The desire for the canal is driven, analysts believe, by a combination of security concerns, strategic leverage, and addressing the high fees to pass through the canal. One key issue is the growing Chinese influence in Latin America and Panama. Particular concern has been focused on the two port concessions granted to the Hong Kong-based company Hutchison Ports PPC, which are now under review. Meanwhile, stoking controversy over the canal gives the U.S. additional leverage over Panama’s handling of migration through the Darién Gap, especially as the Trump administration continues forcing deportation flights. Each of these factors presents real and pressing challenges for Panama.

What the Trump administration and analysts alike are missing in their often economically sterile analysis or flippant discourse about the canal’s long-term performance is the root cause of its challenges: Climate Change. 

The canal was in the news less than two months ago, but it captured less attention than today. The Panama Canal Authority (ACP), which administers the canal, announced its plans for a new dam on the Rio Indio to shore up its water supply and to ensure shipping can continue in the canal undisrupted. This dam would enlarge the size of Lago Gatún, subsume countless communities, and displace thousands of families who call the Rio Indio home.

For years, the canal’s most significant threat hasn’t been foreign interference but the unfolding climate crisis within its watershed. Drought and deforestation have steadily lowered water levels. Instead of prioritizing projects that protect the health of the rivers, ACP has largely failed to take meaningful action, while private organizations like Natura are actively working on solutions in places like the Rio Trinidad. The inaction of ACP has frustrated community members, as they were never able to access the deep pockets of ACP for community-led projects and are now at the mercy of ACP’s mismanagement of the watershed. ACP and the Panamanian government now see the consequences as unavoidable, the shipping lanes have been disrupted, fees have increased, and traffic has slowed, so the lake must expand and communities need to be displaced.

There are innovative, community-driven solutions that could change the course of the canal’s future and would not result in forced displacement.  For example, to address deforestation concerns the implementation of silvopastoral systems could have an incredible impact on the health of the watershed. These systems integrate cattle ranching with forest restoration, expanding tree cover and increasing biodiversity in areas transformed into grass monocultures. Reforestation programs often managed and funded by MiAmbiente and private organizations like Natura, aim to restore deforested areas, increase soil water retention, and improve watershed resilience. Other proposed infrastructure projects offer alternative approaches that will not forcibly displace people. The path forward doesn’t have to come at the expense of those who call this region home. 

The debate isn’t only about whether this should be happening at all. If it does move forward, how will we ensure that resettlement is managed in a way that values not just property, but an entire way of life? 

Panama is currently facing the complex challenge of relocation, particularly with the Guna people from the San Blas Islands. These Indigenous communities, like those in Gardi Sugdub, are relocating, with the assistance of the Panamanian government, due to rising sea levels. Unfortunately, these projects have faced several challenges. For example, the Panamanian government has yet to provide the essential services to the new community that they need, including water and sanitation facilities. Like the Guna, we should be advocating for rights-based, community-led relocation. 

The areas designated for the reservoir expansion, in Panama Oeste and Colón regions, are already some of the most vulnerable in the country. They are among the poorest in Panama and struggle with high unemployment rates and educational deficiencies. The region is further complicated by environmental degradation. Deforestation in these areas has led to poor soil water retention, increased runoff rates, and sediment accumulation, raising Gatun Lake's depth.

Climate change has undoubtedly put immense pressure on the canal. The relationship between drought cycles and stress on the shipping lanes will only continue to intensify. The “solutions” to the canal’s climate challenges will displace communities, making this a clear-cut example of how climate change drives forced displacement.

The global trade community must recognize the depth of the sacrifices these communities are being forced to make. Any discussion of compensation and relocation must be rooted in that understanding and use a rights-based, community-led approach. While some projects and actions could help mitigate these impacts, meaningful and real change will only come from seriously addressing the root causes of climate change.

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