The lush landscapes of El Zaino y La Arenosa in western Panama, home to farming and fishing communities, may soon be submerged under a man-made reservoir designed to secure the future of the Panama Canal amid worsening drought conditions. The proposed $1.6 billion Rio Indio dam project, led by the Panama Canal Authority, aims to ensure a sustainable water supply for the canal’s locks, but not without significant trade-offs, including the displacement of thousands of residents and environmental concerns.

Read also: Panama Canal Posts $3.45 Billion Profit Despite Drought-Driven Shipping Reductions

A Community in Transition

Tres Hermanas, a town with farms, schools, churches, and a medical clinic, is among dozens of communities slated for relocation if the project advances. Residents are divided: while some demand fair compensation, others are determined to stay. Community opposition, as seen in previous projects, poses a potential risk to the dam’s approval.

“We were born and raised here. If we leave, it is not because we want to, but because we’ll have to,” said Paulino Alabarca, a rice farmer from Tres Hermanas.

The Canal’s Economic and Global Importance

The Panama Canal accounts for 3.1% of Panama’s GDP and facilitates 2.5% of global seaborne trade, serving as a critical link for U.S. imports from Asia and exports like liquefied natural gas. However, recurring droughts have increasingly threatened its operations. The Rio Indio reservoir would provide up to 15 additional vessel transits per day during the dry season while also supplying drinking water to Panama’s 4.5 million residents.

Deputy Canal Administrator Ilya Espino de Marotta described the project as “the most complete solution for a 50-year horizon,” though it still requires public consultations, cabinet approval, and legislative endorsement. The dam is projected for completion by 2031, but delays remain a concern, especially given recent public opposition to other major projects.

Balancing Displacement and Compensation

The project would necessitate the relocation of approximately 2,260 people and impact an additional 2,000 residents. To address these disruptions, the government has allocated $400 million for social components, including relocations. Critics, however, argue that the compensation plans lack clarity. Activist groups like the Countrymen Coordinator for Life have voiced concerns about environmental degradation and insufficient relocation details.

“No farmer wants to live in a slum,” said Dilubino Agraje, representing affected communities.

Weighing Environmental and Alternative Solutions

Environmentalists warn of deforestation, biodiversity loss, and downstream ecological impacts. LeRoy Poff, an aquatic ecology expert, emphasized the importance of preserving healthy rivers amid climate change. An alternative proposal to transfer water from the Bayano River reservoir, which would not require relocations, was previously discarded due to logistical challenges and higher costs. However, the idea continues to gain traction among communities seeking less disruptive solutions.

Preparing for a Dry Future

With the next El Niño weather phenomenon expected in 2027, the canal’s resilience is under scrutiny. Interim measures include altering the reservation model, encouraging cargo consolidation, and implementing water recycling initiatives.

Canal Minister José Icaza stressed the Rio Indio project’s importance for the canal’s survival, while Espino acknowledged that both the Rio Indio and Bayano solutions might eventually be necessary.

“Climate change has really disrupted natural navigation channels,” Espino said, highlighting the urgency for long-term solutions.

As Panama navigates these challenges, the balance between environmental preservation, community welfare, and global trade remains a central question. The world watches as the canal’s future hinges on critical decisions.