Economy, Globe, Latin America

Colombian mining, a fruitless business

In 2009, Colombia lost more than half of its possible income from raw materials to large European transnational companies due to an unsustainable mining policy that also affects indigenous towns and the environment.

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Minería en Colombia 3Benjamin Serra

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The mining industry and the extraction of resources, like hydrocarbons, have been presented in the last few years as a motor for growth in the country’s economy.

In fact, the objectives of Colombia until the year 2021 are very ambitious in regards to this area.

Doubling carbon exports, tripling the zone of mining exploitation and quadrupling gold exports, since this country is the nation that exports the most gold in  the whole of Latin America.

However, the policies implemented by the government in that regard don’t seem to have the desired effects on the Colombian economic system. Some effects, on the contrary, are more than positive for the transnational companies and European governments who have invested in the Latin-American country.

Benefit for companies

Minería en Colombia 10The previous president, Álvaro Uribe Vélez, launched this growth plan in order to turn Colombia into a mining power on the continent. It was, therefore, during his government when the most mining permits were awarded in the history of the country.

Furthermore, some investment conditions that were even more favourable were offered to the transnationals.

In fact, according to data from the National Comptroller’s Office, at the end of 2010, close to 60% of land had been allocated in concessions or was about to be approved.

One of the main arguments for gambling on this business model was the reduction of poverty, directly thanks to employment and indirectly through the incomes to the State

 

Sergio Díaz-Granados
Sergio Díaz-Granados

However, modern mining is very technologically advanced and once the construction stage comes to an end, the employment that is generated is very low, if it is compared with the benefits.

In that way, far from achieving the tax revenue expected by Colombia and the supposed profits that it would bring for its economy, what has been achieved are benefits for the transnationals, to the detriment of the country; as the study, “Giving it all away: the consequences of an unsustainable mining policy for Colombia”, makes clear.

According to this study, the large corporations have greatly benefited from the Colombian system of exemptions. The mining industry follows a complicated model of fiscal exemptions that have provided some very low incomes for the country.

Minería en Colombia 11One of the more prominent cases is coal-mining, an area in which the fiscal deductions in 2007 were greater than the value of the taxes that the mining companies paid, according to the paper “El Espectador”.

The complexity of this system, combined with its lack of transparency, means that it is very difficult to ascertain what the companies pay in terms of taxes and privileges, causing an enormous loss for the coffers of Colombia.

British Corporations

A large number of the companies that operate in Colombian territory have their headquarters in the United Kingdom.

This European country is the second largest investor in Colombia, and in 2010, exports came to a total of 622 million pounds sterling, with the main British investors being the companies Anglo American and BHP Billiton, dedicated to carbon and nickel, SAB Miller, of the brewing industry, and the oil company British Petroleum.

Minería en Colombia 8The European companies, with the support of their governments, have experienced very high incomes from their investments in areas such as mining and hydrocarbons, and have seen  the price of their basic products  increase their dividends from direct foreign investment.

In fact, during only the first eight months of 2012, the investment of foreign companies in Colombian mining reached 2,000 million US dollars, a statistic that implies an annual rate of increase of 42%, as the Colombian Minister for Business, Sergio Díaz-Granados, pointed out.

Minería en Colombia 9Repercussions in every area.

Meanwhile, these benefits for European companies have been a great blow for Colombia, and not only in economic terms.

The mining businesses with headquarters in the United Kingdom don’t always operate in a fair way, despite their well-publicized policies of Corporate Social Responsibility. And on many occasions, the state does not respond when faced by such situations.

In this regard, the study includes the opinion of Professor John Ruggie, ex-special representative for the UN on Human Rights and Transnational Companies, who says that if the State does not protect human rights, it is the responsibility of the companies to guarantee to respect them and to avoid complicity in their violation.

Thus, it is proposed that registration in valuable markets should require that the companies have a good record with human rights, producing an account of their conduct in the countries in which they operate.

John Ruggie
John Ruggie

The reason for this lies with the fact that the mining of natural resources and the current policies of Direct Foreign Investment directly conflict with the directives on the protection of the environment, on farmers’ and natives’ rights and on respect of the land.

In fact, the National Indigenous Organization of Colombia highlights that 80% of the approved concessions for carrying out projects in its territories are awarded without consulting indigenous communities; something that demonstrates the lack of protection on the part of the state for their rights, threatening the survival of these towns.

In addition, in 2010 the Constitutional Tribunal of Colombia declared 34 indigenous groups in danger of extinction, since land is such an essential element of their identity, their daily life and their culture.

campana-contra-la-mineria-6The environment is also affected. Article 37 of the Mining Codes of the Latin-American country prevents the municipal authorities from prohibiting mining, even if it enters into competition with other interests of its jurisdiction since it has been declared of “public interest” and has priority over any other activity.

In the same way, Article 34 allows the removal of environmental protection from forestry reserves in order to promote the use of mining, putting in danger regions such as the Amazon, Orinoco and Choco, among others.

All this highlights the fact that, as acknowledged in the official report on natural resources and the atmosphere of the Comptroller General, the current development model proposed for the mining industry in Colombia is unsustainable.

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(Translated by Ollie Phelan – Email: oliverphelan@hotmail.co.uk)

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