Until recently Colombia was lax in enforcing its environmental laws. So it came as a shock to the country’s mining industry when, in January, the government halted coal exports from a port operated by Drummond, an American miner, in a row over pollution. The suspension has been costly not only for Drummond: its operations generate $66m a month in royalties and taxes for the Colombian treasury.
The mining minister, Amylkar Acosta, confirmed this week that the government would let the company resume its exports later this month, when it completes improvements to the port facility to prevent contamination of nearby beaches. The government has been under pressure to take action since environmentalists photographed an incident last year in which more than 500 tonnes of coal were dumped into the Bay of Santa Marta to stop a barge from sinking. Last month six employees at the port were charged, and face possible jail sentences. Drummond has been fined $3.6m and told to clean up the mess.
The case is an illustration of how the government, having welcomed foreign miners, is now having to contend with public disquiet over both pollution and the way the country’s mineral wealth is shared. In an election in May, President Juan Manuel Santos will seek a second term. So he cannot ignore the “hostile” climate of public opinion on the issue, says Alvaro Ponce, a Colombian mining expert.
Protests by nearby residents have delayed several big projects, including AngloGold Ashanti’s proposed gold mine in Tolima province and Eco Oro’s planned gold and silver mine in Santander province. A study by Colombia’s national audit office, published in January, found that economic and social development in towns next to large mining operations is worse than in places where illegal coca crops are grown for making cocaine.
The environment ministry is seeking new powers to require licences for exploration as well as extraction. Mining firms grumble that the process of getting projects approved is already tortuous enough. This and the recent fall in world prices of some minerals mean that up to $7.3 billion of investments are stalled, they say. Mr Acosta says the miners must accept that besides getting their official permits, they have to convince local communities to accept their presence, earning a “social licence” to operate. “Without that, the projects become unviable,” he says.
The backlash against mining has been building for some years. In the mid-2000s, when commodity prices were booming and Colombia’s internal conflicts were subsiding, the government offered incentives for foreign firms to come in and create mining jobs. It awarded exploration permits for swathes of territory, including in areas hitherto off limits, such as the fragile páramo tundra in the Andes. “The floodgates were opened,” says James Lockhart-Smith of Maplecroft, a risk-analysis firm.
But Colombia’s regulators were ill-prepared. In 2011 the government stopped accepting new applications for licences while it dealt with a backlog of 19,000. It rejected 90% of these, then turned its attention to 10,000 projects that had already been given licences, finding that 92% were failing in some way to comply with their conditions.
Despite all the stumbles and setbacks, Colombia is getting somewhere in its drive to exploit its mineral reserves. In 2013 mining investment was $3.6 billion, 21% more than in 2012. Mining already accounts for 2.3% of GDP and 7% of exports, and foreign companies are still lining up to explore new prospects. By the standards of resource-rich emerging economies, it is a fairly well-run place, so the chances are that it will succeed in coming up with a licensing regime that eases public worries without deterring investment. As in richer countries, mining projects will still be welcomed, but not at any price.
Mining in Colombia: Digging itself out of a hole, Economist, Mar. 15, 2014, at 61