People rally in the streets after a ruling from Panama's top court over a mining contract with Canadian miner First Quantum, in Panama City, on Nov. 28.ARIS MARTINEZ/Reuters
Panama is eyeing a sharp cut to its forecast for 2024 economic growth after a court ruling prompted the government to order the closure of Canadian miner First Quantum’s FM-T lucrative copper mine, a government official told Reuters.
Gross domestic product (GDP) growth might be 1-2 per cent next year, down from a previous estimate of 5 per cent, Hernan Arboleda, director of public policies at the economy and finance ministry, said in an interview on Friday.
President Laurentino Cortizo announced last week the government will move to shut First Quantum’s Cobre Panama mine, which accounts for some 5 per cent of the country’s GDP, after the supreme court ruled that the contract was unconstitutional.
Panamanians have protested vehemently against the mine since October, arguing the contract was too generous and First Quantum has since lost over half of its market capitalization.
First Quantum said on Friday it has initiated international arbitration against Panama. Some experts calculate Panama would have to pay at least $50-billion if it loses the case, equivalent to nearly 70 per cent of GDP.
Cortizo’s administration is reaching out to international rating agencies to assure them that Panama still has a sound legal framework that allows investors to do business.
Ahead of the supreme court ruling, S&P revised Panama’s outlook to negative from stable on potential risks to investor confidence and economic growth if the contract was found invalid. JPMorgan also warned the odds of Panama losing its investment-grade rating would increase significantly.
Panama recently enacted a law banning all new mining concessions and expansions. Arboleda said the country still has other attractive investment opportunities but did not give specific examples.
For First Quantum, the developments in Panama could be a repeat of its experience in the Democratic Republic Of Congo. The miner exited the African nation in 2012 after its mining contract was canceled.