Mining and oil boom propel investment in Colombia

News Center >> Mining and oil boom propel investment in Colombia

Mining and oil boom propel investment in Colombia
The Colombian Government must be doing something right.

There are many signs out there pointing to the fact that this country’s mining industry is on its way up. And mining companies across the globe are starting to take notice.

The Fraser Institute recently confirmed that Colombia is a great place to do business when it released its Survey of Mining Companies 2009/2010 (2010 Mid-Year Update).

This report ranked the most attractive jurisdictions for mineral exploration and development in the world. Colombia came in at No.18 – a significant increase from the 35th position achieved in the previous report.

By taking the 18th spot on the rankings, Colombia found itself above regions such as Ontario (20th), British Columbia (26th), Argentina (30th), Queensland (33rd), California (37th), New South Wales (38th) and Colorado (44th).

It seems there could be a new South American powerhouse in the making.

The Associated Press recently released an article featuring both the positive and negative aspects of Colombia’s booming mining industry. Here are the highlights from this article:

Pros

* Security gains and capitalist-friendly investment rules
* South America's third-largest oil producer behind Brazil and Venezuela, Colombia is on track to generate more than 1 million barrels of crude a day by 2012 - double its production in 2006 - the government says.
* A full 80 percent of the $7.2 billion in direct foreign investment the country reaped last year went to petroleum and mining - with investment in the latter sector nearly doubling to $3.1 billion.
* Colombia is so bullish on the foreign investment bonanza flourishing under new President Juan Manuel Santos, a former foreign trade, defense and finance minister, that the government is forecasting a healthy jump in gross domestic product this year - 4.5 percent.
* Colombia's foreign trade ministry says it expects Colombia to attract $10 billion in foreign investment this year, approaching the record $10.6 billion of 2008.
* While Venezuela and Ecuador have alienated many energy investors by rewriting oil contracts - increasing royalties and taxes so much that many multinationals pulled out - Colombia's outgoing president, Alvaro Uribe, offered strong incentives.
* Colombia has been the continent's No. 1 coal producer for 39 years running.
* Only about 5 million (19,000 square miles) of Colombia's 114 million hectares (440,000 square miles) have been explored, said Mario Ballesteros, the director of its Institute of Geology and Mining, though 40 percent of the country is legally off-limits due to natural reserves and environmentally sensitive regions.

Cons

* The country's nearly half-century-old conflict with leftist rebels still simmers and sometimes boils over, especially in rural areas where mining and energy exploration tend to occur.
* Historically, Colombia's illegal armed groups have exacted "war taxes" from mining and oil producers. Those that refused were attacked.
* In 2001 alone, the 480-mile Cano Limon pipeline was hit by 170 acts of sabotage blamed on rebels. The attacks were curbed beginning in 2002 under Uribe, when Colombian military units began guarding the pipeline, said Mauricio Tellez, spokesman for state-owned Ecopetrol, which operates the pipeline.
* "The recent mining boom - exploration and exploitation activities - has been accompanied by the arrival of illegal security groups," said Ariel Avila, a researcher at the Nuevo Arco Iris think tank.
* Avila said he's found in field studies over the last two years that illegal armed groups linked to far-right militias and leftist rebels are providing security for oil companies in several regions, especially in the southeastern states of Meta and Guaviare.