Why a large mine in Panama faces a ruling that could be its end

The Supreme Court of Justice of Panama A permanent session begins this Friday to decide on the alleged unconstitutionality of the contract for a large open-pit copper mine, owned by Canadian capital, whose operation has generated the largest protests in decades in the country with a toll of four deaths, million-dollar losses the economy and social tension.

The plenary session of nine magistrates will meet “until issuing its decision, in the shortest possible time“, regarding two unconstitutionality appeals against Law 406 of the contract between the State and the company Minera Panamá, a subsidiary of the Canadian company First Quantum Minerals (FQM), approved on October 20 and which renewed the concession for 20 years, extendable.

Minera Panamá operates the Cobre Panamá mine, the largest private investment in the history of the country with around US$ 10,000 million, which generates more than 7,000 direct and 40,000 indirect jobs and whose activity is responsible for 4.8% of the Gross Domestic Product (GDP). national and represents 75% of Panamanian goods exports, according to company data.

Below are the five keys to why this project, accused by environmentalists of causing serious damage to the Central American Biological Corridor, faces a judicial process that could decree its end.

1. A first contract declared unconstitutional

The Supreme Court declared unconstitutional in 2017 the law contract that in 1997 endorsed the concession for the exploitation of the mine, first given to the now defunct company Minera Petaquilla, whose rights reverted after several sales to Minera Panamá.

Both Minera Panamá and the Government of then-president Juan Carlos Varela (2014-2019) defended that the 2017 ruling did not affect the mine because it declared unconstitutional the law approved to give legal certainty to the agreement and not the concession.

2. A new contract is negotiated

The current Government of President Laurentino Cortizo announced in mid-2021 the negotiation of a new contract with Minera Panamá to give legality to the operation and increase the benefits to the treasury, thus ruling out the closure of the project considering that this would be a “suicide” Under the economical point of view.

Negotiations began in September 2021 and ended with the agreement of the new contract law in March 2023, after a tough process that included a government order to cease operations at the mine and the activation by the company of “two arbitration against Panama”, as reported on December 24, 2022 by the Ministry of Commerce and Industries.

The Government defends that the new contract multiplies contributions to the treasury by 10, with a minimum annual contribution of US$ 375 million for royalties that were raised from 2% to between 12% and 16%, the payment of previously exempt taxes, and the environmental surveillance.

3. Environmentalists denounce that vices continue

Environmental groups, lawyers and politicians who have been fighting against the mine for years assure that the new contract maintains the same defects that led to the first being declared unconstitutional, among them that in both cases the concession was awarded directly, without the bidding dictated by the law.

“The defects are repeated and increased in this contract in relation to the previous one“former attorney general and former independent Panamanian representative Ana Matilde Gómez told EFE.

4. Wide popular rejection

The crisis that began on October 23 in rejection of the mine has left massive marches not seen in decades, road blockades that have resulted in the death of 4 protesters, losses that exceed 1.7 billion dollars and a teacher strike that has without classes for nearly 800,000 students. But the demonstrations against the mining contract began at the beginning of the year.

In a non-binding public consultation activated by the Government through a digital platform, “more than 70% of the people who participated said no to open-pit metal mining,” stressed former Attorney General Gómez.

5. What comes after the failure

If the Supreme Court declares the unconstitutionality of Law 406 the contract “ceases to exist“, the former attorney general and constitutional expert Ernesto Cedeño told EFE. The Executive will have, in the very short term, to order the cessation of operations, which is not the same as the closure of the mine.

Environmentalist Raisa Banfield, member of the movement ‘Panama is worth more without mining’told EFE that they promote the realization of a “public tender with terms of reference for companies to come to reduce the operation and put an end to it”, a process that will be long and expensive.

Minera Panamá and FQM are also expected to activate arbitrations that may involve billions of dollars in compensation.

On the other hand, the scenario of a ruling that dictates that the contract is constitutional is unlikely, in Gómez’s opinion, “because the highest court would be reversing itself” regarding the 2017 decision.