Actor Leonardo DiCaprio has been among those playing a supporting role in Panama’s rejection of Canadian copper mining giant First Quantum. In his latest environmental cause, the actor is offering support for the campaign against the continued operation of First Quantum’s mine.
Mr. DiCaprio got what he wanted. Last Tuesday, the Panamanian Supreme Court ruled that a contract enabling First Quantum FM-T to extend its operations in the Central American country was unconstitutional, and authorized a process to shut down the US$10-billion mine.
But Mr. DiCaprio is placing himself on the wrong side of history, and not for the first time – nor is he the only one.
This is not only because the mine had put Panama squarely at the centre of the global energy transition, in which copper is a critical component. This fiasco now most likely will see the government of Panama face lawsuits north of US$60-billion to account for lost income by the company and its suppliers and investors. On Monday, Reuters reported that Panama was forecasting a decline in 2024 economic growth of up to four percentage points.
The crisis has become a masterclass in populist politics, hapless and ailing leadership, the peddling of falsehoods and cynical opportunism, a coming election, an opposition seeking a populist message, and smelling the ruling party’s blood.
This is the stuff of real Hollywood epics.
First Quantum’s mine employs 50,000 Panamanians both directly and indirectly, and provides 75 per cent of its export income. Supporters of the Panama contract argued that it will enable thousands of jobs while paying the government royalties and taxes of at least US$375-million a year – estimated at 5 per cent of Panama’s GDP.
First Quantum’s investment in Panama might have been the first of many in a country blessed with natural resources. Its contract with the government was spread across two 20-year periods, renewable subject to mutual agreement.
The government of President Laurentino Cortizo, which negotiated the contract after a four-year delay, assured that the new deal would guarantee the environment while increasing income to the treasury tenfold.
When Mr. Cortizo’s government presented a negotiated renewal to the National Assembly this August, the process became hyperpoliticized, despite First Quantum’s presence for a decade. Protests erupted, enduring for months and paralyzing the country’s major roads, as well as the port and powerplant servicing the mine.
The arguments against the deal are being made on several spurious grounds. These included the idea that the country only got 2 per cent of the proceeds, which was clearly not the case.
Mr. Cortizo, hoping to appease the protesters, signed a moratorium on new mining concessions, which applies to some 13 pending applications, but not to First Quantum. The President also announced the staging of a referendum on Dec. 17 on whether to revoke the controversial contract. This idea was quickly withdrawn by the besieged President.
Mr. DiCaprio has been here before, starring in Blood Diamond, a 2006 Hollywood action thriller centred on diamonds mined in war zones and sold to finance conflicts. It was a morality play, where warlords and diamond companies prey on innocents for profit. If only things were that simple.
Once the applause had settled on the other side of the world, and the simplistic storyline had wowed audiences, Africa had to manage the negative aftermath. Nelson Mandela was among those who leapt to the diamond industry’s defence, describing it as “vital” to southern Africa’s economy.
During the 1960s and 1970s, Panama foundered between two competing commitments: to support U.S. interests in the isthmus and to promote Panamanian development and a capitalist class. That contradiction was obscured during the Noriega period when development was largely eclipsed by the militarization of the canal under Panamanian security forces. Now, the contradiction is back – between seeking a better future through development and radicalizing the choices that this involves.
If such NIMBYism pervades, there will be no energy transition. Absent reasonable returns and the related ability to derisk investments, companies will vote with their feet and go to more stable jurisdictions. Panama will be stuck, its attempt to diversify stopped in its tracks.