Reviving Cobre Panamá Could Be Strategic to U.S. Minerals Security

The current crisis traces back to a 2018 ruling by Panama's Supreme Court, which questioned the constitutionality of the original 1997 concession agreement. After more than four years of negotiations, a new contract granting First Quantum long-term operating rights was signed on October 20, 2023. However, the deal sparked immediate public backlash, igniting widespread protests and road blockades. Critics argued that the contract's terms were unfavorable to Panama, citing issues such as inadequate royalty provisions, concerns over national sovereignty, and the exclusion of environmental and precious metal regulations.

In an effort to calm the unrest, President Laurentino Cortizo proposed a national referendum on the contract. However, Panama's electoral court deemed the conditions unsuitable for holding a vote. Tensions escalated further when two protestors were killed in early November, intensifying pressure on the government. Road blockades disrupted mining operations, leading First Quantum to scale back ore processing in mid-November while negotiating wage guarantees with its mine workers. Meanwhile, Panama's Supreme Court began hearing constitutional challenges to the contract, paving the way for a potential legal showdown. On November 28, 2023, the court declared the contract unconstitutional, effectively stripping First Quantum of its legal operating rights in the country. In the aftermath, the company suspended 7,000 employee contracts, maintaining a small team of essential personnel, and Panama's trade minister resigned. By December 1, First Quantum withdrew its 2023 production forecast for Cobre Panamá and initiated arbitration proceedings through both the International Chamber of Commerce and the Panama-Canada Free Trade Agreement to challenge the ruling.

In a significant turn of events, First Quantum paused its arbitration proceedings in March 2025 following signals from President José Mulino that he was open to alternative solutions. The company shifted its focus to renewed negotiations. If these talks succeed-leading to policy stability, the resumption of mining operations, and the export of copper ore-it would mark a major victory for both global copper supply security and for Panama's economic recovery. Nevertheless, the situation underscores the critical role of arbitration protections as a key requirement for Western mining companies considering foreign investments.

Why Is Cobre Panamá Strategic to Global Copper Security?

Copper continues to be a critical component of the global economy. Demand for copper is projected to increase by 70 percent-surpassing 50 million tons annually by 2050-due to its essential role in strategic industries such as artificial intelligence, clean energy technologies, transmission networks, data centers, and defense. However, meeting this rising demand presents a major challenge, as between one-third and one-half of the global copper supply is expected to be impacted by declining ore grades and aging infrastructure, leading to higher production costs and greater capital reinvestment needs.

In this context, the shutdown of a major copper mine-ranked tenth globally in output and operational for less than five years-represented a significant disruption to global supply. As the largest open-pit copper mine in Central America and one of the most productive worldwide, Cobre Panamá produced 330,863 tons of copper in 2023 before halting operations, accounting for roughly 1.5 percent of global supply. At a time when many long-established mines are in decline, Cobre Panamá stands out as one of the few newly developed, large-scale operations to have reached production in the last 15 years.

What's in It for the United States?

Diversifying copper supply sources is essential to safeguarding U.S. national security interests. Executive Order 14220, issued by President Trump, highlights "A single foreign producer dominates global copper smelting and refining, controlling over 50 percent of global smelting capacity and holding four of the top five largest refining facilities." This heavy dependence poses a strategic vulnerability, especially amid rising geopolitical tensions.

To meet long-term demand, the United States must broaden its network beyond its traditional copper trade partners. Currently, the vast majority of refined copper imports come from four free trade agreement nations: Chile, Canada, Peru, and Mexico. While these relationships remain important, copper output in these countries is forecasted to grow by only 6 percent through 2035-insufficient to meet future needs.

The United States must enhance its capabilities across the copper supply chain-including mining, smelting, and manufacturing. To develop a supply chain that's independent of China, the United States must secure greater access to copper ore, both within its borders and from partner countries.

