Panama’s minister of public works Federico Suárez announced work has begun on the 14km long line which includes 11 stations and expected to open in 2013.
Spanish construction giant FCC, along with Brazilian company Norberto Odebrecht and French firm Alstom has begun construction in a €1bn (£0.85bn) contract.
Line 1 will run from north to south, linking Panama city centre with the suburbs in the east, which is currently served by a poor public transport service. It will connect the national bus terminal in Albrook to the Los Andes shopping mall to the north of Panama City.
This new mass transit system, the first in Central America, seeks to modernise Panama City’s transport system and broadly replace the bus system, whose fleet has been operating for over 40 years. In its initial phase, the metro line will have capacity for 15,000 people per hour each way, increasing to 40,000 each way by 2035.