Building the Panama Canal, completed in 1914, was described at the time as the "greatest liberty ever taken with nature". This month, work is under way on a massive expansion of the canal, with giant new locks being built at either end of the waterway, as well as huge new channels and a widening of the canal where it cuts through the mountainous Continental Divide. Construction, scheduled to last seven years, is costed at $5.2bn (£2.7bn).
But the fact that work has started without a comprehensive environmental impact study being carried out has worried Panamanians. They fear that although their country is among the wettest on the planet, the canal could mean that one day soon they will turn on their taps and out will come dirty, salty water - or even none at all. At the same time, environmental groups such as Greenpeace have warned of the project's "potentially catastrophic consequences" for the world's oceans.
The original canal, completed after more than 20 years' struggle, did not so much impact on the environment as change it forever. Mountains were moved, the land bridge between the north and south American continents was severed, and more than 150 sq miles of jungle was submerged under a new manmade lake. To defeat deadly mosquitoes, hundreds of square miles of what we would now call "vital wetlands" were drained and filled, and vast areas poisoned or smothered in thousands of gallons of crude oil.
At the time, no one gave it a second thought. Oscar Vallarino, head of the environment department of the Panama Canal Authority (ACP), says: "When the canal was built, the environmental issues were not a concern." His words are echoed by Stanley Heckadon, a staff scientist at the Smithsonian Tropical Research Institute in Panama: "The concept of progress was overwhelming. The canal itself is the product of generations of dreams of linking the oceans. The mentality was: 'We will do what we have to do.'"
Heckadon has been at the forefront of conservation in Panama for more than 20 years. Those efforts have focused on preserving the jungles that make up the watershed for the rivers that supply the canal - some of the most species-rich forests in the world. Flora and fauna historically endemic to South and North America have mixed and evolved in Panama, resulting in tremendous biodiversity. The country has identified more than 900 species of birds, 1,500 species of trees and 10,000 species of plants.
But deforestation threatens more than the tourist dollar or endangered species. Each time a ship passes through the canal, 52m gallons of fresh water - enough for a day's supply for a small city - is discharged from the locks into the ocean. This water comes from the canal's watershed, and if that is denuded of trees, it comes laden with silt and in unpredictable surges. The silt raises the bottom of the manmade lakes designed as storage for the canal, critically reducing their capacity.
Since the opening of the canal, development in the 1,000 sq mile watershed has often been haphazard and unplanned. By 1985, the proportion forested had fallen in 50 years from 85% to 30%, but it is now back up to nearly 50%, thanks to far-sighted policies to discourage cattle rearing and slash-and-burn agriculture, and to establish national parks.
But is this enough? The planned doubling of the canal's capacity means it will need a lot more water. There is the added complication that the manmade lakes also supply the hydroelectricity and drinking water for Panama City, the fast-growing capital, as well as other towns and cities.
Critics of the expansion scheme, such as University of Panama biologist Ariel Rodriguez and the former director of the National Environmental Authority Gonzalo Menendez, argue that Panama's government has not done enough to stop the development and urban sprawl that leads to soil erosion and water contamination in the watershed. They say water supply to Panama City is becoming tainted, and that it will worsen once construction, with extensive underwater blasting and dredging, gets into its stride. They also warn that the effects of climate change are making the vital supply of water to the canal's locks unpredictable.
Heckadon, a cautious optimist about the expansion plans, believes that water supply and quality - to the cities as well as to the canal - constitute "one of the most crucial questions Panama will face for the next decade, for a generation".
Loth to build new lakes, which would submerge pristine jungle and require the politically sensitive issue of relocating existing communities, the ACP has opted instead to deepen and expand the main water storage, Lake Gatun, while the new locks will use special adjacent basins to recycle water.
It seems a clever solution to an environmental and political problem. But it may backfire. Over the years, parts of the canal have become increasingly salty as the sea water mixes in the locks with the fresh water from the high lakes. The most immediate worry concerns the water supply to the population. The ACP talks down the salinisation threat, but is clearly concerned, and is planning ongoing studies.
Jumping the divide
And there could be further issues at stake. Back in 1910, a far-sighted naturalist pointed out to the canal builders that they were in effect diverting a river that flowed into the Caribbean Sea to make it emerge in the Pacific, and that the rivers bound for the different oceans contained radically different eco-systems. A recent study has found that, so far, eight species have made the "jump" over the Continental Divide, albeit with no measurable ill-effects. But if the canal becomes a sea-water bridge it would be far easier for a wider range of marine species to cross the canal from ocean to ocean.
Environmentalists are worried. Greenpeace says: "The creation of artificial corridors that allow migration of species from previously separate habitats is of great concern because it is highly likely to have unpredictable and potentially catastrophic consequences on the finely balanced web of life in each habitat."
In simpler times, transforming nature was a sign of humankind's ingenuity, and the canal expansion plans still require a certain amount of blinkered determination. As Guillermo Castro, professor of sociology at the Centre for Latin American Studies, Panama City, puts it: "Every productive process, including this expansion, implies a transformation of nature."
· Panama Fever by Matthew Parker is published by Hutchinson (£20). To order a copy for £18 with free UK p&p call 0870 836 0875 or go to theguardian.com/bookshop. For more information about the book, visit matthewparker.co.uk.