© Reuters. FILE PHOTO: View of the Cobre Panamá mine, of Canadian First Quantum Minerals, in Donoso, Panama, December 6, 2022. REUTERS/Aris Mart?nez/File Photo
By Elida Moreno
PANAMA CITY (Reuters) – Panama is considering a sharp cut in its 2024 economic growth forecast after a court ruling led the government to order the closure of Canadian miner First Quantum's (NASDAQ:) lucrative mine, it said. a government official told Reuters.
Gross domestic product (GDP) growth could be 1 to 2% next year, down from a previous estimate of 5%, Hernán Arboleda, public policy director at the Ministry of Economy and Finance, said in an interview Friday.
President Laurentino Cortizo announced last week that the government will take steps to close First Quantum's Cobre Panamá mine, which represents about 5% of the country's GDP, after the Supreme Court ruled the contract was unconstitutional.
Panamanians have vehemently protested the mine since October, arguing that the contract was too generous, and First Quantum has since lost more than half its market capitalization.
First Quantum said Friday it has initiated international arbitration against Panama. Some experts estimate that Panama would have to pay at least $50 billion if it loses the case, which is equivalent to almost 70% of GDP.
The Cortizo administration is contacting international rating agencies to assure them that Panama still has a solid legal framework that allows investors to do business.
Prior to the Supreme Court ruling, S&P revised Panama's outlook from stable to negative due to potential risks to investor confidence and economic growth if the contract were declared invalid. JPMorgan also warned that the chances of Panama losing its investment grade rating would increase significantly.
Panama recently enacted a law prohibiting 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 events in Panama could be a repeat of its experience in the Democratic Republic of the Congo. The miner left the African nation in 2012 after her mining contract was cancelled.
