In late October, thousands of Panamanians took to the streets (and even the water) across the country to protest a contract granted by the Panamanian government to the Canada-based First Quantum Minerals mining company to operate Central America’s largest copper mine. Copper is a precious mineral and a critical component for various industries. However, the people of the Central American country are pushing back due to a long list of environmental concerns.
The
historical decision by Panama to hold a national referendum on 17 December over
the contract represents a major win for environmental organizers and could well
set a precedent for other polities in South and Central America.
Background
The
copper mine is Panama’s only active mine and Central America’s largest copper
mine. It is located in the coastal Donoso District, Colon Province in Panama’s
Caribbean coast, within a protected park, and reportedly covers 12 hectares of
jungle. The Cobre Panama mine commenced commercial production in 2019. “At full
capacity, it can process 85 million tonnes of ore annually and produce more
than 300,000 tonnes (661.4 million lb.) of copper each year. Gold, silver, and
molybdenum are also recovered. Currently, the complex includes two open pit
mines, a processing plant, two 150MW power stations, and a port.”
A first
wave of protests occurred in September, which brought negotiations back to
square one; the president and Congress signed a contract with First Quantum on
20 October. The new contract guarantees a minimum annual income of $375 million
to the government and will be effective for 20 years. An option to renew is
included.
A 22
October press release from First Quantum summarizes the situation and contract:
“On 20
October, 2023, the National Assembly in Panamá approved Bill 1100, being the
proposal for approval of the Concession Contract for the Cobre Panamá mine, in
the third debate of the plenary session with a vote of 47 in favor out of a
total of 55 votes registered. On the same day, President Laurentino Cortizo
sanctioned Bill 1100 into Law 406, and this was subsequently published in the
Official Gazette. The enactment of Law 406 marks the final step in revising the
legal framework for the Cobre Panamá mine.”
With the
publication in Panama’s Official Gazette (Gazeta Oficial), “payments to cover
taxes and royalties up to the year-end 2022 of approximately $395 million and
certain amounts payable for 2023 corporate tax installments, withholding taxes,
and quarterly royalty payments will be due within 30 days,” the company further
noted.
First
Quantum CEO Tristan Pascall praised the contract, stating, “we are pleased that
the revised contract establishes the basis for a renewed long-term relationship
between Panamá and First Quantum… We are committed to the contract’s
obligations and to responsible stewardship of the Cobre Panamá mine, including
a continued positive impact on our workforce, the surrounding communities, and
the environment.”
The
approved contract gives First Quantum’s local subsidiary, Minera Panama, rights
to the territory in question for 20 years, with the option to renew for another
two decades. An insightful article by Octavio Garcia Soto for Corporate Knights
about the contract and protests provides more historical background: “the
mine’s first contract was signed in 1997 under then-owner Petaquilla Gold and
was declared unconstitutional in 2017 by the Supreme Court. First Quantum
acquired the mine in 2013. But even without a contract, operations have
continued.”
Minera
Panamá has argued that it carries out environmentally friendly policies and
activities. In a 7 December 2022 press release, the company announced the
acquisition of “another Epiroc Pit Viper 351 E drill rig, the largest
zero-emission surface drill rig in the world,” adding that the acquisition
“highlights the advancement towards sustainable mining that reduces and
mitigates the impacts of producing equipment with advanced technologies.”
Currently, Minera Panamá-First Quantum Minerals is implementing a climate
change mitigation strategy, which aims to achieve a 30% reduction in greenhouse
gases by 2025 and 50% by 2030. First Quantum’s subsidiary also added that the
copper mining operation “is an important supporter of economic development in
Panama, representing 4.8% of its gross domestic product.”
Popular
Blowback
Protests
commenced as soon as the new contract was announced. Besides waving Panamanian
flags, the protesters have made placards with messages like “protect our
natural resources” and “stop destroying our lands.” The protests have also
turned violent at times, with some roads blocked with burning tires. Government
buildings like the Ministry of Finance and the Chamber of Commerce in the
capital were also attacked. The police have utilized tear gas to disperse
protesters. (Panama does not have a military).
In
response to the maritime protests, Cobre Panama issued a statement on 28
October, “condemning the illegal and violent [events] as unauthorized vessels
with unauthorized individuals aboard having entered the Punta Rincon
International Port.” The statement was a response to a group of vessels
(approximately eight) that entered the port, property of Minera Panama, to
protest the contract.
The
reasons for the protests are summed up in a recent article published on MSN.
The first reason is environmental concerns, namely the idea that the mine will
damage the natural environment, pollute water and air, and destroy
biodiversity. Second is social inequality: protesters are concerned that the
contract benefits foreign enterprises and not local communities. Finally
protesters decry a lack of transparency, arguing that the government did not
consult nor engage with indigenous communities before signing the contract.
The
Panamanian government has attempted to strike a conciliatory tone, recognizing
the people’s right to peaceful protest and stating that violence will not be
tolerated. On 27 October, President Laurentino Cortizo announced that no new
mining concessions nationwide would be permitted starting on said date. Mining
negotiations currently underway will also be terminated. He also added his
willingness to talk, “I will always be willing to conserve and [find]
agreements… I will always be willing to talk… this is an open-door government.”
Analysis
Many
analyses have discussed the protests, summarizing the situation and the
government’s alternatives. For example, MSN explains, “the protests in Panama
reflect the growing dissatisfaction across the country. The protesters want
more respect for the natural environment, social equity, and democratic
participation.”
An
analysis by Corporate Knights puts the protests in context, as Panama has a
“combative relationship with mining. The country has massive copper reserves,
including one of the world’s biggest undeveloped copper deposits in Cerro
Colorado. But out of 15 approved mining projects, First Quantum is the only one
that has remained operational.” “Environmental advocates say mining’s heavy
water consumption would threaten rice production and livestock farming,
essential industries already suffering from water scarcity.”
17
December: A date with destiny
As I was
completing a draft of this article, the Panamanian government made a shocking
announcement: On 29 October, President Cortizo announced his intention to hold
a national referendum on Sunday, 17 December, “so that Panamanians decide…if
Law 406 of the mining contract should be annulled or not.” “The people are
sovereign,” he tweeted and announced plans for a law to prohibit the mining of
metals nation-wide.
On 31
October, First Quantum released a statement about Panama’s decision,
explaining, “First Quantum has contacted the government in order to understand
the details in respect of the popular consultation.” The company also noted,
“we are fully committed to operating in an environmentally sensitive manner, by
meeting all environmental compliance obligations and by supporting Panama’s
biodiversity through our reforestation.” Depending on the results of the
upcoming referendum, it will be vital to monitor what legal actions, if any,
First Quantum will take.
Finally,
it is worth noting that the protests and announcements by Panama about the
referendum have hurt First Quantum Minerals in the worst way possible: the
price of its stock has dropped. On 17 October, the stock reached a high of
CAD32.02, but as of 1 November, the stock was priced at CAD13.74 and falling.
***Wilder
Alejandro Sánchez is President of Second Floor Strategies, a consulting firm in
Washington, D.C. He is an analyst who monitors defense & security,
geopolitical, and trade issues across the Western Hemisphere, Eastern Europe,
and Central Asia.
**The
views expressed in this article belong to the authors alone and do not
necessarily reflect those of Geopoliticalmonitor.com.