PANAMA CITY (AFP) - Police clashed with farmers and indigenous people in western Panama for a second day Saturday over a planned dam that locals fear will wipe out their way of life.

Demonstrators in the town of Vigui threw up barricades with three trunks and branches, some on the Pan-American Highway, the main road to neighbouring Costa Rica.

They say the planned Barro Blanco hydroelectric dam, near the borders of Veraguas and Chiriqui provinces, will displace at least 36,000 people. Many local indigenous people's traditional way of life is based on fishing from the river and transport on the waterway.

Police in riot gear seeking to reopen the highway cracked down on dozens of demonstrators who fought back with rocks and other blunt objects.

"People were protesting peacefully for the closing of the (planned) Barro Blanco (hydroelectric power plant) and police attacked them," local Ngobe Bugle indigenous leader Silvia Carrera said.

Carrera said she expected there would be injuries but could not confirm whether protesters were treated in hospital.

The Panamanian government wants to use the Central American nation's vast and largely untapped water resources to make energy more affordable, selling land as needed to build hydroelectric power plants.

The government argues that oil-fueled plants have made energy costs too high in the country of 3.4 million.

Last year, indigenous people and the government held UN-mediated talks after violent clashes over traditional indigenous lands being used by mining industries and for hydroelectric plants left at least two people dead.