| CAJAMARCA, Colombia
CAJAMARCA, Colombia Oct 11 Gold mining
companies have invested hundreds of millions of dollars but not
extracted a gram. Palm farmers are told their land belongs to
someone else. Some communities are voting to ban mining in areas
already awarded for exploration.
Whether or not President Juan Manuel Santos can salvage a
peace deal with Marxist rebels that was rejected by voters on
Oct. 2, legal roadblocks and high taxes are a major deterrent
for companies looking to invest in Colombia.
Santos says ending Latin America's longest-running conflict
would open up vast areas of land to development, reduce
corporate security costs and bring additional growth of up to
1.5 percent a year.
Since voters narrowly rejected the deal, Santos has
scrambled to extend a ceasefire with the rebels and meet with
opposition figures in a bid to find common ground and resurrect
hopes of a negotiated end to the 52-year war.
But even companies eager to explore former conflict zones
say other worries are more pressing.
Many are wary of recent court decisions banning exploration
on land already awarded in concessions and giving local
authorities greater power to reject mining projects. For others,
high corporate taxes are a damper.
"It's useless to have a post-conflict window of opportunity
if our neighbors have half the tax rate we do and if 30-year
contracts are signed and then the conditions change," said
Santiago Angel, head of Colombia's mining association.
Analysts calculate many businesses in Colombia pay over 50
percent tax, compared with 27 percent in Peru and 25 percent in
Canadian gold miner EcoOro, which has spent $240 million on
exploration in Colombia, lost 50 percent of a concession in
Santander province after a constitutional court ruling halted
mining exploration to protect wetlands.
"Changes in laws and legislation make project development
impossible," chief executive Mark Moseley told Reuters. The
company is hoping it can reach a compromise with the government
under Colombia's free trade agreement with Canada.
Despite security improvements in recent years, industry
insiders say companies may reconsider expansion plans or simply
not move to Colombia altogether due to the legal uncertainties.
Of some 150 miners that arrived in Colombia during a gold
price boom in 2009, only 30 remain.
Experts estimate half of Colombia's territory has been
starved of investment because of the war and Santos hopes peace
would triple foreign direct investment to $36 billion a year
over the next decade with companies exploring deposits of gold,
coltan, copper, rare earths, emeralds, tungsten, potassium and
Still, mining firms complain that tighter regulation and
political pressures are hurting the industry.
South Africa's AngloGold Ashanti is facing a public
vote that could stymie its plans to extract gold at its flagship
La Colosa project in Tolima province.
Mining at the site - a $2 billion potential investment which
could yield 28 million ounces of gold - would be banned if
Cajamarca municipality follows the lead of nearby Piedras, whose
residents voted to ban extraction amid water quality fears.
Under current law, companies must get approval from local
ethnic groups before beginning projects, but do not typically
consult the broader community. Some areas are using referendums
to change that.
Both Cajamarca and the city of Ibague have pending votes. If
passed, AngloGold, which has invested close to $900 million in
Colombia since 2006, would be forced to abandon the project.
"Tell me what the rules of the game are, I'll analyze them
and take a decision about whether to invest in the country or
not. But don't tell me in the middle something isn't
constitutional," said AngloGold executive Juan Camilo Narino.
For Ibague mayor Guillermo Jaramillo, there are clear health
and environmental reasons to banish mining.
"They are going for gold. We are defending our land," he
said from his office overlooking the city's colonial square.
AngloGold says it follows all regulations and mining at La
Colosa would not affect ground water.
Whatever the rights and wrongs of each side, the panorama of
uncertainty is a deterrent to investment.
The government says it understands challenges facing
companies and will try to adapt.
"We have to keep working on a series of institutional fixes
that will give much more clarity on mining and energy
development," deputy mining minister Carlos Cante said.
He said solutions include better defining what areas can be
explored and improving company relations with communities.
Potential new investors from Australia, Canada and Asia have
expressed interest in Colombia, he added.
The government hopes agriculture would benefit particularly
from peace, since part of the accord reached with rebels of the
Revolutionary Armed Forces of Colombia (FARC) is focused on
investment in rural infrastructure.
But here too producers say they face hurdles beyond the
conflict. Programs to return land to displaced war victims are
roiling property holdings and could prevent expansions into
fertile areas once controlled by rebels.
The displaced often struggle to reclaim property, which may
have been seized by rebels or right-wing paramilitary groups and
sold on to buyers who know little of its provenance.
Just 29 percent of landholders in Colombia have formal
titles, the government says.
Reparation programs are in their infancy, but several palm
farmers in Guaviare province were recently told to vacate land
in favor of another claimant, said Jens Mesa, president of the
"If there's not absolute clarity, it's very difficult to
move local and foreign investment," Mesa said. "A deal with the
FARC is very important, but it doesn't excuse the country from
making these other changes."
Without reliable records of who owns what, companies could
be vulnerable to property claims after spending millions on
"The risk is buying lands without knowing who they belong
to, not knowing what happened there, and five years later a
truth commission or a victim shows up," Control Risks analyst
Sergio Guzman told a recent business forum.
"That's any company's nightmare."
(Reporting by Julia Symmes Cobb and Nelson Bocanegra,; Editing
by Helen Murphy and Kieran Murray)