Copper mining could endanger the Panama Canal and tropical forests

Panama has erupted in protests, the largest since 1987, when the people wanted to overthrow the military dictatorship of General Manuel Noriega. But environmental, social and governance concerns cause the current unrest.

It focuses on Canadian miner First Quantum, which has produced 350,000 tonnes of copper since 2019 and added 5% to the country’s total gross domestic product.

But environmentalists oppose such development, maintaining that the nation owns the mineral wealth, not the Canadian miner. Significantly, further exploration will disrupt the lives of the indigenous population and contradict efforts to preserve rainforests and keep CO2 emissions under control. Additionally, copper mining competes with the Panama Canal and rainforests for fresh water, while acid mine drainage could harm water quality and safety.

“Our government does what it wants with our resources,” says Juan Monterrey, executive director of Geoversity in Panama City and Panama’s former chief climate negotiator, in a chat with this writer. “Then protests broke out: 250,000 people marched in a country of 4.4 million people. The government is fighting a long-term battle, betting that people will get tired. “He has sold the country.”

Panama’s highest court will meet to discuss the legality of the contract starting November 24. The agreement requires First Quantum to pay the Panamanians $375 million annually for 20 years. President Cortizo of Panama said he would comply with the ruling.

The mining company maintains that it operates in an environmentally safe manner and creates jobs for residents. He says the protests have disrupted port activities, causing a reduction in mineral processing at Cobre Panamá. This will harm 7,000 employees and contractors and 40,000 additional people who provide services to the mine (2% of the Panamanian national workforce).

Ironically, the two sides share commonalities. In fact, First Quantum mines copper, a strategic raw material essential for the global energy transition. This is because it is intended for wiring and motors, necessary components of electrification and, therefore, decarbonization.

“Panama is a test case in the race for copper,” says Monterrey. “There are unexploited copper deposits in Panama and the world. Where will the mining occur? Will it be in tropical rainforests and other ecosystems rich in biodiversity? Or, more importantly, will it happen when the operation is legal and accepted by locals? Striking a balance between meeting global copper needs and addressing local aspirations requires thoughtful and inclusive dialogue.”

The mining site is located in vital forests

Panama’s rainforests absorbed 18.3 million tons of CO2 between 2016 and 2020, more than the national energy sector emits annually. That is why Panama safeguards its trees that house biodiversity, prevent soil erosion and regulate the water cycle: between 1947 and 2014, the country lost 6.7 million acres of forest (a fraction of its total) mainly due to livestock and agriculture. Panama is gradually eliminating deforestation and restoring its forest cover.

The country’s major industries include agribusiness, manufacturing, petroleum products, chemicals, and transportation linked to the Panama Canal and Panama City Airport, which serves 170 destinations worldwide. Meanwhile, international banking is important, along with mining and tourism. The inefficient agricultural sector is the main cause of the country’s greenhouse gas emissions.

The mining site, Cobre Panamá, is in the heart of the rainforests. Hence the dispute. However, the government negotiated the contract out of public view, a deal that gives First Quantum exploration rights to 32,000 acres over two decades and about 1.5% of the world’s copper.

“First Quantum remains committed and open to constructive dialogue to address the concerns raised by the people of Panama and to establish a long-term relationship,” says Bonita To, director of investor relations at First Quantum. “The company reserves the right to protect itself with all available options in accordance with its contractual rights and international law.”

President Jimmy Carter’s experience with the Panama Canal could prove useful. While the United States built the canal in 1914, it became a point of contention, fomenting unrest in Panama in the 1960s. People saw it as American colonialism: President Carter and Panamanian leader Brig. Thus, General Omar Torrijos Herrera renegotiated the treaty in 1977 and on January 1, 2000, Panama took control of the canal.

Is there a balance?

Panama is fighting a drought that endangers the operations of the Panama Canal, through which 6% of the world’s maritime traffic passes. The dry conditions coincide with government actions to allow mining in tropical forests near the canal basin, meaning mining and canal interests compete for scarce water supplies.

“The Panama Canal is the only waterway that operates on fresh water and depends on healthy forests and neighboring ecosystems for its operations,” says Geoversity’s Monterrey. “Panama wants investments, but the business must be transparent and aligned with our values. This contract goes against the sovereignty of the land, which we value so much.

“Unfortunately, instead of devising a comprehensive long-term plan to transform Panama into a center of green growth, politicians and many members of the business elite tend to pursue flashy projects for short-term gains,” he adds. “Mining should only happen when laws and communities are respected and benefits are shared. “Panama is open to green and ethical businesses.”

A logical discussion follows: Is the world demand for copper more critical than the will of Panama and its people? World markets demand copper, but Panamanians require protection of their natural resources and a new development paradigm. Is there a balance between global needs and locally determined aspirations?

Companies hold many of the cards. However, the demand for minerals cannot prevail over a country’s rule of law. The government must enforce environmental protection and restoration under any circumstances.

Panamanian sovereignty and its coveted tropical forests and biodiversity are paramount. First Quantum understands this, noting that it has set a target of 30% greenhouse gas reduction by 2025 and 50% by 2030 on the project while continuing to reforest.

But this dispute goes much deeper and the mining company cannot rectify using concrete economic and environmental figures.

“It is a fact that the contract created a colonial enclave,” responds lawyer Publio Cortés, former vice minister of Finance of Panama, in Corporate Knights. “This brings back an unpleasant memory for Panamanians because, for almost a century, we had a colonial enclave of the United States of America in the territories adjacent to the Panama Canal.”

Without critical raw materials like copper, the world cannot build enough electric vehicles and renewable energy plants to meet its climate goals. But cutting down rainforests to obtain these materials is counterproductive: a resource that traps 7.6 billion tons of CO2 a year worldwide. These forests are also home to indigenous populations, making it much more difficult for mining companies to gain popular support.

Panama’s Supreme Court may bring this battle to a head, invariably generating more legal disputes and civil unrest.