but nonexistent, save for a backpacker hostel and a tiny boutique hotel that is often full.

Luckily, I stumbled on Los Cuatro Tulipanes, which rents out fully furnished apartments, the kind of swank pads that are blooming throughout the district, starting at $165 a night. I scored a third-floor apartment with a balcony that overlooked two construction sites, but which also offered glimpses of the Panama City Bay and the distant skyscrapers of downtown. My neighbors across the street lived in a dilapidated triple-decker with a broken front door and crumbling staircase.

The ride to the Casco Viejo from the airport takes you through some of Panama City's most dangerous neighborhoods. My taxi driver couldn't quite believe I was staying there and kept warning that the streets were filled with potential attackers. But I was reassured when the apartment ended up being a block away from the tourist police headquarters (set up in 2005 as part of the effort to rejuvenate the Casco Viejo) and a few streets from the official residence of Panama's president.

GOURMETS, GANGS

Within a two-block radius I found a gourmet ice cream shop run by French expatriates, a seafood fusion restaurant with legendary 12-course tasting menus, an abandoned building taken over by a local gang, an authentic Cuban bar with the best mojitos I've ever tasted, a 350-year-old church that was once ransacked by the pirate Henry Morgan, and the scary ruins of Manuel Noriega's former pleasure palace.

And of course, building after amazing building was being gutted and renovated. Five years ago, the buildings housed dozens of poor families behind their historic facades. In another five they will be condominiums, expensive hotels and museums.

For many visitors, it is this mingling of old-world charm -- neighborhood kids playing soccer in the street, laundry hung across balconies -- with bohemian chic that gives the Casco Viejo its allure. But most believe that within a decade or two, nearly all traces of the neighborhood's hardscrabble past will be erased.

So how did the Casco Viejo arrive at this point in its history? I found some of the answers by taking an excellent tour of the area with a local guide named Arminta Owens.

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