(English) Responsible Mining

Inocencio Galindo de O.

The concern of environmentalists and indigenous Panamanians over changes to the Mining Code are understandable. Being a high-impact activity, mining must be carried out in a responsible fashion, meet the highest standards, and have adequate oversight.

However, the way certain opponents of the new law have manipulated and misinformed the public is both incomprehensible and irresponsible. Some opinions expressed in the media point to narrow political interests, while others exhibit superficial knowledge of the reforms. This has led to violent protests, including the unjustified attack on the Vice-Minister Carles, who came to the demonstrators peacefully.

My analysis of Law 8 of 2011 concludes that it fosters the development of responsible mining. On this issue, I wish to clarify certain points.

1. It is incorrect to state that the law’s purpose is to allow or encourage open-pit mining. Under the original Mining Code, this activity was permitted and undertaken in Panama, but with much laxer requirements than those included in the reforms in terms of oversight by the proper authorities, applicable penalties for violations of contracts or rules, fees and royalties for exploration and exploitation concessions, etc.

2. The Government is not giving away Panamanian territory to foreign governments. The letter of Law 8 is clear and does not allow foreign governments to acquire ownership of our national territory, its subsoil, or groundwater. The amendments to the Mining Code continue to prohibit granting concessions to foreign governments or their institutions. Furthermore, Law 8 regulates financing by foreign government entities, stating that they shall not receive, as warranty, land owned by the concessionaire, and that concessions must remain in the hands of private enterprise.  

3. Opponents claim that by allowing foreign government entities to invest or finance these projects, Panama risks a dispute with a foreign government against which it may not be able to defend itself. If this were the case, then we would not have been able to finance the Panama Canal expansion or numerous public and private projects financed by multilateral organizations or foreign governments; or issue bonds in international markets for fear that foreign companies, through the purchase of Panamanian debt, would acquire power over our country; or grant public service concessions to companies that are wholly- or partly-owned by foreign governments, as in the case of our ports and electric utilities. Notably, although the Law 8 allows foreign government entities to invest in mining concessionaires, [these] must be constituted as private entities under Panamanian law, without any diplomatic privileges and subject to our rules and regulations in case of international retaliation.

4. Opponents say this will be great business only for some, while the State will receive but crumbs. This is false. Law 8 establishes a 5% royalty payment for copper projects, up from 2%: an increase of 150%! The State shall also receive 5% of the company’s gross income and collect income tax, currently at 30% for the mining industry. This represents billions of dollars in revenue, which could be used for social works and programs; it will generate thousands of jobs during the projects’ construction and operation, as well as infrastructure development, which the State will then acquire. Regarding the Mineria Panama copper mining project in Colon Province, it is estimated that, at current prices, the State will receive upwards of $125 million in royalties annually, while some $50 million per year will be earmarked for local communities and $25 million for the Social Security Administration’s Program for Disability, Old Age, and Death. 

Even though some will always be opposed mining, I recommend reading the new law with an open mind. An objective reading will demonstrate the amendments do nothing but improve the legal framework within which mining is carried out in Panama, strengthening the government agencies that oversee it, increasing applicable fines, improving environmental standards and those regarding mine closures, including indigenous groups in decisions regarding development projects in their reservations, and increasing the royalties and profits for the State and local communities. A sober analysis will avoid unnecessary and costly battles detrimental to social harmony.