A contentious mining contract has plunged Panama into protest, triggering its most significant episode of social upheaval in decades. Since Oct. 16, the public has taken to the streets in historic numbers, with no signs of abating despite concessions made by the government.
At the center of this movement is the Cobre Panamá mine, one of the world’s largest copper mines and, notably, the largest private investment in Panama’s history. When the copper deposit was identified in 1968, it was described by one newspaper as an economic asset as great as the Panama Canal. The mine is operated by Minera Panamá, a local subsidiary of the Canadian company First Quantum Minerals (FQM) and also partly owned by South Korea’s state-run Korea Resources Corporation. It opened for business in 2019 but has long been mired in controversy and legal troubles. Original mining rights for the project were negotiated in 1997 in a contract that permitted unrestricted mineral exploitation with only a 2 percent royalty payment. The agreement also exempted the mine’s operators from paying certain taxes. In 2017, however, Panama’s Supreme Court of Justice ruled that the law granting concessions for the mine—which was reached without a bidding process, citizen participation, or environmental impact studies—was unconstitutional because it did not align with the nation’s best interests and lacked a clear commitment to social welfare and the public good.
Since the court’s delayed announcement of this ruling in 2021, a new long-term contract has been negotiated that aims to right some of its predecessor’s wrongs. Its authorization was passed by Panama’s National Assembly in record time—only three days—and was given final approval by President Laurentino Cortizo on Oct. 20, despite Cortizo having promised to ban open-pit mining just a few years prior. Against a troubling economic backdrop, the Cortizo administration has hailed the contract as a triumph. But protestors decry its shortcomings and argue that determinations concerning Panama’s natural resources should remain within the purview of its people, not foreign corporations.
The Minera Panamá contract is an issue connected to some of the country’s deepest veins of unrest, and the protests suggest a wellspring of public dissatisfaction with Panama’s current environmental, economic, and political models. The public uprising may indicate that not only is the contract between the state and mining companies unsustainable, but so too is the one between the state and its citizens.
Since its earliest days as a country, Panama’s development has been inextricably tied to foreign ambitions. After gaining independence from Colombia in 1903, the newly formed Panamanian government signed a treaty that granted the United States extensive control over the Panama Canal Zone, stripping Panama of its ability to impose taxes or charges on the canal, its subsidiaries, or its employees. Under this treaty, Panama received only a one-time payment of $10 million, a fraction of the overall value of the canal to the global economy.
Although the canal returned to Panamanian hands in 1999, the global race for critical minerals is once again attracting foreign interest in the country’s resources. Panama’s copper is a crucial component of many of the green technologies needed to solve the global climate crisis. But in Panama as elsewhere, climate policy is in tension with environmental policies, and the process of extracting this mineral is wreaking havoc on Panama’s environment. The mine is situated on the Mesoamerican corridor, designated as a protected area, but inspections into its activities have uncovered a staggering 209 instances of non-compliance with measures outlined in Panama’s 2011 Environmental Impact Assessment, particularly concerning river and soil contamination.
What started as an environmental issue, however, has become entangled with larger discontent toward the conventional model of foreign resource extraction, especially as it pertains to the sovereignty of developing nations.
Many of the current protestors share the belief that the mining concession resembles a new Canal Zone and amounts to an all-too-familiar violation to the country’s sovereignty. Panamanian law, for instance, permits land expropriation, through which the government can seize privately owned land for public use (in this case, to give to mining companies); an earlier version of the contract protected this practice explicitly. The new contract also allows the foreign-owned Minera Panamá to construct port facilities and levy fees on the state to use these key infrastructure facilities.
The new contract allows for all this while guaranteeing little in return. Under the new agreement, Panama will receive $375 million in revenue from the mine annually, which includes taxes and increased royalties. But protestors complain that $375 million, though better than the original contract, is still too low compared to the mine’s gross profit—last year, $1.065 billion—and out of proportion to environmental damages. The income tax rate Minera Panamá will pay as part of this figure, 26 percent, is considerably lower than what its parent company, FQM, pays elsewhere in the world. In Zambia, for instance, FQM pays a 38 percent income tax: When its Kanansanshi mine made $1.025 billion in 2021, FQM paid Zambia $392 million in taxes.
Moreover, the new contract allows Minera Panamá to operate without paying the agreed-upon fee under specific conditions—for instance, if the price of copper were to fall below a certain threshold or if copper production in the concession area were below a designated amount. It also does not require the $375 million lump sum to adjust over time. The value of the proposed amount would diminish considerably over the next 40 years under likely inflation trends or in particularly volatile commodity markets. Whether the mine is a flop or success, the contract provides openings in either direction for the public to be shortchanged.
When Cortizo initiated negotiations back in 2021, one of his officials said a new contract was “necessary to balance the relationship between the company and the State”. That calculation hasn’t always been simple for Panama or other resource-rich countries.
