Panama and the Crossfire of Local Environmentalism and the Global Energy Transition

Cobre Panamá indicates that the process of extracting the critical materials is complicated, messy, and disruptive—for all parties involved.


Source: Luis Acosta/AFP via Getty Images.

In late November 2023, the forces driving the global energy transition from fossil fuels to renewables collided with strong public anti-mining sentiment in Panama. The main target of public ire was First Quantum, a Canadian company that had recently received a 20-year concession from the government, which would have allowed it to continue mining at Cobre Panamá, which supplies 1.5 percent of the world’s supply of copper.  

The mine’s closure reflects the complicated nature of the green revolution: the mine’s operation is important to the development of renewable energy like wind, solar, and batteries, but this often runs counter to local concerns over the environment and sovereignty. As reflected by Panama’s case, the collision of the global energy transition and local interests represents a significant challenge likely to crystallize through the decade’s end.  

Mining in Latin America has a long history and has played a central role in economic development in several countries. It is also associated in the public mind with exploitation by colonial powers and later by multinational companies, as well as boom-bust cycles.  


The Cobre Panamá Crossfire 

These associations have only grown stronger as the global energy transition kicks off a new foreign scramble for Latin America’s mineral resources. Chinese, Australian, British, European, Canadian, U.S., Japanese, and South Korean companies are showing up throughout the region seeking to secure their supply chains for copper, lithium, and nickel. In Panama’s case, Dartmouth University’s Professor Jorge Cuéllar observed: “…when foreign companies come in and try to extract copper that is going to get shipped elsewhere like China and the Near East, where it’ll be processed, a lot of capital and value generated from that raw material is not going to come back to Panama.” This has led many Latin American governments to reassess their mining investment regimes and seek to balance new mining ventures with environmental concerns and public opinion.   

The roots of the 2023 Panama mining crisis date back to 2013, when First Quantum inherited the rights to Cobre Panamá. In 2017, Panama’s Supreme Court deemed the law under which First Quantum operated unconstitutional. The company was forced to sign a new contract with the government, which exchanged a 20-year mining lease (with an option for a 20-year extension) for an annual Panamanian revenue of USD 375 million.   

Panamanian President Laurentino Cortizo’s government regarded the revenues as an important factor in fiscal consolidation. The size and scope of the mine were considerable for Panama: Cobre Panamá has extracted 300,000 tons of copper per year and represents around 5 percent of the country’s GDP and 75 percent of exports. According to the company, the mine generates 40,000 jobs indirectly, including 7,000 jobs directly, most of which are Panamanian. Without the revenues from the mine, Panama is looking at a sizeable budgetary gap.  

The protests’ broad nature took Panama by surprise. They were the largest the country has seen in decades and centered on greater accountability from public officials in terms of transparency of deals, environmental concerns, and sovereignty. As one Panamanian stated, “I am protesting because they are stealing our country. They are just handing it over.” Roadblocks were erected, parts of the country were temporarily cut off, and mining operations came to a halt. Although the Cortizo government offered to hold a referendum on the mine, public sentiment remained against the copper operation. In late November, the Supreme Court declared the law that allowed the First Quantum contract unconstitutional, a decision promptly respected by the government. A moratorium was soon put in place on any new mining concessions.  


The Economic & Political Impacts 

The protests must be seen in the context of Panama’s economic management in recent years, which has generally been positive, posting strong real GDP expansion, diversification, and poverty reduction. The economy made a strong recovery from the COVID-19 pandemic, expanding by 15.3 percent in 2021 and 10.8 percent in 2022. Inflation was low and the country’s banks well-capitalized. The International Monetary Fund’s (IMF) 2023 report notes that a key force in the country’s recovery was the construction sector, which was driven by expansions of the Panama Canal and Tocumen Airport, the building of new skyscrapers in Panama City, and the construction of one of the largest copper mining complexes in the world, Cobre Panamá. Real GDP is estimated at six percent this year, with inflation expected at 1.5 percent. That said, growth is likely to cool to four percent or lower in 2024.  

