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Demonstrators take part in a march against a mining contract, which is being debated in parliament, in front of the National Assembly in Panama City on September 5, 2023.ROBERTO CISNEROS/AFP/Getty Images

A hard-won Canadian copper mining contract in Panama has become the target of protests and legal denunciations as it nears the final steps to finalization.

Panama’s National Assembly has begun consideration of a contract law for First Quantum Minerals Ltd.’s FM-T Cobre Panama mine, which would end a lengthy period of uncertainty for the Vancouver-based company and formalize a royalty structure that promises hundreds of millions of dollars a year for Panama, establishing a new economic pillar alongside the country’s namesake canal.

But street protests that have broken out in Panama City this week have made tangible a swelling opposition to the contract, which has been denounced by labour activists, Indigenous groups, former government leaders, constitutional scholars and evangelical pastors alike. Even the Catholic Church has expressed concern.

Some want Panama to renegotiate the contract. Others say the US$10-billion mine, which began commercial operation in 2019, should be put to an international bidding process. Still others want Panama to take a state ownership stake, following the lead of other countries in the region that have nationalized mineral resources.

Panama’s ruling Democratic Revolutionary Party, which completed negotiations on the contract this year and has pushed for its passage without significant debate, holds sufficient National Assembly power to give it legislative approval. Panamanian President Laurentino Cortizo has showed no sign of wavering in his support of the contract, which is moving through a first-reading process in the legislature.

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But rising social rancour over the mining contract, which has been publicly opposed by several presidential candidates, has created new questions over passage of the contract.

Even the Mining Chamber of Panama, a committed supporter of the mine, says it is concerned. “The government has the votes,” said Zorel Morales, the chamber’s executive director. “But we don’t know if they are going to go through with that, because they see there will be a political cost.”

It is possible, he said, that legislators contemplating re-election next year will choose to vote against the contract. Or the government could withdraw it. Or the National Assembly could defer a decision, by calling for a technical review panel to scrutinize the contract and come back with recommendations.

“We don’t know,” Mr. Morales said. Rejection of the contract would be “very dangerous for the country,” he said, pointing to potential downgrading of Panama’s credit rating and a black mark on its attractiveness to foreign investment.

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Demonstrators take part in a march against the mining contract in front of the National Assembly in Panama City on Sept. 5.ROBERTO CISNEROS/AFP/Getty Images

Adding to the problems for First Quantum: If it cannot conclude a new labour agreement with a union representing mine workers, a strike could begin by this weekend.

First Quantum concluded a draft agreement with the government of Panama this year after years of sometimes tense negotiations that included a brief operational halt. The mine’s initial contract law was struck down by the country’s Supreme Court in 2018, which deemed it unconstitutional.

Now, however, an increasingly pitched debate about the new contract has touched on some of the most sensitive political and cultural scars in a country with a long history of fighting to control its own destiny.

Provisions in the contract allow Cobre Panama to request the closing of airspace up to 3,000 metres above the mine, to control access to its roadways and to work with government authorities to expropriate additional lands.

First Quantum declined to comment. But such provisions are standard technical requirements in line with existing Panamanian law, industry defenders say. Some, they say, are needed for safety in a huge industrial project that operates with explosives and enormous mining trucks.

Panama is ready to cash in on its copper boom

Critics, however, describe the restrictions as an echo of an ugly history.

“It reminds us of the conditions we had with the Panama Canal during the administration of the canal by the Americans,” said Guillermo Cochez, a former mayor of Panama City and ambassador to the Organization of American States.

Before Panama gained full domestic control of the waterway in 1999, Panamanians required special permission to enter the canal. Memories of that time remain fraught. Rodrigo Noriega’s father attended a high school situated across the street from the canal zone. When he crossed that street to pick a mango, he was arrested for trespassing, expelled from school and forced to abandon his hopes of becoming a doctor.

Many Panamanians have similar memories of such “abuse, of bullying,” said Mr. Noriega, a lawyer who writes a column in La Prensa, a leading local newspaper.

“My concern is that this mining enterprise may become something like this for the nearby communities, for the campesinos, for the pescadores,” he said, referring to farmers and fishers.

The mine has no history of expropriating local land, and has sought to boost the fortunes of nearby agricultural suppliers, including through the purchase of locally grown produce.

Still, anger with the contract began to rise almost as soon as it was posted to a government website this year. Software restrictions made it difficult to download or print the contract. In response, José Chen Barría, a professor and former comptroller-general of Panama, took photos of the digital text and published them in a book alongside a series of essays from detractors.

He dismisses the financial importance of the mine, which already contributes nearly 5 per cent of Panama’s GDP and promises, under the new contract, a floor royalty contribution of US$375-million a year. The Panama Canal, by contrast, expects to contribute US$2.5-billion to the country’s treasury this year.

“For $375-million, Panama doesn’t need First Quantum,” he said.

Further concern has been raised about the mine’s ability to access rivers that may become future sources of water for the Panama Canal, which has suffered drought conditions that have constrained throughput.

The idea of the mine using needed water is “not only outrageous. I think it’s humiliating,” said Jorge Eduardo Ritter, a former Panamanian foreign minister.

Mr. Noriega has monitored local talk radio, where callers are “angry that the canal is not going to have water in the future because of the mine.”

Such a concern is hypothetical: The Globe and Mail visited the mine site this year, and local executives said 98 per cent of its water comes from the heavy rains that blanket the area.

Still, opponents argue that some of the contract’s provisions may also conflict with Panama’s constitution, which makes it illegal for foreign governments “or semi-official entities or institutions” to “acquire title over any part of the national territory,” with the sole exception of foreign embassies. First Quantum’s major shareholders include Jiangxi Copper, which is backed by the Chinese government.

Whether that arrangement would violate the constitution has not been tested in court; Panama has generally welcomed foreign investment, including in its mining sector.

But Carlos Bolívar Pedreschi, a celebrated Panamanian constitutional scholar, said the new contract is unlikely to withstand Supreme Court scrutiny. “I have no doubt that the new contract violates the Panamanian constitution,” he said.

If the contract does win legislative approval, he said, “We will have problems in the streets. We will have violence.”

Last July, protests over corruption and the rising cost of living shut down major roads and schools. Some of the leaders of last year’s protests have been present in demonstrations against the mining contract.

Those protests have left Panama’s governing party “divided,” said José Eugenio Stoute, a local political analyst. Some believe the contract should be approved “at any cost,” he said. But the outcome has grown uncertain, he said, because others want it “withdrawn before a social explosion is generated that paralyzes the country.”

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 19/04/24 4:52pm EDT.

SymbolName% changeLast
FM-T
First Quantum Minerals Ltd
-0.81%15.96

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