In Panama, say, a little place where I live (7)
I believe the answer is:
habitat
'place where i live' is the definition.
I can't judge whether this defines the answer.
'in panama say a little' is the wordplay.
'in' is an insertion indicator.
'panama say' becomes 'hat' (panama is a kind of hat).
'a little' becomes 'abit' ('a bit' can be a synonym of 'a little'**).
'hat' going around 'abit' is 'HABITAT'.
Can you help me to learn more?
(Other definitions for habitat that I've seen before include "Animal's natural home" , "Natural environment, plant or animal" , "British retailer" , "Living area" , "Surrender" .)