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The Copper of the Mine
Panama's Public Rages at a Canadian Mining Contract
“The Spaniards raked into the mines, scooped out the mountains, invented machines to draw out water, to break the ore, and separate it; and as they sported with the lives of the Indians, they forced them to labor without mercy.” - Montesquieu [The Spirit of the Laws, I.XXI.22]
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The Central American nation of Panama has been rocked by enormous protests, which if not unprecedented, are certainly unusual in the small nation of over 4 million people. At issue is a contract President Laurentino Cortizo and Congress approved with Canada’s First Quantum Minerals on October 20th to extend their concession to work the enormous open pit Cobre Panama copper mine for another 20 years. The new contract for the mine in a remote rainforest guarantees $375,000,000 in government revenue annually, while the mine’s output is around 5% of Panama’s GDP, and it employs 49,000 people in “direct and indirect” jobs. However, protestors are upset about their national wealth going to Canada and the environmental impacts. Protestors are also concerned about the project’s water usage, as the country’s main source of revenue- the Panama Canal- requires an extraordinary amount of fresh water, and its traffic is already limited by a drought. Further, the history of mining in Latin America is fraught with exploitation and Panama is increasingly reliant on a booming ecotourism industry, making the public uninterested in harming the beautiful and diverse landscape in the fiendish pursuit of mineral wealth. An irony in all of this is that a main reason there is such a demand for copper is to make electric vehicles, which are supposed to help the global environment, but its hard to sell people on tearing up their own rainforests for vague global climate improvements. Perhaps most importantly, as I love to point out, though Canada’s reputation in the United States is as our friendly hat [or retarded cousin, according to Tucker Carlson,] in the “Global South” Canada has a reputation for brutal extractivism and the associated social and environmental damage. Despite containing only .48% of the global population, Canada has almost half of world’s publicly listed mining companies, or a per capita rate 100x the global average. Thus, quite a lot of Panamanians feel like they have many reasons to not want this Canadian super-mine in their country. In the face of protests, the President proposed the unusual step of holding a national referendum on the mining contract, but the electoral court ruled it could not be carried out in a proper fashion if planned so quickly, leaving it up to the Supreme Court to rule on the contract. For its part, First Quantum has lost an enormous amount of value over the protests and the ensuing uncertainty about the mine continuing to operate.
First Quantum Minerals, which has invested more than $10 billion in the Cobre Panama Mine, could be in serious trouble even before the contract is decided upon. Work has already been reduced due to the challenges of delivering supplies including food amidst road blockages, while on the other end protestors have broken into ports to prevent the export of materials. On top of all of this, there are elections in the country next year. While a moratorium has been passed on future mining projects, the political class remains in a great deal of peril. We can also be sure that First Quantum Minerals does not want to lose the more than 10 billion dollars it has invested in the project, which it must be only beginning to recover.
The sensitivity of the Panamanian people about their land and sovereignty is understandable, if we take a brief look at their history. Originally, a French company had tried to build a canal in what is now Panama, but the endeavor went bankrupt, leading the United States to purchase the rights and equipment. At the time, Panama was a part of Colombia, but in 1902 Colombia’s Congress found the terms under which the United States wanted to license a canal unacceptable. In a typical American fashion, bathed in freedom and respect for national sovereignty and the rule of law, the United States supported a revolt against Colombia, and then made the deal they wanted with a new and weaker country. Panama was founded in 1903, and the US received a lease for full military control over a 10 mile wide canal zone, splitting the country with a US military occupation. This did have the advantage that the US had relatively less cause to meddle in their country, as it had sole control of what it needed and could mostly just militarily defend the zone instead of worrying about making sure there were friendly governments. In 1977, Jimmy Carter negotiated a treaty which returned the canal zone to Panama, implemented in 1979. The treaty included an agreement to return the canal itself before 2000, on the condition that it would remain neutral as a waterway; it was transferred to Panama’s control in 1999.
