Sustainable development is an emerging development model that has impacted the relationship between the environment and traditional development objectives. This work combines political ecology and natural resource economics in a rearticulation of sustainable development theory that draws on concepts from the biological sciences. Based on existing theory, biodiversity is identified as a critical (non-substitutable) resource. The case of Panama is then examined as an example of a country whose development has come into conflict with the health of its exceptionally diverse ecosystems through the conversion of forested land. An empirical model is created to test the statistical significance of several explanatory variables on rates of deforestation in Panama. This work should be useful for students or professionals in the environmental field who are interested in how the full value of natural resources can be incorporated into the development process and how, given a specific social and institutional structure, policies can be devised to tackle undesired environmental degradation.