Panama’s current economic challenges don’t make the decision-making calculus any easier. The government’s response to widespread protests in 2022 over the cost-of-living crisis has largely relied on short-term subsidies. Although these measures did provide some momentary relief, they threaten Panama’s long-term economic prospects, evident in the country’s recent outlook downgrades by Fitch and S&P Global. Unemployment persists, informality rates are high, and the debt-to-GDP ratio is a concerning 58 percent.
Conceding to protestors’ demands in the immediate term could make an already rough economic situation even worse. The mine accounts for 75 percent of the country’s exports, around 5 percent of its GDP, and more than 2 percent of total employment. In the event that Panama unilaterally terminates the contract, it would also be burdened with an astronomical debt estimated to range anywhere from $10 billion to $100 billion as economic compensation for infrastructure construction, human capital, and environmental development investments made in the country by Minera Panamá.
Allegations of questionable financial dealings surrounding the contract have compounded citizens’ political frustrations further. Rumors circulating on social media speculate that some members of Panama’s National Assembly may have received payments exceeding $1 million to secure their votes in favor of the contract. Whether or not these allegations can be confirmed, the perception of these dealings among the public doesn’t help the government’s case. Corruption is already top of mind in Panama, seen by the public as the country’s most important issue. This concern is especially pertinent as the country reels from the July sentencing of former Panamanian President Ricardo Martinelli as part of the New Business scandal, which exposed corruption throughout Panamanian society. With the mining debacle, Panama’s government is now widely perceived by its public as acting against the nation’s interests, hastily pushing the contract through the assembly while silencing citizen dissent.
Clearly, officials in Panama City are already feeling the pressure. On Oct. 29, in an effort to quell discontent and restore the government’s credibility, Cortizo announced a now-abandoned referendum for the public to decide whether to repeal the mining contract. But this move was ill-fated from the start. Beyond logistic concerns, many saw the referendum not as empowering citizens but as a tactic for the government to shift policymaking responsibility to the people so they could later be blamed for any adverse consequences. Cortizo has since signed into law an indefinite moratorium on new mining concessions or renewing existing concessions. But this similarly fails to address citizens’ demands, as it leaves an opening for the Cobre Panamá mine contract that has been at the center of the debate.
The country’s mining fate—and protestors’ best hope for change—now lies in the hands of the Supreme Court of Justice. Already, the court has admitted 10 lawsuits targeting the constitutionality of the contract, and it is expected to enter deliberations for two of these on Nov. 24. Whereas Panama would have owed billions to Minera Panamá if the contract were terminated through a referendum, environmentalists and legal experts argue that a Supreme Court ruling would position the country more favorably against potential international legal action for a breach of contract. Thus, the court declaring the contract unconstitutional remains Panama’s only escape from being financially shackled to Minera Panamá. Obtaining a unanimous ruling from all nine justices, however, could take anywhere from days to years. The 2017 ruling that triggered the contract renegotiation, for instance, was issued about eight years after the initial complaint was made to the court. And until the court says otherwise, the new contract stands.
In the meantime, the public’s mining frustrations are likely to bear on Panama’s political makeup as the country prepares for its May 2024 general election. The ruling Democratic Revolutionary Party (PRD), its presidential nominee and current Vice President José Gabriel Carrizo, and other traditional parties’ candidates for president, such as former Minister of External Affairs Rómulo Roux, have an uphill climb to restore their credibility. This is especially true for Roux, who is a partner at the law firm that has advised Minera Panama for more than 25 years and was himself one of the drafters of the original 1997 contract. Though Roux has said he will leave the law firm if he wins the presidential election, many still see this as a conflict of interest that undermines already fragile voter trust.
In this context, independent candidates and grassroots movements are gaining momentum by tapping into the growing demand for fresh, accountable leadership. Serena Vamvas, a young candidate for the San Francisco district representative who has protested against mining since at least 2021, has gained significant popularity this year on a platform based on sustainability and environmental protection. Ricardo Lombana, an outspoken critic of the contract, is also gaining traction and positioning himself as an opposition figure to corruption and clientelism.
In 2021, Cortizo celebrated Panama as a carbon-negative country at COP26, the United Nations Climate Change Conference. Though he urged global action on climate change and lauded the role Panama’s forests have played in achieving its carbon goals at the conference, his rhetoric hasn’t always matched his actions back home. Now, after a long spell of legal and bureaucratic wrangling, Panama seems to be at something of a tipping point. Is Panama first and foremost a mining country, or a country that listens to its people? With a court decision and an election ahead, Panama may have an answer sooner rather than later.
Cristina Guevara is a policy and legislative advisor for the National Assembly of Panama. She is a frequent writer on the state of corruption, democracy, and human rights in Panama and Latin America.