This is the economic impact of ‘losing’ a copper mine in Panama

The government of Panama estimates that the economy of the isthmus will grow between 1% and 2% next year from the previous estimate of 5%, due to the effects of the closure of a Canadian copper mine. First Quantum Mineralsan Economy Ministry official told Reuters.

Furthermore, Hernán Arboleda, director of Public Policies of the Ministry of Economy and Finance of Panama, assured that the government will have to talk with the international rating agencies to reiterate that in the country there are “legal security”.

Last week, after weeks of protests, Panama’s supreme court declared “unconstitutional” the contract that allowed First Quantum operate the largest copper mine in the country and President Laurentino Cortizo assured that his government will abide by the ruling and proceed to close it “neat and safe” of the operation.

“Maybe the growth rate is not 4%, maybe it can be 1%, maybe 2% or it can be 1.5%“Arboleda said in an interview with Reuters, ensuring that the figures are still unofficial. “There is no more mine, so we will have a fall”he added.

This year, Panama leads the World Bank’s economic growth forecasts for Latin America and the Caribbean with 6%. Arboleda assured that the estimate continues to be maintained for 2023 despite the economic blow due to the closure of the mine, whose commercial production is suspended due to blockades.

Legal security, advantages

In recent years, the economy of the Central American country, strongly driven by financial and logistics services, has expanded at rates higher than the average for the region. Last year, Panamanian GDP grew 10.8%.

The operation of First Quantum It contributed around 5% of Panama’s GDP. JPMorgan warned that the chances of Panama losing investment grade status would increase significantly if the contract was revoked.

The contested contract granted First Quantum a 20-year mining right with an option to extend for another 20 years, in exchange for US$375 million in annual income for Panama. Protesters argue that the terms of the agreement are too generous to the mining company and allege corrupt practices in its approval. The company has denied it.

Arboleda said that the administration of President Laurentino Cortizo will speak with the risk rating agencies to assure them that in the country “there is legal certainty”.

“We have to reinforce it and talk to the rating agencies and tell them again and remind them what Panama is, tell them again that there is legal security“said the official.

Panama, one of the most stable economies in Latin America, has the coveted investment grade of the three big rating firms: S&P, Moody’s and Fitch.

“An investor should note that he cannot enter into mining activities (in Panama), it is already prohibited. But all the other activities, there are the advantages that Panama has, there is the dollar, there is the canal, communications“Arboleda explained.