Policy alternatives to improve demand for water-related ecosystem services in the Panama Canal Watershed

The Panama Canal plays a prominent role in Panama's economy. The functioning of the Canal is dependent on the Canal Watershed (PCW), which provides over two billion gallons of fresh water on a daily basis. Furthermore, the PCW supplies potable water for the major urban centers of the country, including Panama City and Colón. While demand for fresh water is high, by all accounts the provision of water supply is taken for granted in Panama. Although the deforestation of the PCW affects both water quality and quantity, there is little institutional will or social pressure to address these concerns. The result is an absence of formal demand for watershed services, either through direct regulation of land use in the PCW or indirectly through financial inducements offered by the government or water users to land managers. We conclude that the most effective policy alternatives to stimulate demand for such services will complement or address politically salient concerns of the Government of Panama, such as job creation, expanding forestry sector exports, and Canal profitability. Additional information-based campaigns might focus on a long-term goal of raising public awareness of the value of hydrological services and the importance of water conservation. © 2007 by The Haworth Press, Inc. All rights reserved.