Facing easily the most pressure-packed atmosphere in the competition to date with an impressive and vocal crowd at the Estadio Rommel Fernandez, Canada was on the board just five minutes in as fellow Whitecaps FC Residency product Matthew Chow launched in a long cross from the left side.
Bustos had a lot of distance to cover to get on the end of the cross, but he made up a lot of ground and threw himself after the ball for a fantastic diving header from close range.
Panama slowly took control of the encounter thereafter, and in the 36th minute, Diaz tied the game when he emphatically volleyed a cross from the right side just before halftime.
Panama continued that pressure in the second half as they once again asked questions of the Canadian backline, and Canada responded well to every challenge they faced.
But with just ten minutes remaining, Zorilla finally gave Panama a deserved winner when he lashed his low shot just inside the right post of Canadian goalkeeper Marco Carducci, also of the Whitecaps FC Residency program.
Canada had a chance in the 88th minute when a number of Canadians were behind the Panamanian backline on a free kick. They were perhaps offside but their chance was saved from close range.
The third place game takes place on Friday and the draw for the World Cup, to be played in the United Arab Emirates, takes place at the end of August.