Mining in Colombia by Alvaro Pardo

This is what Alvaro Pardo, an economist investigator from Punto Medio and former President of Carbocol and other institutions from the Colombian Ministry of Mines and Energy, says during the Forums in La Guajira regarding some of the economic and political facts of mining in Colombia. It does not look too good for the local communities living under these economic policies

Slide 1:

Mining, Politics, and Society

Luis Álvaro Pardo B.

Riohacha, Guajira

June 2012

Slide 2:

The Neoliberal Agenda

·         Privatization of the economy

·         Favoring and expansion of the private sector

·         Deregulation and minimal state intervention

·         Reduction of mining income

·         Social and environmental irresponsibility

·         Tax privileges

Slide 3:

Our Mining Model

·         Empowerment of large mining companies

·         Promotion of mining…a country up for bid

·         Everything for sale…except Ecopetrol (until now)

·         Mining regulations…standards to the letter.

·         The social and environmental “discourse”

·         Huge tax breaks to big mining

Slide 4:

·         Tax privileges

-30% deduction for buying real fixed assets

-straight-line amortization

-Elimination of the income remittance tax

-Deductions:

·         Interest on loans

·         Social service organizations

·         Energy surcharge (50%)

Slide 5:

·         Tax privileges

-Deduction in payment of royalties.

-Investment in scientific and technological development

-Investment in the environment

-Subsidies for job creation

·         Other benefits

-Fuel Subsidy - $1.3 billion

-Importation of non-domestic industrial equipment

-Agreements of legal stability

Slide 6:

·         Transfer rates.

·         Tax benefits for the mining sector are 38% of total benefits.

·         The DIAN [National Office of Taxes and Customs] does not know the details of the tax breaks.

·         The tax breaks neutralize the royalties.

Slide 7:

Other practices

·         Report from the National Comptroller’s Office

·         Findings: Practices are designed to reduce the payment of legal and contractual obligations.

-Division of mining deeds

-Divergent figures reported to various state entities

-Missing payments of fees and royalties

Slide 8:

Consequences

·         Big companies concentrate most of the mineral wealth already discovered.

·         A regulatory state that does not participate in the exploitation of the country’s Non-Renewable Natural Resources.

·         A weak institutional policy of mining, unable to supervise the activities of the private sector.

·         The lowest mining income in Latin America.

Slide 9:

Consequences

·         Country with the second highest inequality in L.A.

·         We pay mining companies for doing us the favor of operating in our country.

·         Non-Renewable Natural Resources at a bargain prices

·         Environmental degradation

·         Social discontent

Slide 10:

Mining: Source of Conflicts

      Conflict explosion: Environment, social, land system, ethnic minorities, water, roads, health, displacement, Dutch         disease, public-private corruption, groups outside of the   Law, money laundering, drug trafficking, tax breaks, direct                 subsidies.

·         Great social discontent.

·         Mining districts…worse than before

Slide 11:

What creates big mining?

·         Creation of paper unions

·         Avoid the debate for their social, environmental, and fiscal responsibility.

·         Signing of the Auto-regulation Agreement

-After many decades, they agree that they need to be responsible and ethical.

-The height of cynicism

·         Speculating about the country’s Non-Renewable Natural Resources

Slide 12:

·         The State, the companies, and the unions are selling us the idea that private interests have the same purpose and objectives as the general public interest.

·         Mining creates well-being and development.

·         Growth – Development

Slide 13:

Quality of the IED

·         Canadian companies or companies created in tax havens.

·         Speculation with the Non-Renewable Natural Resources.

·         Upward revaluation of potential reserves

·         Revolving Door

Slide 14:

What has been the experience?

·         Mining, a lever for social development and well-being.

·         Canada/Sweden/Australia/Norway/Finland.

-A strong institutional mining policy

-Maximization of mining income

-Efficient use of mining income.

Slide 15:

Pending…

·         Consolidation of the new institutional policy.

-A policy with national coverage

-Firms in charge of inspecting the mining industry

·         Tax Reform

·         Reform of Mining Regulations

-Second half of the year

-Preliminary consultation

·         New Law for preliminary consultation

Slide 16:

The Mining Industry’s Social Agenda?

·         Mining policy with a strategic and long-term vision for Non-Renewable Natural Resources.

·         Compliance with constitutional principles related to Non-Renewable Natural Resources

-Planning

-Rationality

-Sustainable Development

-Improvement of Quality of Life.

Slide 17:

The Mining Industry’s Social Agenda

·         Strengthening of the mining industry

·         A reform of Mining Regulations based on the public interest of Colombians.

·         Mining where you can and subject to fundamental laws, a healthy environment

·         Development of essential and responsible mining

·         Royalties for education, health, research, and development of technology and infrastructure

Slide 18:

·         Thank You

·         www.colombiapuntomedio.com

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·         Twitter: @ColPuntoMedio