I found some great treasures for my collection on my trip to Panama City. Check out:
Karavan Gallery: Great selection of paintings, folk art and Panamanian Kuna Indian molas already made into pillows. I thought it was one of the best stores I found in Casco Viejo and bought five pillows and three small paintings!
Papiro y Yo Handmade Products: Since 2009, this attractive store sells paper, fiber and can tabs made into jewelry, accessories, art, gifts and stationery items. It is located at Condominio Callejon del Chicheme, Local #1 Calle 4 in Casco Viejo.
Galerias de Arte Indigena, at Calle 1, No. 844: Here I found the best selection in town of the incredible Hösig Di Younaan Rainforest baskets. I had seen several in US galleries that were very expensive, here you can find hundreds of baskets at all price points. They are truly exquisite so leave room on your credit card. The store also had a large selection of molas and masks to choose from.
There are also some small craft markets in Casco Viejo where you can find some local handicrafts.