Five keys to understanding the socio-economic impact of protests in Panama - Expat Community

Five keys to understanding the socio-economic impact of protests in Panama

Nov 10, 2023 | News & Articles, Panama | 0 comments

The controversial renewal of the mining contract with a subsidiary of a Canadian company has plunged Panama into a wave of protests that have claimed the lives of at least four people, in addition to causing millions in losses due to road closures in the country.


We explain in five keys the socio-economic impact of these protests against the agreement with Minera Panama, a subsidiary of the Canadian company First Quantum Minerals (FQM):


  1. The largest protests in decades

The approval of this controversial contract on October 20 triggered a wave of protests, the largest in decades, led by environmentalists, youth, and unions.


The situation forced the authorities to seek a way out of the crisis with a mining moratorium, which prohibits granting new concessions for metallic mining and halts those in process, one of the demands of the protesters. They also left it to the Supreme Court of Justice to decide on the possible unconstitutionality of the contract with FQM.


Despite this, the protests continue, with one of the most tragic days occurring this week, with the death of two protesters in a shootout during a roadblock, bringing the total to four deaths in 18 days of demonstrations.


  1. The Pan-American Highway blocked

Rejection of the controversial contract has been reflected in constant blockades on the Pan-American Highway, the country’s main road connecting it from north to south and with the rest of Central America.


These blockades have caused shortages of basic products in some urban centers, such as Panama City, where prices have skyrocketed due to product scarcity.


The government and security forces have created a logistics corridor by air and sea to transport medical supplies, fuel, gas, and food.


Currently, the strongest blockade is in the province of Chiriquí, bordering Costa Rica and considered the country’s breadbasket, where it was reported that around 900 trucks were stuck on the road.


In response to isolated cases of vandalism and looting, businesses, banks, shopping centers, and the hospitality sector have had to fortify themselves with wooden boards.


  1. A blow to the economy

Panama’s business guilds estimate losses of up to $90 million per day due to this irregular situation in the Central American country.


The tourism sector has been one of the hardest hit, with $200 million in losses after more than 68,000 tourists canceled their visits to the country until January, including participants in conferences and conventions. The hotel guild estimated losses of $13 million just for that sector.


The economic impact of the protests has been noted by risk rating agencies such as Standard & Poor’s (S&P), which downgraded the outlook from “stable” to “negative” due to the “risk of potential damage to investor confidence and future private investments.”


On October 31, Moody’s linked the fulfillment in 2023 of the 3% of GDP deficit target established in the fiscal rule to the tax revenue of $770 million (0.9% of GDP) from the contract with Minera Panama. Authorities projected that this law contract “would provide royalties of $375 million (0.4% of GDP) annually in the coming years.”


  1. Complete rejection of mining activity

Protesters not only reject the new contract but all mining activity, arguing that the economic benefits do not compensate for the environmental damage to Panama, where forest cover reaches 68% of the territory.


However, opposition to mining has also highlighted the economic significance of FQM’s exploitation of the largest open-pit copper mine in Central America.


The Chamber of Mines of Panama defends this activity and the renewal of the contract, for the significant economic benefits it would bring. According to official data, mining contributed 13.2% to GDP from 2017 to 2022.


Since Minera Panama began production in 2019, the mining sector has represented around 80% of the country’s exports.


In Panama, there are at least ten mining projects with “enormous potential in gold and copper mineral deposits primarily,” according to the mining guild, which argues that the country “is characterized by having abundant mineral resources due to its geological location.”


  1. The Supreme Court of Justice, facing the final decision

The Supreme Court of Justice of Panama holds the future of the new contract in its hands, after lawmakers decided not to overturn it through parliamentary means.


The country’s highest judicial body has admitted nearly a dozen lawsuits challenging the constitutionality of this agreement, as it did with the previous one in 2017.


Environmentalists and jurists argue that a finding of unconstitutionality on this contract would put the Panamanian state in a more advantageous position against a possible international arbitration by the mining company for breach of contract.


The economic consequences, according to the mining guild, of reaching international arbitration with the Canadian multinational would be around $50 billion, considering the $10 billion investment.


An increase in country risk is also estimated, with the eventual loss of investment grade, a decline in Panamanian bonds, and the deterioration of public finances. –

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