Colombia: Foreign Firms Cash in on Generous Mining Code

OTTAWA - These are prosperous times for Canadian mining and oil companies extracting resources from Colombia.

"We have at least four exploration wells to be drilled throughout Colombia with large value additions for our company," said Scott Price, a spokesperson for Solana resources, an oil and gas company headquartered in Calgary, Alberta.

The company's Colombia production increased almost three-fold between January and September 2007 to 1,450 barrels of oil equivalent per day, with more lucrative investments in the conflict-beset southeastern Putumayo region, set to start producing in 2008.

But it isn't just untapped oil reserves drawing Canadian extraction companies into Colombia. "We think the fiscal legislation governing oil exploration is very attractive, far more attractive than what is being offered in Canada," Price told IPS.

The drafting of Colombia's laws governing oil and mining has come under scrutiny from trade unionists and human rights activists, who allege that CIDA, the Canadian International Development Agency, helped write the legislation to advance the interests of Canadian companies operating in the country.

Beginning in 1997, CIDA -- the international assistance arm of the Canadian government -- partnered with Martinez CAfA3rdoba and Associates, a Colombian law firm representing several multinational companies, and CERI, the Canadian Energy Research Institute, an industry think-tank based at the University of Calgary, to rewrite Colombia's mining code.

Once the new code had been drafted by CERI, CIDA and Colombian lawyers financed by Canadian tax dollars, it was submitted to Colombia's Department of Mines and Energy (UPME). The code became law in August 2001 after muted opposition from some Colombian politicians, including the Senator Gustavo Petro.

The new mining and energy legislation, completed in 2001, constituted a "Canadian manipulation to benefit foreign companies to the detriment of Colombians," said Francisco Ramirez, president of SINTRAMINERCOL, Colombia's State Mine Workers Union, during a 2006 interview in his heavily guarded Bogota office.

Ramirez has escaped seven assassination attempts, which he blames on right-wing paramilitaries hired by mine companies attempting to thwart his activism.

"The new code flexibilised environmental regulations, diminished labour guarantees for workers and opened the property of afro-Colombian and indigenous people to exploitation," Ramirez told IPS.

According to CIDA's summary of its project, "Canadian energy and mining sector companies with an interest in Colombia will benefit from the development of a stable, consistent and familiar operating environment in this resource-rich developing economy."

"We had a five-year, 11-million-dollar project in Colombia, which ran from 1997 to 2002, to help Colombia strengthen its institutional capacity in both the Ministry of Mines and Energy and the Ministry of the Environment and the regulatory agencies these agencies worked with," said a senior official with CIDA, who spoke by phone with IPS on the condition of anonymity.

While the new code came into effect in 2001, the impacts for Canadian companies have been more acute in the last few years. "The situation with security has consistently improved," said Price, in explaining his company's recent lucrative investments and the time delay between the passage of the code and new investments.

One of the new code's most controversial changes concerns the royalty rates paid to the Colombian government by foreign mining and energy companies exporting non-renewable resources.

Prior to the CIDA-backed legislation, which came into effect in August 2001, royalties were set at a minimum of 10 percent for mineral exports above 3 million tonnes per year, and a minimum of 5 percent for exports below 3 million tonnes. This was set by article 16 of law 144 in Colombia's 1994 mining code.

Today, under Article 227, the royalty tax for private owners of Colombian subsoil has been reduced to 0.4 percent, regardless of how much material is extracted. Royalties are intended to allow the government to finance public services like schools and hospitals.

Critics of the mining code say that cutting the royalties means less money for Colombia's development, an ironic assertion considering the project was partially financed by Canada's development agency.

Some officials have deemed CIDA's activities as "Canadianisation". But, according to Jamie Kneen, communications coordinator for Mining Watch Canada, a union-funded advocacy group, that wouldn't be accurate.

"Canadian royalty rates vary but they tend to be more like 3-4 percent," or 10 times higher than what is permitted for many Colombian operations, Kneen told IPS.

"The CIDA-backed code also contains some articles that are simply unheard of in other countries," said Ramirez. "If a mining company has to cut down trees before digging, they can now export that timber for 30 years with a total exemption on taxation."

The new code also increased the length of mining concessions from 25 years to 30 years, with the possibility that concessions can be tripled to 90 years.

On a visit to Bogota in July this year, Canada's Conservative Prime Minister Stephen Harper told reporters, "Canadian expertise compliments Colombian economic strength in areas such as mining, engineering, and oil and gas."

Activists are left wondering whether Canada's development agency is aiding multinational mining companies rather than Colombians.

In a report issued last July, the London-based rights watchdog Amnesty International warned that Colombia's decades-long armed conflict "provides a useful cover for those seeking to expand and protect economic interests."

It cited a long list of labour activists who have been the target of attacks in the health, education, public services, agricultural, mining, oil, gas, energy and food sectors.

According to Colombia's National Trade Union School, 2,245 trade unionists were killed between January 1991 and December 2006, while 138 fell victim to forced disappearance and 3,400 were the targets of threats. This makes Colombia "one of the most dangerous places in the world for trade unionists," says Amnesty.

Another leading international human rights group, the New York-based Human Rights Watch, says that three-quarters of the attacks were committed by the far-right paramilitary groups that are allied with government forces.

Local trade unionists say that 87 percent of the nearly four million people displaced by Colombia's armed conflict over the last two decades were fleeing municipalities in mining regions. Eighty-nine percent of the trade unionists who have been murdered were active in those same municipalities.

(c) 2007 Inter Press Service

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