Panama Will Pay for Cowering to Rioters, opinion by Andrés Sebastián Díaz Ponce.

Date:

Share post:

Intimidated Supreme Court Shuts Down Central America’s Largest Copper Mine.

The Panamanian Supreme Court of Justice (CSJ) caved to rioters on November 27, 2023, by ordering the closure of one of the most important open-pit copper mines in the world. First and foremost, the CSJ sentence undermines the rule of law and legal certainty. Further, the mine’s closure will reduce trust with foreign investors, lead to billion-dollar tax losses for the state, and increase unemployment in Panama.

On October 20, Congress approved a 20-year lease for below-ground extraction by Minera Panamá (MPSA). This gave contractual approval for the operation of the largest mine in Central America: Panama Copper. MPSA is a subsidiary of the Canadian multinational mining company First Quantum Minerals (FQM).

Immediately after the contract’s approval, however, the usual suspects threw a tantrum. Unions, indigenous activists, and environmentalists led six weeks of violent protests and blockades. On November 27, an intimidated CSJ declared that the concession was unconstitutional and mandated the mine’s closure. For the moment, there are no further details on how the closure—a delicate, complicated process—must proceed.

Leftist President Laurentino Cortizo said he had no choice, due to the separation of powers, other than to accept the CSJ ruling. His administration had painstakingly renegotiated the lease with FQM since 2021. Cortizo has now promised the mine’s closure will happen in a “careful manner.”

The CSJ did not take into consideration the economic and environmental consequences of closing such a mine. Alejandro Chambi, the mine’s environmental director, contends that fully closing the mine will take between 10 and 15 years. Further, an improper closure could lead to an “environmental catastrophe,” including the pollution of adjacent rivers.

The closure of Panama Copper is a severe blow to the country’s economy and trade balance. For example, the state will stop receiving $375 million annually from royalties. In addition, the company used to pay around $200 million annually in taxes. According to insurance group Credendo, the mine’s production generates 5 percent of Panama’s GDP. While some protesters have demanded that MPSA pay more taxes, closure will hardly quench such envy.

Beyond the mine’s closure, the blockades undermined the country’s economy more broadly. In October, risk-assessment firm Moody’s estimated that the blockades caused economic losses of $1.7 billion or 1 percent of the 2023 GDP. In the same vein, Moody’s downgraded the country’s sovereign debt from Baa2 to Baa3—the lowest investment-grade rating—due to a weak fiscal structure and legal and political uncertainty.

The mine’s closure means uncertainty for thousands of workers and higher unemployment. It is currently 7.4 percent, according to the National Statistics Institute. Since the end of 2020, when it peaked at 18.5 percent, unemployment has been decreasing. According to a 2023 Free Metro report, however, the mine “generates 7,300 direct and 33,000 indirect jobs.” A lot of people will suffer and be looking for employment to support their families.

The CSJ ruling, especially given the violence that catalyzed it, is toxic for legal certainty and foreign investment. FQM contends it has been extremely careful in adhering to the law and has warned Panamanian officials that there will be an international arbitration process to contest the state’s apparent violation of the lease for mining. The arbitration will take place under the framework of the free-trade agreement between Panama and Canada. To protect its right to the mine, FQM has initiated a case with the International Court of Arbitration. According to FQM, it has already invested $10 billion in Panama Copper, the largest private investment in Panamanian history.

The legal challenges, however, date back to 2017, when the CSJ declared the mine’s contract renewal unconstitutional due to alleged irregularities in the procurement process. The ruling was only published officially in 2021, which led to extensive negotiations between the government and the Canadian company. Both parties then signed the contract in June 2023. In the 2017 ruling the CSJ argued that the company was causing health and environmental damage, which violated the Panamanian Constitution.

Since all activities generate some pollution, what level is unconstitutional appears to be in the eye of the beholder. FQM understood its operation to be legitimate, given both executive and legislative approval. Further, the Canadian company asserts that it has followed the country’s Mining Law regarding its environmental impact: “We reiterate our unbreakable commitment to the law in every aspect of our operations in the country.”

Apparently, legal approval and careful adherence to the law are not enough in Panama, not when there is violent opposition in the streets. The activists, who are harming both local workers and foreign investors, have been rewarded for their bad behavior.

Adrian Day, an investment analyst and portfolio manager based in Puerto Rico, told the Impunity Observer that the CSJ ruling will have a devastating impact on foreign investment in Panama and its reputation. For him, the controversial CSJ ruling shows that the rule of law does not govern Panama. Instead, the institutions respond to mob violence. Day explains that even if a new administration were to “save the deal,” FQM would be reluctant to commit major new investments to the country, and other companies would likewise be hesitant.

The mine’s closure will also have a negative impact on the world’s copper supply, since Panama represents 1–1.5 percent of it. The environmentalist gurus, such as Greta Thumberg and Leonardo DiCaprio, inserted themselves and backed the mine’s closure. They appear to forget, however, that the energy transition they crave needs copper extraction. An electric car, for example, requires 50 to 113 kilograms of copper, four times more than what a combustion-engine car needs.

The CSJ ruling is irreversibly damaging Panama’s reputation as an investment-friendly jurisdiction. Progressive environmental romanticism has led Panama to self-sabotage its productivity. Further, aggressive rhetoric has overshadowed and impeded meaningful dialogue regarding the benefits of extractive industries for locals and foreigners alike. This has led to a shortsighted, feel-good decision that is hurting Panama.

The opinion of this article is foreign to Noticiero el Vigilante.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

spot_img

Related articles

Por quién doblan las campanas; doblan por ti, opinión por Fritz Thomas

Es un caso más, de tantos que ocurren en distintas partes del mundo.La muerte de una persona en...

Asociación de sacerdotes mayas de Guatemala celebran el año nuevo Maya

https://youtu.be/AshGzn9I0JQ La Asociación de sacerdotes mayas de Guatemala celebran el año nuevo Maya el cual es el 5140. Se celebra...

Peso Pluma cancela su gira por Latinoamérica por problemas personales

https://youtu.be/XEN2SbGSgYk El artista mexicano Peso Pluma canceló esta madrugada por problemas personales su gira por Sudamérica, incluido su actuación...