Burning of Panama and The Loss of English Support
He recaptured the island of Santa Catalina on 15 December 1670 and, on 27 December, he gained possession of the fortress of San Lorenzo in the Caribbean coast of Panama, killing 300 men of the garrison and leaving 23 alive. Then with 1,400 men he ascended the Chagres River towards the Pacific coast and Panama City.
On 28 January 1671, Morgan discovered that Panama had roughly 1,200 infantry. He split his forces in two, using one to march through the forest and flank the enemy. The Spaniards were untrained and rushed Morgan's line where he cut them down with gunfire, only to have his flankers emerge and finish off the rest of the Spanish soldiers. Although Panama was at the time the richest city in New Spain, Morgan and his men obtained far less plunder than they had expected. Much of the city's wealth had been removed onto a Spanish ship that then stood out into the Gulf of Panama, beyond the looters' reach. Most of the inhabitants' remaining goods were destroyed in a fire of unclear cause. Morgan's men tortured those residents of Panama they could catch, but very little gold was forthcoming from the victims. After Morgan's attack, the Panama city had to be rebuilt in a new site a few kilometres to the west (the current site). The former site is called Panamá Viejo and still contains the remaining parts of the old Panama City.
Because the sack of Panama violated the 1670 peace treaty between England and Spain, Morgan was arrested and conducted to the Kingdom of England in 1672. He proved he had no knowledge of the treaty. Instead of punishment, Morgan was knighted in 1674 before returning to Jamaica the following year to take up the post of Lieutenant Governor.
By 1681, then-acting governor Morgan had fallen out of favour with King Charles II, who was intent on weakening the semi-autonomous Jamaican Council, and was replaced by long-time political rival Thomas Lynch. He gained considerable weight and a reputation for rowdy drunkenness.
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