The answer is (of course) that they were worn by workers on the Panama canal in the 19th century to protect them from the sun. So despite being woven in and exported from Ecuador since 17th century, travellers to the Panama area came to call them Panamas.
They are made from the toquilla palm, which grows best in the humid, hilly inland regions of the Ecuadorian coast. The fibres are prepared in the coastal villages, then transported to Cuenca where they are woven and shaped into hats for tourists like us...

(don't worry, we resisted the temptation to buy!)
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