Six months after violent protests rocked Panama, the country’s politicians are on edge and foreign investors are staying away.

The demonstrations, which started among local unions and university students and spread rapidly across the country, forced authorities to hastily shut down a controversial but economically critical copper mine in December.

So jarring was the unrest — in a nation unaccustomed to the kind of instability that often flares up in neighboring countries — that the mine has become a taboo topic in the run-up to next month’s presidential election. None of the top candidates are keen to talk about it on the campaign trail. When they reluctantly do, they signal it will likely remain shut.

For Panama’s creditors, that’s a big problem. Without the $10-billion mine project, they say, it’s difficult to see how the country’s sputtering economy rebounds or how the government contains a deterioration in its budget deficit. So they’ve been avoiding Panama’s bonds, making them one of the worst performers in emerging markets over the past six months.

“I don’t have a lot of confidence in a new administration being able to course correct,” said Kate Moreton, an analyst at Columbia Threadneedle in New York. She declined to comment on the firm’s holdings.

Panama had held investment-grade ratings from all three main rating agencies until recently, in part because of its track record of robust economic growth. Fitch Ratings changed that on March 28, cutting its grade to BB+ from BBB- while warning that weaker growth and a “tense” social backdrop should limit room for the next president to implement fiscal reforms.

Bond investors had already priced that in. As the protests started brewing around October, the country’s debt started trading like a junk-rated credit.

Investors demand about 35 extra basis points to hold Panama compared to the average risk premium for BB rated sovereign securities, according to JPMorgan Chase & Co. data. Panama has returned just 2.3% in the last six months, much less than the 12% average for emerging market dollar debt, according to a Bloomberg index.

The Cobre Panama mine accounts for about 5% of the nation’s gross domestic product, and the International Monetary Fund expects its closure to help drag economic growth down to 2.5% this year from 7.5% in 2023.

The shutdown comes as the government faces weaker revenues from the Panama Canal due to the drought and higher interest costs, alongside the prospect for spending increases and the need for pension reforms. Fitch expects the nation’s ratio of gross general government debt to GDP to jump to 61%. The ratio was 53% at the end of 2023.

As traders brace for the May 5 vote, presidential hopefuls have said little on how they’ll tackle the country’s fiscal problems. But the prospect that any of the frontrunners will reopen the mine amid social pressure seem slim.

“Panama to us is a ‘prove me’ type of story,” said Arif Joshi, who helps oversee about $9-billion as co-head of emerging market debt at Lazard Asset Management, and who holds the country’s bonds. “The valuation is absolutely there, but we need to see the new administration and what their policy goals are before we would get constructive on the credit.”

The unrest centers around a contract the government struck with the mine’s owner, First Quantum Minerals, which critics said undermined the country’s national sovereignty over its mineral rights.

The pro-business frontrunner in the presidential race, Jose Raul Mulino, said last month in a local television interview that the Panamanian people have spoken “loud and clear” against the mine and that it’s very difficult to reverse its closure.

The next-most-popular contenders — former president Martin Torrijos and attorneys Romulo Roux and Ricardo Lombana — have all said they oppose the mine.

Both Panama and bond investors may have a respite from further action by other rating companies until the new president is installed, analysts say.

Moody’s Ratings has Panama at Baa3 with a stable outlook, while S&P Global Ratings has it at BBB with a negative outlook. Were one of these agencies also to lower their grade to junk, that would trigger billions of dollars in forced selling by some funds.

“The next government will indeed have a full in-tray: Panama needs a fiscal adjustment, a pension reform and a solution to the mine problem,” said Graham Stock, senior EM sovereign strategist at RBC BlueBay Asset Management, who holds Panama debt. “All three are necessary but unpopular so it is not surprising that the presidential candidates prefer not to talk about them.”