Panama's mining reform likely to lead to increasing indigenous protests and roadblocks disrupting cargo and transport

On 22 March, Panama's Minister of Trade and Industry Melitón Arrocha announced that the government was working on a reform package to overhaul the institutional and environmental framework for mining activities, with the aim of giving more certainty to investors, increase revenue from mining, and boost minerals exports. Although the specifics of the reform have not been revealed, the government is considering amendments to the provisions that regulate and oversee mining activity, determining areas subject to regulation, and a plan for closing mines and its resultant environmental impact. This is an indication that President Juan Carlos Varela's government is being receptive to the concerns of the private sector.

Panama's mining association (Cámara Minera de Panamá: Camipa) maintains that the existing institutional framework, which it says lacks an oversight body with technical capacity and strong leadership, is partly responsible for the difficulties the sector experiences, such as works paralysis, project suspensions, salary debts, and tax and royalty payment avoidance. In mid-March, Camipa submitted a proposal to parliament to create a new and autonomous regulatory body, but this was rejected on the grounds that the law stipulates that the government – in this case, the Ministry of Trade and Industry's Mineral Resources Directorate – has to keep oversight of projects that are likely to have an impact on communities. The government is reorganising the directorate and is likely to seek to increase its capacity to hire staff, and oversee environmental management plans and technical resources.

Canadian government specialists are advising the Panamanian government, which indicates that Panama is likely to draw from a country with extensive experience in mining exploration and production, while also reassuring Canadian mining investors, including First Quantum, which is behind Minera Panamá's USD6-billion copper project Cobre Panama. The project, located in the district of Donoso, Colón province, is scheduled to begin production between 2016 and 2017 and is expected to become the country's largest exporter (USD2.25 billion a year).

Panama’s mining potential

Varela has made the mining sector one of the five key pillars of his 2015–19 Strategic Plan to diversify the economy. According to government estimations, Panama's proven mineral reserves (mostly copper and gold) reach approximately USD118 billion (on 2014 prices). Camipa estimates that mining could even account for 10% of Panama's GDP by 2017, up from 2% in 2013, and estimates that Panama has the potential to become the eighth-largest copper producer in the world. For example, Cerro Colorado is one of Latin America's largest copper deposits, totalling 25 billion pounds.

Protest risks

Despite this potential, disruptive social unrest has hindered mining as well as energy projects in indigenous lands. In early 2012, protests by indigenous groups against mining and hydropower activity left at least three demonstrators dead during confrontations with the police. As a result, then-president Ricardo Martinelli was forced to ban mining activities in indigenous ancestral lands, where most of Panama's mineral reserves are located, and introduce a requirement that the government commit to consultations for any hydropower project in the Ngäbe-Buglé indigenous reservation, an area that covers the provinces of Bocas del Toro, Chiriquí, and Veraguas, comprising roughly 10% of the country.

Protests have continued nevertheless. In July 2013, local communities complained that the government awarded concessions to mining firm Petaquilla Minerals within territory where mining was banned. In February 2015, following further indigenous protests, Panama’s national environmental agency (Autoridad Nacional del Ambiente: ANAM) ordered the temporary suspension of the planned Barro Blanco hydropower project in Chiriquí.

The lack of an appropriate framework led parliamentarians to table a bill for an indefinite moratorium on mining exploration and exploitation in July 2014, claiming that mining activities cannot go ahead without proper environmental controls. Camipa, on the other hand, advocates for a one-year moratorium that would allow enough time to strengthen the environmental and institutional framework. The moratorium bill is currently being discussed in parliament.

Outlook and implications

The government is keen to develop the mining sector, and will try to avert social unrest and reconcile businesses' and indigenous interests. In late March, it created the Ministry of Environment, effectively upgrading the status of ANAM, and the government has said it will try to reassure communities of the benefits of mining activities before an amendment is put through.

A likely debate on a new mining framework will increase the risk of protests, particularly if indigenous groups see this as a government attempt to develop mining reserves located in indigenous areas. Protests are likely to intensify if the debate involves lifting the ban on concessions on indigenous land, although there are no indications at this stage that this issue will be reviewed. However, ongoing talks with the Canadian government are likely to facilitate the continuing development of Cobre Panama, and the government is likely to offer promises to restrict further encroachment of indigenous land. Indigenous groups are often joined by other activists, such as unions and students, to protest against mining or hydropower projects in protected lands.

Protesters often block access to project sites and erect roadblocks, including on the Pan-American Highway that connects Panama with Costa Rica, and in Chiriquí and Veraguas provinces, generally using trees and rocks. Roadblocks usually last less than 24 hours but are likely to disrupt traffic and cause delays to cargo supplies. Property damage risks are highest for vehicles and security booths located outside the perimeter of mines or energy plants. Occupations and arson attacks (for example on police stations) are also likely, but the groups lack the capacity to cause damage to mining or hydroelectric facilities themselves.