Panama's Crossroads: Mulino’s Mining Stance and the Investment Impasse

As Panama’s President José Raúl Mulino doubles down on his refusal to negotiate a new mining contract for the shuttered Cobre Panama copper mine, the nation finds itself at a critical economic and environmental crossroads. The dispute, now entering its third year, pits the government’s fiscal urgency against public outrage, investor demands, and existential ecological risks. For investors, the stakes are clear: the outcome could redefine Panama’s economic trajectory, while leaving First Quantum Minerals (TSX: FQM) in a precarious legal and financial limbo.

The Legal Quagmire

The Cobre Panama mine, operated by Canada’s First Quantum Minerals alongside Korean partner KOMIR, has become a symbol of Panama’s struggle to balance economic growth with environmental protection. After Panama’s Supreme Court ruled the mine’s original contract unconstitutional in December 2023—citing flawed environmental clauses and excessive investor protections—the mine closed, ending its 5% contribution to Panama’s GDP. First Quantum responded by filing a $20 billion arbitration claim under the Canada-Panama Free Trade Agreement, arguing that Panama’s cancellation of the contract violated international law.

The legal battle has already taken a toll on First Quantum’s stock, which has fluctuated wildly amid uncertainty. Investors remain wary of the arbitration’s outcome, with analysts noting that rulings against host governments in such disputes often strain diplomatic ties and deter future foreign investment.

Economic Stakes and Political Calculus

Mulino’s administration has framed reopening the mine as a lifeline for Panama’s ailing pension system, which faces a projected $3 billion shortfall by 2026. The president insists that proceeds from the mine could help stabilize the system and fund its eventual closure—a position enshrined in Legislative Bill 462, a contentious pension reform law passed in 2024. However, critics argue that Mulino’s strategy is politically risky. A 2024 poll found that 63.6% of Panamanians oppose reopening the mine, with 60% disapproving of Mulino’s renegotiation efforts, linking the issue to broader distrust of austerity measures.

The government’s stance is further complicated by a mining moratorium on new concessions, enacted in November . To restart Cobre Panama, Panama’s National Assembly would need to lift the ban—a move unlikely without significant public backlash. Meanwhile, the mine’s operator remains in a holding pattern, having temporarily paused arbitration in 2024 to explore negotiations. Yet Mulino has made clear that talks can only proceed if First Quantum abandons its lawsuit—a demand the company has yet to accept.

Environmental and Social Risks

The dispute is not just about money; it’s about survival. The Cobre Panama mine sits within the Mesoamerican Biological Corridor, a protected ecological zone home to endangered species and Indigenous communities. A 2023 report by Environmental Law Alliance Worldwide (ELAW) warned of a “very serious and imminent risk” of collapse at the mine’s tailings dam—a structure storing toxic waste—a result of poor monitoring and internal erosion.

Local groups like the Guerreros del Mar (Warriors of the Sea) have documented water contamination, loss of biodiversity, and health impacts near the site. They demand a permanent closure plan and oppose any reopening, arguing that Panama’s environmental and social well-being cannot be sacrificed for short-term gains. As protests intensify, the government faces mounting pressure to prioritize these concerns over economic expediency.

The Investment Impasse

For investors, the Cobre Panama dispute is a high-risk, low-certainty proposition. First Quantum’s $20 billion claim, if upheld, could deliver windfall profits—but a loss in arbitration could strand the company with a mine it cannot operate. Meanwhile, Panama’s economy remains hostage to the outcome. The mine’s 5% GDP contribution before its closure underscores its economic importance, yet reopening it without resolving environmental and social grievances could trigger further unrest, destabilizing both the mining sector and broader investor confidence.

The moratorium adds another layer of uncertainty. Lifting it to restart Cobre Panama would require political capital Mulino may not have, given his already diminished approval ratings. Even if negotiations succeed, the revised terms would need to address core grievances: higher royalties, stricter environmental safeguards, and community consent—a tall order in a polarized climate.

Conclusion: A Risky Gamble

The Cobre Panama dispute is a microcosm of modern resource governance—a clash between profit, ecology, and human rights. For investors, the calculus is grim:

• First Quantum’s stock (FQM:TSX) remains volatile, tied to the whims of arbitration and political maneuvering.
• Panama’s GDP growth hinges on resolving the impasse, yet public opposition and environmental risks make a swift resolution improbable.
• The $20 billion arbitration claim, if lost, could force First Quantum to write off its investment entirely, while a win might come at the cost of long-term reputational damage.

With 63.6% of Panamanians opposing the mine’s reopening and 60% disapproving of Mulino’s stance, the path forward is fraught. Investors would be wise to treat the Cobre Panama saga as a cautionary tale: in an era of heightened ESG scrutiny, betting on projects that ignore ecological and social costs is a gamble with few winners. For now, Panama’s crossroads remains uncharted—and its mines, closed.