However, the matter of governance adds a further layer of complexity to the situation. Panama’s political institutions are democratic, defined by open and fair elections, orderly changes of office, and a relatively free press. Panama has also been working to deal with corruption. In October 2023, it was taken off the Financial Action Task Force’s gray list, which indicates that improvements have been made to the country’s anti-money laundering rules and enforcement. However, corruption remains a serious problem, impacting the highest levels of Panama’s government. The Transparency International Corruption Index (2022) ranks Panama at 101 out of 180 countries—well ahead of Latin America’s most corrupt states (Nicaragua 167th, Haiti 171th, and Venezuela 177th) but with ample room for improvement.  

In July 2023, former President Ricardo Martinelli was sentenced to over ten years in prison for money laundering. While Martinelli has denied any illicit activities, he also faces money laundering charges for his alleged involvement in the Odebrecht case, the massive bribery scandal involving Brazil’s then-major construction firm, which resulted in scandals throughout the region. Complicating matters is the fact that, despite Martinelli being sentenced by Panamanian courts, he leads in opinion polls for the presidency. Moreover, Martinelli is using the mining issue in his campaign, quickly applauding the Supreme Court’s decision and playing to nationalist sentiment.  



While anti-mining nationalists and environmentalists are celebrating a victory, Panama now faces other problems, such as how to plug holes in the budget, the likelihood that economic growth will slow, and potential damage to Panama’s reputation as a safe place for foreign direct investment. Unemployment is likely to go up, considering the sudden loss of 7,000 mining jobs. There is also a possibility that First Quantum could seek to sue Panama for up to USD 50 billion in damages. The Court’s action was a major blow, clearly underscoring the political risk to companies. Making matters worse on the fiscal side, the country has suffered a long drought, which resulted in fewer ships passing through the Panama Canal, trimming revenues. 

Reflecting the above concerns, rating agency Moody’s recently downgraded its ratings to Baa3 from Baa2, and S&P affirmed its BBB rating, but now has a negative outlook. In September 2023, Fitch had already revised its outlook for its BBB- rating from stable to negative due to “persistent fiscal pressures and uncertain prospects for consolidation.” These ratings could have a significant impact as they indicate that the country’s creditworthiness risks going from investment grade to noninvestment grade. Of particular concern now is the loss of two years of future royalties amounting to USD 770 million (0.9 percent of GDP) from the renegotiated contract with First Quantum. Panama’s overall creditworthiness is likely to face major downside risk challenges in 2024, which could be complicated by the May 2024 general elections. Lower ratings usually translate into greater costs in raising debt in international markets.  

Panama’s experience with the Cobre Panamá demonstrates the gap between the goals of going green in the advanced economies and the impacts on the Global South, where much of the critical materials reside. The Global North is concerned about the energy transition, climate change, and the rapid creation of a new economy. Importantly, much of the public in the Global North wants to go green but does not want mining in their own backyards—it would be better to have it out of sight. Latin American countries are finding the scramble by the Global North to secure supply chains a benefit and a risk. The latter includes local environmental concerns and erosion of sovereignty. The demand for critical materials, as in Panama, highlights the challenge of governance adding costs to doing business. Cobre Panamá indicates that the process of extracting the critical materials is complicated, messy, and disruptive—for all parties involved. Much more thought is needed as to how to find a happy medium where extraction does not threaten exploitation.  


Scott B. MacDonald is Chief Economist at Smith’s Research & Gradings, Research Fellow at Global Americans, and Founding Member of the Caribbean Policy Consortium. His latest book, The New Cold War, China and the Caribbean, was recently published by Palgrave Macmillan.

Global Americans takes pride in serving as a platform that offers in-depth analyses on various political, economic, environmental, and foreign affairs issues in the Western Hemisphere. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Global Americans or anyone associated with it, and publication by Global Americans does not constitute an endorsement of all or any part of the views expressed. 

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