* Mining rules tightening from Guatemala to Costa Rica
* Governments keen to avoid conflict with mining opponents
* Panama, Nicaragua buck regional trend
By Leslie Josephs
SAN JOSE, Costa Rica, June 2 Four Central American
countries, fearing environmental and political fallout from mining, have
called for a halt to new projects, even as gold prices soar and copper
Mining has frequently been a source of controversy in Central America,
sparking sometimes violent protests by residents who fear losing their land
or access to resources such as clean water.
Less than two hours after taking office in May, Costa Rican President
Laura Chinchilla issued a decree banning all new open-pit gold mining in
the country, reversing the policy of her predecessor, who had lifted the
ban two years earlier.
"We are reiterating our environmental agenda, our commitment of
rejecting extractive industries in Costa Rica, especially open-pit mining,"
Chinchilla said shortly after being elected in February.
Costa Rica's only open-pit gold project, owned by Canada's Infinito
Gold Ltd IG.V, has been tied up in the courts for nearly two years by
environmental groups who allege it will destroy virgin forest that is home
to endangered species, and cause widespread pollution.
El Salvador's left-leaning President Mauricio Funes wants a total ban
on mining and refuses to recognize permits granted by a previous
business-friendly administration for a contentious gold project in one of
the country's poorest regions.
A subsidiary of Vancouver-based Pacific Rim Mining Corp PMU.TO, the
owner of the mine, filed for international arbitration last year, seeking
that the government return at least $77 million in investment due to the
delays imposed on the project.
Both Guatemala and Honduras are holding off on new mining projects
until new mining legislation is passed by their lawmakers that tighten up
"Mining bans are certainly due in part to governments wanting to avoid
inciting tensions with local communities, anti-mining organizations, and
environmental groups," said Heather Berkman, a regional analyst at Eurasia
PANAMA AND NICARAGUA SEEK INVESTORS
The region's history of conflict and political instability already
makes it a more challenging place to invest due to concerns that projects
will be delayed or canceled.
"Central American countries are generally viewed as a lot more
unstable," said Simon Gardner-Bond, a mining analyst with London-based
investment bank Ocean Equities. "Your project has to have economics that
are that much more attractive."
But other Central American countries are aggressively courting mining
Panama's pro-business President Ricardo Martinelli believes untapped
copper reserves could generate billions of dollars for the country. Inmet
Mining Corp IMN.TO is currently looking for a third partner to develop a
massive $5 billion copper-gold deposit in Panama.
The government is pushing ahead with plans to find a developer for the
Cerro Colorado project, which is believed to hold 11.2 billion tonnes of
copper, but sits in a semi-autonomous indigenous region. Environmental and
rights activists have promised strong resistance to the project.
Contentious projects are moving ahead in Panama. Petaquilla Minerals
Ltd PTQ.TO began production at its Molejon gold mine earlier this year
despite opposition from activists.
Nicaragua, once a regional hot spot of the Cold War, has emerged as
another strong mining supporter.
Leftist President Daniel Ortega, a former Soviet ally who is now open
to capitalist investment to help Nicaragua become a major gold exporter,
last month inaugurated a gold mine owned by B2Gold Corp (BTO.TO).
(Additional reporting by Sean Mattson in Panama City, Sarah Grainger
in Guatemala City, Gustavo Palencia in Tegucigalpa and Nelson Renteria
in San Salvador; Editing by John Picinich)