Panamanian Gov’t Catches Mining Fever
PANAMA CITY, Panama – When Spanish colonists first settled the territory that is now Panama, they gave it the name “Castilla de Oro” based on the belief that the hills were rich in gold.
Yet 500 years later, Panama is just starting to tap its mining potential. There is currently only one major gold mine in operation in Panama: Petaquilla Gold, run by a Canadian mining firm that starting extracting the precious metal in 2008.
But if all goes according to the plans and projections of the government of President Ricardo Martinelli, Panama could have one of the largest mining industries in Latin America within the next 20 to 30 years.
“As President Martinelli has said, our government intends to develop mining and several other pillars to make Panama the first first-world country in Latin America,” Roberto Henríquez, Panama’s minister of commerce and industry, told The Nica Times in a recent interview.
Only instead of mining gold, Panama is working to develop a copper mining industry. The country’s hopes are based on years of exploration that suggest this snake-shaped country with a canal might have the single largest untapped copper deposits in the hemisphere.
If exploited to its fullest, some analysts calculate, Panama’s copper mining industry could bring in billions of dollars in revenue. If that’s the case, copper mining could rival – and perhaps surpass – the revenue generated by the Panama Canal, the country’s great cash cow.
The problem, Minister Henríquez says, is that “previous governments were not sincere when they told investors that there was a policy for mining in Panama.”
He said the old mining law from 1964 was inadequate and failed to attract much interest and investment. That’s why the business-friendly Martinelli administration – and Henríquez specifically – have made it a priority to develop a new mining law to bring in big investors.
The new law, which is expected to be presented to the Panamanian Congress in the coming weeks, would allow foreign governments to own up to 49 percent of the shares of Panamanian mining companies.
Under the current law, foreign governments cannot invest in Panama’s mining industry, only private companies can.
“To attract foreign investment the new law is important because we are talking about such huge amounts of money. It’s very difficult for any private company to get that kind of money from only the private sector,” Henríquez said. “At the same time, there are countries that have identified (copper) as an important mineral in their development strategy, and they are willing to invest.”
South Korea’s Keenness
With copper prices still hovering near last April’s all-time market high, countries such as South Korea, Asia’s third-largest base metal buyer, are expressing serious interest in increasing their copper reserves.
In March, South Korea announced its plans to boost its copper purchases this year by 23 percent in expectation of higher market prices once the world’s economies recover and demand for the metal increases, according to Reuters.
And South Korea has made no secret about its interest in Panama’s copper reserves, especially the site known as Cerro Colorado, which is considered to be the largest untapped copper mine in the Americas.
South Korean President Lee Myungbak visited Panama June 28 as a special invited guest to the presidential summit of the Central American Integration System (SICA). But analysts claim the real purpose of his visit was to talk to President Martinelli about his government’s mining interests in Panama.
If South Korea (or the United States, Canada or Japan – the other three countries that have reportedly expressed interest in Panama’s copper deposits) invests in the Cerro Colorado project, Panama would stand to gain billions under the new law, which would increase the country’s royalties from 2 to 4 percent on all mining operations. Additional revenue would come from income taxes.
With potentially billions of dollars at stake, Henríquez is eager to present the bill to Congress, which Martinelli essentially controls.
“For the ministry of commerce, this is a matter that needs to be speeded up,” Henríquez said. “My responsibility is to close this matter because I have other matters to deal with afterwards.”
Henríquez also hopes to build on the momentum of the country’s first copper-mining project, Minera Panama, which is currently completing its exploration phase and is expected to start extracting the mineral in the near future. Minera Panama is an equally massive project, which will would invest $4-5 billion in port, road and power-generation infrastructure, Henríquez said.
The Minera Panama mine, which would operate for 30 to 40 years, is projected to create 10,000 construction jobs and then 4,000 full-time mining jobs. It would also generate around $4 billion in tax income and royalties for the Panamanian government over the next four decades, Henríquez said.
Once the local residents see the economic impact of that mine – including a special development trust fund that will be managed by the local community – they will be convinced that it is in their best interest, Henríquez predicts.
Won’t Hurt Tourism
Henríquez also insists that the government’s plans to expand the mining sector won’t harm Panama’s budding tourism industry, another of the development pillars identified by the Martinelli government.
“The mines are going to be located far from the tourists, from the beaches, and from the sea,” Henríquez said.
“The mines are in the internal part of the country, while our tourism is located either in the cities of Panama City or Colon, or on the beaches, or in the mountains of Boquete or Cerro Punta,” the minister explained. “None of these locations would be affected by mining, and if we find out they would be, we simply won’t develop the mining project.”
Yet not everyone in Panama is comforted by the government’s assurances, especially following the violent labor protests outside Bocas del Toro last month. The protests were in response to the administration’s last legislative initiative, known as the “Ley Chorizo” (or “sausage” law), so dubbed by critics because of all the unhealthy things they said were stuffed into it.
Two people were killed and 100 injured during a 10-day protest that erupted after the banana workers and the Bocas Fruit Company clashed over the interpretation of the sausage law, which prompted a violent police intervention (TT, July 16).
The government’s poor handling of that issue, according to Central American analyst Heather Berkman, of the Washington, D.C.- based Eurasia Group, has taken a bite out of Martinelli’s political capital, making it a bad moment for him to push forward on his controversial mining law.
“The sausage law controversy has incited more opposition against the government,” Berkman said.
Plus, she said, opposition to the sausage law and the mining issue could be related. One of the many provisions of the sausage law says that environmental studies can be waived on development projects if the president’s cabinet declares the project to be of “social interest.”
Environmentalists fear what that provision could mean for the mining industry, despite administration claims that the environment will be protected under the new mining law.
Conservationists and indigenous groups – especially the Ngäbé Buglé community of Cerro Colorado – are already coming out against the government’s mining aspirations.
Environmental activist Olmedo Carrasquilla told The Nica Times that his group, Collective Ecological Voices (COVEC), worries that the mining industry will result in destruction of forests on indigenous lands, false economic promises to impoverished communities and potential ecological disaster in the case of mining accidents. He notes that none of the nine communities where mining concessions have been promised have been consulted by the government.
“The mining concessions that have been given on indigenous lands violate national and international laws, especially in the case of the Ngäbé Buglé community,” Carrasquilla said.
Carrasquilla’s criticism of the mining sector has not been appreciated by the Martinelli government.
On May 11 the activist was arrested for “suspicious behavior” while eating in a cafeteria in Panama City shortly after going on a radio program and criticizing the government for being authoritarian and ignoring the voices of environmentalists. He was released hours later without charges when activists and journalists marched on the jail demanding explanations (NT, May 28).
Minister Henríquez says the Panamanian government is aware of the other opinions on the matter, and respects other countries’ decision to not pursue mining. But, he stressed, “We have the right to develop our country according to our views and mining has a role to play in that strategy.”
If it turns out like the government hopes, mining could play a major role in the country’s future. But first the administration will have to negotiate a minefield of a different type.
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