Panamanian indigenous protesters and farmers blocked the Pan-American Highway Monday to demand the government abandon a European-funded hydroelectric dam they say will swallow their land and damage the environment.

Some 200 protesters invaded the transcontinental highway and shut down traffic at the entrance to the German- and Dutch-funded Barro Blanco dam project, witnesses said.

"We will stay here until President Juan Carlos Varela comes and says the Barro Blanco project is cancelled," said protest leader Ricardo Miranda.

The protest comes after the breakdown of UN-backed talks to resolve the standoff between the protesters, the government and the Panamanian companies behind the 28-megawatt project, Generadora del Istmo and Hidraulica de San Jose.

The Ngabe-Bugle people in the western Panamanian region of Chiriqui say the dam will flood vital farmland and damage the Tabasara River.

After months of protests, the government put the dam on hold in February for failure to complete environmental impact studies.

But canceling it could expose the government to legal action by the companies, which say they would lose more than $130 million.