Panama Approves Third Canal Lake Project to Tackle Droughts and Secure Waterway Future

Panama Canal Authority

$2 Billion Indio River Lake to Boost Resilience Against Climate Shocks

The Panama Canal Authority (ACP) has approved a $2 billion project to construct a third lake, aiming to strengthen the canal’s resilience against severe droughts. This new dammed lake, spanning 500 km² on the Indio River, will support the existing Gatun and Alajuela lakes. Recent droughts, intensified by the El Nino weather pattern, forced Panama to drastically cut canal transits in 2023 and 2024.

Project Details, Timeline, and Ongoing Challenges

Building the Indio River lake will take five years, offering water security for at least the next 50 years, according to the ACP. However, the canal may still face at least one more period of transit restrictions due to drought before the improvements are fully realized. The canal usually sees 36 transits per day, but this fell to 22 during last year’s crisis. A rebound in rainfall since July has allowed the ACP to restore transit levels, though the long-term threat from climate volatility remains.

Legal and Social Hurdles Complicate Expansion

Previously, legal restrictions blocked new reservoirs until Panama’s supreme court expanded the canal authority’s jurisdiction to include the Indio River basin. The project now faces resistance from about 2,500 local residents, mainly farmers, who oppose forced relocation and demand fair compensation. Intense negotiations continue, with rights organizations backing the residents’ cause. Meanwhile, geopolitical tension has emerged after former US president Donald Trump claimed the canal is controlled by China. Panama’s president, Jose Raul Mulino, has reaffirmed that the Canal Authority—an autonomous government agency—manages the waterway, not any foreign entity.