Cobre Panamá represents a potential long-term source of copper. There are three reasons that Panama has strategic value as a potential supplier of copper concentrate to the United States in the long term. First, Panama has excellent geological resources. Cobre Panamá is among the world's largest copper mines and is one of the few significant copper projects developed globally in the past 15 years. It has the capacity to supply copper to the United States until at least 2055. Second, its geographic location offers a logistical advantage. Of the ten largest copper operations in the world, only three are located in North or Central America: Morenci in Arizona (in production since 1872), Buenavista in Mexico (operational since the 1940s), and Cobre Panamá, which began production in 2019. This proximity makes it more commercially viable to process copper in the United States, provided domestic midstream infrastructure is expanded. And third, the United States and Panama have strong bilateral economic ties, anchored by the U.S.-Panama Trade Promotion Agreement (TPA) that went into effect in 201. In 2024, U.S.-Panama trade reached $11.3 billion in goods, with the United States posting a $10.1 billion trade surplus, underscoring the strength of this economic relationship.

In parallel, the United States needs to build its refining capabilities. Currently, the United States has only two operational copper smelters, and some of its copper ore is still shipped to China for processing. In the short term, the United States could support the creation of off-take agreements to have Panamanian copper processed in allied countries like Japan, Chile, or India-home to the world's largest copper smelter-instead of China. But over the medium to long term, ramping up domestic smelting infrastructure is essential. Because profit margins in copper smelting are low, federal financial incentives will be necessary. Ultimately, the resilience of the U.S. copper supply chain will depend on how effectively the country can align its foreign policy to secure copper sources and its industrial policy to boost domestic refining capacity.

Why Is Resolving the Current Dispute Strategic to Panama?

In the five years leading up to the Covid-19 pandemic, Panama's economy grew at an impressive average annual rate of 4.6 percent-making it one of the fastest-growing economies in Central America. However, after contracting by 17.9 percent in 2020, the World Bank downgraded Panama's classification from "high-income" to "upper-middle-income." Mining emerged as a promising avenue for revitalizing economic growth. The mine quickly became a cornerstone of the economy, contributing nearly 5 percent of GDP and employing around 40,800 people,

The economic fallout from the mine's closure has been substantial. On February 27, 2025, President José Mulino emphasized the toll the shutdown has taken, noting that the country is facing significant hardships due to the loss of jobs and the broader economic benefits once generated by the mine. The halt in operations has resulted in a major drop in government revenue. Copper exports from Cobre Panamá were the country's second-largest source of export income-a revenue stream that has now vanished. First Quantum played a key role in Panama's fiscal landscape, contributing $1.8 billion domestically in 2023 through wages, social security payments, taxes, and procurement from local suppliers. The closure has also weighed heavily on national economic performance: Panama's GDP growth slowed to 2.9 percent in 2024, a sharp decline from the 7.4 percent growth seen in 2023. This downturn has been largely attributed to the suspension of mining activity and a decrease in air.

Panama serves as a clear example that the governance of natural resources has far-reaching implications that extend well beyond the minerals extracted. The closure of the Cobre Panamá mine has had a profound impact on the country's dollarized economy, triggering declines in export earnings, employment, and industrial output. These disruptions have led to credit rating downgrades from major agencies, including Fitch Ratings, Moody's, and S&P, reflecting growing concerns about Panama's long-term financial risks. In March 2024, Fitch downgraded Panama to junk status, citing deepening fiscal and governance issues exacerbated by the mine's shutdown. Later, in November 2024, S&P also lowered the country's rating, warning that potential liabilities stemming from First Quantum's international arbitration could reach as much as 20 percent of Panama's GDP. As a result, Panama now holds one junk rating and two others that are only marginally higher. These developments carry significant consequences: Borrowing costs have risen, discouraging investment and constraining economic growth. At the same time, the government now faces higher expenses to fund infrastructure projects and service existing debt, adding further pressure to an already strained fiscal outlook.