Colombia’s Mining Industry: A Story of Corruption, Violence and Wasted Potential
August 12, 2012 1 Comment
Colombia is now into its third week of strikes as a result of disputes between workers at FENOCO, Colombia’s main coal transporting railway, and their bosses. Colombia’s Labour Minister has called on both sides to attend talks and work out a way to end the impasse that has so far resulted in Colombia losing $1.2 million a day in royalties.
The strike, which began on July 23rd, was caused by coal workers at FENOCO demanding better working and pay conditions. There is also a demand by the Trade Union leaders for workers laid off in 2009 after a similar strike, to be reinstated.
One of FENOCO’s shareholders, Drummond International a US-based mining company, have already announced that it has run out of stock and has been forced to cancel coal cargoes coming from Colombian mines. Sources close to the Unions state that Drummond International, a partial owner of FENOCO, has ‘’changed the working hours of staff unilaterally, violating labour standards, in an attempt not to pay out full wages to workers at the train company’’. There have also been reports of death threats against national and regional Union leaders of the mining industries.
Colombia is currently the world’s fourth largest producer of coal, transporting cargo to the main export ports on the country’s Caribbean coast along FENOCO’s 226km rail line. Drummond International has already declared ‘Force Majeure’ on a case by case basis which allows buyers and sellers of coal to renege on previous contracts due to ‘situations beyond their control’.
Colombian mining has historically been a story of untapped potential. Despite vast resources along the country’s northern regions, the industry in total makes up about 2.4% of GDP. During the 1990’s and the early 2000’s, foreign investors were put off by Colombia’s instability, resulting from civil war and high levels of corruption. President Alvaro Uribe, as part of a nationwide clean up of Colombian politics and civil society, made investment more attractive by eliminating large parts of Colombia’s FARC terrorists and incentivised companies to bid for mining contracts and introduced tax breaks to help the industry grow.
In many ways, this plan worked too well. The Colombian state was inundated with applications by low level companies whilst a lot of the larger contracts went to a select few multinationals. Colombia would yet again experience irritation as its government struggled to cope with the high demand leading to current President Juan Manuel Santos refusing to accept any more applications and removing a lot of the incentives introduced by his predecessor. His government would review all pending requests, rejecting over 90% of them and withdraw any contracts which were not already covered for financially by the firms involved. Colombia’s new National Mining Agency began accepting new applications on August 3rd and will aim to reinstall the incentives which will hopefully make the industry grow again.
As with most debates in Colombia at the moment, the issues extend in some way to the great security debate and what to do about finally ending the government’s war with the FARC. A major factor, as already stated, in giving life to Colombia’s dormant mining industry was the partial elimination of the essentially causeless rebels and the reassurance that Colombia’s government were in an adequate position to protect the interests of foreign investors and to increase employment levels. Now, supporters of the former President are left baffled that Santos is moving ever forward with his ‘obsession’ to leave Colombia in a state of complete peace after his term comes to an end.
The FARC are more akin to a dagger in the heart, rather than a thorn in the side of the Colombian economy. The country is also South America’s third largest producer of oil but successive targeted attacks on oil pipelines have resulted in huge financial losses to the industry and put oil workers at serious risk. There were 40 attacks last year in total by FARC and they have continued in a similar vein this year, conducting the coordinated bombing of two different sections of the 770-kilometre Caño Limon, the country’s second-largest oil pipeline.
In theory, Santos’s plan to introduce partial amnesty to FARC fighters will give the rebels a reason to enter into talks after decades of fighting. It is a much more enticing prospect than prison, they argue. On the day of a congressional vote on the proposed amendment to policy, a series of car bombs struck parts of the capital, Bogota. Uribe tweeted that ‘Bogota is covered in blood on the day that government is pressing Congress to approve impunity for heinous crimes’
The mining debate has gripped Colombia and has led to serious disagreements at the top level of government, acting as yet another threat to the future of the ruling coalition. At a time of industrial dispute and further protests by Green Environmentalists, Colombia’s mining industry is once again left frustrated. For the sake of so many in this nation of unstable economic growth, talks between the Unions and FENOCO must go ahead and they must reach an agreement. South America may be rich with resources, but numerous recent developments have meant that for the rest of the Western World, finding a friendly government to do business with has been tricky. Colombia has the potential to fill that gap, if only circumstance would allow it.