Despite all of this, the US did find time to attack the country, with President Bush invading Panama in 1989 to overthrow the dictator Manuel Noriega, who was captured and faced narcotics charges in the United States. It was a short but brutal invasion, which is mostly forgotten in the United States. Panama was quite literally founded for the purpose of its soil being torn up and its territory exploited by a foreign power, which remains deep-seated in the national consciousness. At the same time, the Canal was always a major asset, more so now that Panama operates it, and it is the primary reason for the small country’s global significance. As to the high volume of water use, which is most relevant to this story, the reason is that the canal climbs quite a bit due to Panama’s rugged terrain, and thus relies on a series of locks. I was initially confused about this when I started looking into this story, having forgotten the classic Animaniacs song which deftly explains the functioning of the Canal:
The Canal has long brought a high volume of trade to Panama and made it a major country for international commerce, but historically the population has still been mostly poor. The challenging terrain is difficult for many other types of business, and there is still a high level of subsistence farming in rural areas. Despite these challenges, Panama has had robust economic growth for the last few decades. Panama has not traditionally been a mining country, and before Cobre Panama there was only one gold mine, in the same area, now ran by First Quantum [the Cobre Panama mine also produces gold and silver in the process of sifting through vast quantities of dirt in search of copper.] The concession- roughly the size of Miami- for what is now Cobre Panama was first awarded in 1997. It is not necessary to get into the business history here, but suffice to say the difficulty of the terrain and the enormous investment required meant that no work was done on the project until First Quantum Minerals came to hold the rights after a merger. Work began in 2014, and the mine began to produce in 2019. The scale of this one project is so large that it makes Panama one of the top countries for Canadian mining investment. 7.7% of Canada’s foreign mining investment is in Panama according to the Canadian government.
The 2022 production at Cobre Panama was reported as around 350,000 tonnes of copper, 140,000 ounces of gold, and 2,800,000 ounces of silver, which taken together account for 80% of Panama’s exports by value. First Quantum is known for being relatively good on environmental and labor issues, at least by the standards of an industry which is known for being very bad on both things in developing countries. It was generally considered within the mining industry that this would be a model of sustainable, low-conflict resource development. However, for all of that, the government was only supposed to be getting $35 million a year in direct royalties [though of course economic activity produces other revenue.] In 2017 a court ruled this was an unconstitutional contract as it was not in public interest, and the new contract negotiated in 2021 guarantees $375 million revenue annually to the state. In its current form this is one of the best deals any state has with a foreign mining company, but the ability to increase royalties by over 10 times is enough to make people all the more suspicious of the government for signing the original contract.
Despite what they would tell you, the environmental and social damage of Cobre Panama is not any sort of misconception. A Canadian academic, Daviken Studnicki-Gizbert, with extensive experience in this region of Panama just published an editorial for the National Observer noting almost complete silence about Panama’s protests in Canada’s press. According to him, Panamanians are puzzled by this, imagining Canadians would have an interest in protests against a business from their country. I am not puzzled; though they would be genetically incapable of not saying “soaree” if confronted about Canadian mining interests, it is also a key part of Canada’s national character to try and deny or ignore that they are avaricious abroad. In Studnicki-Gizbert’s futile effort to interest Canadians in why Panamanians are upset, he notes that many Panamanians protestors sport the slogan “gold is green,” in reference to the country’s lucrative ecotourism industry. He then proceeds to explain to the layperson why there is so much concern about this particular mine:
“They don't see this mine in their future. First Quantum's operation is a very large project, one of the largest copper mines in the Americas. It occupies the ancestral territories of the Ngäbé and the Buglé peoples.
It has punched a 6,000-hectare hole of open pits and tailings ponds in the middle of the Mesoamerican Biological Corridor. Three watersheds have been entirely ploughed under. Communities have been expelled from their homes.”
It’s needs to be noted that it is a bit hard to get a clear picture [literally] because Google Maps seems to have images from 3 different times covering this one mine, but if you go there on Google Maps and zoom in you seem to be able to see where an older tile has a river that isn’t there in a more recent tile. It is obviously the case that this enormous amount of soil-moving has a deleterious effect on nearby water. And again, there is the general concern about the amount of water use that inevitably goes with such a project, though I can’t find any statistics. Panama already has 2.5 times the global average per capita water usage, the highest in Latin America, primarily due to the enormous consumption of the Canal.
For all of this, First Quantum insists it is an industry model of “Environmental, Social, Governance” [ESG] you are always hearing about. They say that the resettlement of communities was voluntary and transparent, and that they pay close attention to water quality.
