Presidential debate ignites new controversy over Cobre Panamá mine

The future of First Quantum Minerals' flagship Cobre Panamá mine sparked some of the most heated discussions during the first of the three presidential debates ahead of Panama's May 5 general election.

Aside from the controversy over the copper mine, which has been forced to stop operations, some of the related topics raised by the candidates included holding a new national referendum on mining as well as incorporating a ban on open pit mining into the constitution, as was recently proposed in Mexico by President Andrés Manuel López Obrador.

Although last year the government agreed on a new operating contract with Minera Panamá, the local subsidiary of First Quantum, after the original contract for the mine was declared unconstitutional in 2017, thousands of demonstrators protested against it for environmental and social reasons.

The supreme court subsequently annulled the new contract in late November, leading to an order to close the open pit mine despite its major contribution to Panama’s public finances, ensuring it will remain a hot topic for some time to come.

The contenders in the debate represented the major political parties and included independent nominees. However, the podium of one of the favorites, former president Ricardo Martinelli, was empty, as he is in the Nicaraguan embassy in Panama City after requesting asylum from that country, a petition that was granted in early February. 

He is campaigning to return as president despite being convicted of money laundering and later sentenced to nearly 11 years in jail. Martinelli claims he is innocent and is the victim of political persecution.

With just over two months until the election, a February 15-19 poll by Gizmo Services, published in daily La Estrella de Panamá, was led by Martinelli's running mate José Raúl Mulino (although Martinelli is the official candidate at present), representing a coalition of Realizando Metas (RM) and Alianza. Close behind was Rómulo Roux, candidate of the Democratic Change and Panameñista parties.

Some 19.8% of those surveyed said they would currently vote for Mulino, while 19.6% said they favored Roux.

They were followed by José Gabriel Carrizo with 15.7%, Martín Torrijos with 11.8%, Zulay Rodríguez with 9.7%, Ricardo Lombana with 9%, Maribel Gordón with 3.0% and Melitón Arocha with 2.8%.

The proposals

Arocha, a lawyer and former lawmaker, is a member of the Panameñista party, but in these elections he is running as a freely nominated candidate as well as for the social independent alternative party PAIS.

During the debate on Monday, he recalled that while he was trade minister (July 2014 to January 2016), he practiced a de facto mining moratorium by not granting any metallic or non-metallic mining concessions.

However, he said the current situation is different because the Cobré Panamá operation has already affected the environment and the necessary measures must now be taken to avoid generating further damage and costs.

"What I propose is to put these mineral resources at the service of the country, as long as it is done through a broad consultation with the nation, most likely through a referendum to listen to what the country has to say," he said.

Although Arocha was ranked last in the Gizmo poll, an assessment by a panel of six experts commissioned by newspaper La Prensa concluded that he was the winner of the debate.

Candidate Ricardo Lombana, a lawyer and former presidential candidate who is running for the Otro Camino movement, responded to Arocha that the public have already demonstrated their opposition to the mine via protests, in addition to the supreme court ruling.

“We agree with including a ban on open pit mining in the constitution, through a constituent assembly,” said Lombana.

However, Arocha pointed to the problem of the 7,000 direct employees and 40,000 indirect employees of the mine who have been affected by the closure and underlined that although many of the protesters were opposed to mining, others were demonstrating against the unconstitutional contract and widespread national corruption, so a referendum would be appropriate.

Although not included in the debate, in late November Martinelli expressed concern on social media about the supreme court ruling to shut down the mine.

“Local calm has returned but the international storm is coming. As Panamanians, whether for or against, we must all now be on one side; in favor of Panama. Arbitration is costly and takes a long time,” said Martinelli at the time. He also claimed the next government will inherit colossal problems regarding the dispute over the mine.

Finally, given the controversy, Roux is a surprising challenger to Martinelli/Mulino, since he is openly linked to Morgan & Morgan, one of several law firms in Panama that helped draft the Cobre Panamá contract.

Last October, before the mining contract was declared unconstitutional, the candidate said in a podcast posted on social media that “politicians who say that the mine must be closed are talking nonsense because it cannot be closed.”

Roux then stated that he had always agreed that the contract should be renegotiated so more public funds could be collected from the mine and to ensure the operation adhered to the highest environmental standards.

However, he also stressed that "if an individual who’s going to be president says that the mine must be closed, not another dollar will not come" to Panama.

Cobre Panamá was one of the biggest copper mines in the world to begin operations in the last decade. It contributed around 5% of Panama’s GDP and represented up to 75% of the country exports of goods, according to the company.

The mine produced 330,863t of copper in 2023, some 5.6% less than in 2022 due partly to the halting of operations late in the year.

Oxford Economics recently estimated that “the suspension of Minera Panamá operations could reduce GDP growth to 1.9% from 4.2% in 2024 and to 2.9% from 4.1% in 2025, and [the economy would] only return to long-term growth in 2026.”

The firm also expects credit rating agencies to downgrade Panama's sovereign rating shortly due to weaker fundamentals and growing threats to the country's ability to achieve its fiscal goals.

In early February, First Quantum CEO Tristan Pascall told the Financial Post that “considerable economic difficulties are emerging in the country … and we believe it is impossible for the next government to overlook the contribution that a responsible mining sector can make.”