Investment on the Sidelines

Mining in Colombia could be viewed as a risky business as investors struggle to navigate the opposing forces of government bureaucracy, guerrilla violence and environmental opposition. However, international heavyweights such as BHP, Glencore and Anglo American are fully committed to operations in the country, and projects by Canadian juniors continue to be developed as the quality of resources promises potentially huge rewards.

The outgoing administration of Juan Manuel Santos recently put in place incentives to attract investment. In March of 2018, the finance ministry said it will provide up to 1.6 trillion pesos (US$580 million) in tax breaks over the next four years to woo investment for mining and oil exploration.

Colombia could attract about US$1.5 billion a year in investments, according to mining association ACM president Santiago Angel. Investment in mining fell dramatically over the last few years as metals prices dropped and the level of legal certainty in Colombia deteriorated into one of the most immediate obstacles to development. A forecast investment of US$7.6 billion up to 2022 will only be possible if the government can provide legal certainty to companies, Angel said in May.

Credit: Asociación Colombiana de Minería

Apart from the shifting legal landscape, Colombia's mining sector faces two additional large roadblocks: community opposition and security. Santos attempted to tackle all three, but the majority of government efforts were eventually channelled towards the peace process which was and continues to be the most significant challenge for Colombia's development as a country. In 2018, the threat of physical violence has taken on a new face and social conflicts and adverse legal rulings have risen to prominence with the potential to derail investment plans. 

In BNamericas' 2018 Mining Survey, when asked which country presents the best investment climate for mining, only 3% of respondents chose Colombia (whereas 38% chose Peru and 31% Chile). Clearly, something needs to change.

The election in June of investor-friendly Iván Duque as President of Colombia could be the catalyst that is needed to kick-start the Colombian economy and improve the mining investment climate.

Figure: Mining FDI


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