It does seem that as far as vast open pit mines in developing nations go- a very low standard- they have done a reasonably good job on all counts. Still, much of the public simply doesn’t want to be a mining country, and hasn’t been bought off with the promise of increased revenue. It needs to be noted that the Panama Canal could never be built in the modern era, but now that it’s been there for all of everyone’s life, and is basically the main thing about Panama, people are quite attached to it. Further, it was a sort of national humiliation for many decades having their country split by a US military occupation, so there is a degree of pride in controlling it. The attachment to the Canal notwithstanding, it seems that quite a lot of Panamanians are not particularly materialistic, and see a bright future as a pristine vacation destination without extractivism. Of course, the tourist industry development also crowds locals out of some of the best outdoor recreation, but everything has a price.
Before the news came out on October 20th that the First Quantum contract had been renewed, the politicians of Panama were already unpopular for the usual reasons, which is to say, corruption, lack of transparency, and poor services. Add to this the drought, which is a matter of national stress in Panama given the importance of the Canal. However, even so, President Cortizo, who is term limited, was at an abysmal 18%, which is extremely low for anyone. Though the mine was always controversial, the government probably didn’t think the finalization would get the reaction it did, after years of negotiations. You never know what spark will start protests in times of widespread discontent, but one way or another, spark protests it did. The country’s major unions went out to the streets and schools and businesses closed. Most of the protestors were peaceful, waving Panamanian flags and chanting slogans as they marched:
Other protests were less peaceful, with the police indiscriminately firing teargas at them, though it is hard to find other credible videos:
While the protests have mostly avoided extreme violence and destruction, they are sufficiently large and paralyzing to society that the government had to act. For one thing, the PanAmerican Highway was shut down in many places, which is the main land route connecting North and South America. It’s most likely this amount of anger will harm incumbents a great deal, as Congress approved the contract.
Once protests broke out there was no great way for the Panamanian government to respond. The investment First Quantum Minerals made is the largest private investment in Panama’s history. It will reflect badly on Panama as a place to invest if the operation falls apart due to political opposition. The 2017 contract was supposed to go until 2037, so if the mine is shut down, it will not have produced nearly what was intended when the mine was built and it seems impossible it will have covered the cost. Also of concern is that if the contract is annulled by legislation, Panama could be liable for the company’s losses in international arbitration, whereas if the Supreme Court rules it was never legal, the same issue is unlikely to apply. Either way, Moody’s has already lowered Panama’s rating to the lowest level where it is still considered a country one can safely invest in. At the same time, Panama has passed a moratorium on new mining projects in response, though there is only this one major mine in Panama and legislators thought better of shutting it down. Still, the contract is currently facing eight lawsuits challenging its constitutionality. One does wonder how much liability the government faces, since the contract under which First Quantum invested the money was already invalidated, and they made no further investments in the two weeks since this contract was finalized. One also wonders what investors would think of the complex process that brought it to this point, as they might believe it possible to write contracts differently in the first place with more awareness of local conditions. Further, if Panama doesn’t want to be a mining country and wants to be a tourist country, it’s possible that tourism investors will be less spooked. Overall though, international capital dislikes any country where street protestors cause the government to invalidate business contracts.
The protests in Panama are interesting in that First Quantum Minerals doesn’t seem to have done anything more unethical than is inherent to building a massive open pit mine on indigenous land in a forest. Of course, First Quantum are Canadian, so that is a major part of their culture: it is as Canadian as apologizing to a moose over a glass of warm maple syrup. Still, usually in these circumstances there are much smaller indigenous protesters who have been horribly screwed over by terrible business practices, commonly for the benefit of people in the city. Those from developed nations have trouble understanding this, thinking, “oh, why are they protesting a dam, don’t they want power and plumbed water?” Not realizing that the indigenous people had their village flooded to be moved to some shithole so other people could have water and power. In this instance, as far as I can tell, the foreign corporation treated people and the environment as well as could be expected in the circumstances, and the protestors aren’t individuals who are negatively impacted- they are in fact individuals who would benefit, if only broadly- and they come from a large cross-section of society. This time, the issue is that Panamanians are jealous of their sovereignty, having had their country split for almost a century, and don’t want to give Canadians all this land and power. They are also looking to a different forms of development, where nature is an asset and not something getting in the way of progress. I think many simply aren’t avaricious enough to do this to their country for a temporary profit. It’s hard to see how the current government or Cobre Panama recovers from this situation, but you can be sure that in private First Quantum Minerals is wondering if humanity has truly left the era where a foreign corporation is allowed to overthrow a Latin American state.
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