Panama

President Laurentino Cortizo has ordered the closure of Cobre Panamá, Central America’s largest copper mine, after the Supreme Court ruled that the government’s contract with the mine’s Canadian operator, First Quantum Minerals, was unconstitutional. In the meantime, the closure will do significant damage to Panama’s economy and exports. The fiscal and financing outlook will also become more complicated, given that the government will now not receive mining royalties of 0.5% of GDP annually (backdated to 2022).

The high level of uncertainty relating to Cobre Panamá will hang over the campaigns for the general election. Panamanians typically vote out the incumbent party; opposition candidates will therefore sense an opportunity to take power from the ruling centre-left Partido Revolucionario Democrático, particularly in view of Mr Cortizo’s botched handling of the mining contract issue. Regardless of whether the mine eventually reopens, the institutional weaknesses that have been revealed by the episode have hurt Panama’s standing with international investors, to the detriment of the country’s medium-term economic and fiscal position. 

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