Former official suggests public debate and referendum on mining, Cobre Panamá

There should be a public debate on mining in the country and a referendum on both that and the future of the Cobre Panamá copper mine, according to Panama's former deputy economy minister Domingo Latorraca.

“I believe it's important to adequately analyze the issue and rethink the future of mineral resource exploitation in relation to environmental protection. And I don't think they're incompatible with each other," Latorraca, a founding partner of consultancy Eleménte, said in an interview with BNamericas. 

The renewal of the contract for the Cobre Panamá mine with First Quantum Minerals' (FQM) local subsidiary Minera Panamá led to national protests over environmental concerns and the terms of the deal. After the supreme court declared the new contract unconstitutional, President Laurentino Cortizo was forced to announce in November 2023 that FQM would be ordered to shut down the mine. 

"I think the parties will have to sit down and talk... and if there is willingness and the authorities believe that it may be to the benefit of the State... negotiate a new contract," Latorraca said, adding that any new agreement would have to ignore the previous contract and be "drafted from scratch.”

Through Eleménte, Latorraca conducts a monthly survey of economic activity among more than 200 company executives. In the most recent edition of that survey, conducted after Panamanians elected José Raúl Mulino as new president on May 5, some 88% of the respondents said they backed the exploitation of mineral resources in Panama, as long as it was under favorable conditions and with strict oversight.

Other observations included statements that mineral resources should be used for the well-being of the country, but with “iron-clad controls.” However, Latorraca said that the comments in the survey highlighted that there are doubts about the State's institutional and oversight capacity.   

“I believe that the banking system is the proof that we can do it because it's really well regulated and stable, with an independent board of directors that's on top of it,” said the former official, who was deputy economy minister from 2000 to 2003.

“If we have a supervisor [in mining], why not, because the financial system is a tough system... it keeps the banking system online, is well capitalized, well regulated... it provides international services and represents around the same contribution to the economy as the mining operation, about 5-6%. Why can't we do that responsibly too?" Latorraca said.

Other comments by the survey respondents were that the State could be a passive shareholder in possible mining joint ventures or PPPs operated by a shareholder specialized in the sector.

Some also echoed previous concerns about open pit mining, saying that it should be banned, while others stated that it was essential to reopen the Cobre Panamá operation to avoid having to pay out large sums in compensation, with First Quantum reportedly seeking US$20bn in damages for having to close the mine.

Latorraca agreed with this point in particular. 

“The reopening of the mining operation is essential to avoid multimillion-dollar lawsuits that the country faces related to... the contingencies as a result of the stoppage of operations,” he said, suggesting that those opposed to the copper mine had probably not taken this eventuality into account.

"They didn't weigh it up, or they didn't care that the State could be and actually is being sued by the company for billions of dollars. And it seems that they also didn't care about the 30,000 direct and indirect jobs,” he added.

He said it was quite correct that president-elect Mulino had expressed his willingness to seek a direct solution to the mine closure on the condition that the company withdraw its arbitration case against the country, although the parties must still find a way to come to the table and enable such a process to begin. 

First Quantum has filed for arbitration under the Canada-Panama free trade agreement and has also filed a separate case with the International Chamber of Commerce (ICC) for arbitration under the termination clause in the ICC contract.

“Looking forward, I think that the most logical thing would be... to have an explicit, rapid and technical debate that allows the population to take stock and for a referendum to be held,” said Latorraca.

“I think that this operation [Cobre Panamá] should be reactivated as a closure plan that is self-financing, as the president-elect has indicated, and which takes as long as necessary, and to get all these lawsuits off our backs,” Latorraca added, underlining that having a valuable asset like Cobre Panamá that is not producing revenues basically represents millions of dollars in losses.

To do that, it would be necessary to lift the moratorium on the exploitation of mineral resources that is established in the constitution after being approved at the end of last year in the wake of violent and widespread social protests driven by environmental groups.