We tested how sediment trapping by hydroelectric dams affects tropical estuaries by comparing two dammed and two undammed rivers on Mexico's Pacific coast. We found that dams demonstrably affected the stability and productivity of the estuaries. The two rivers dammed for hydroelectricity had a rapid coastal recession (between 7.9 and 21.5 ha year^-1) in what should otherwise be an accretional coastline. The economic consequences of this dam-induced coastal erosion include loss of habitat for fisheries, loss of coastal protection, release of carbon sequestered in coastal sediments, loss of biodiversity, and the decline of estuarine livelihoods. We estimate that the cost of the environmental damages a dam can cause in the lower part of basin almost doubles the purported benefits of emission reductions from hydroelectric generation.