The Mineral Industry of Colombia in 2002
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THE MINERAL INDUSTRY OF COLOMBIA By Ivette E. Torres Mines and hydrocarbons represented 4.4% of the gross has been recognized as an important producer and the world’s domestic product (GDP) in 2002. This sector was dominated leading exporter of emerald. In addition, the country was an by hydrocarbons, which was Colombia’s most important export. important producer of ferronickel and the only producer of The combined mines and hydrocarbons decreased by 11.06%; platinum in Latin America. It also produced bauxite, copper, alone, mines decreased by 6.25%. The decrease was despite iron ore, lead, steel, silver, and zinc. It was an important increased production and the higher average price of ferronickel. producer of cement in Latin America and produced small The construction sector, which represented 4.7% of the GDP, amounts of construction materials and industrial minerals increased by 5.8%. The industrial sector, which represented (table 1). 14% of the GDP, increased by 1.1% (Ministerio de Minas y Energía, 2003, p. 85). Government Policies and Programs The economy of Colombia grew at a moderate pace as indicated by a 1.9% increase of the GDP (Latin Focus, 2003§1). In 2002, the Ministerio de Minas y Energía evaluated many The GDP in 2002 was estimated to be $82.2 billion. That figure changes in its organizational structure and that of the entities made Colombia the 41st largest economy in the world (World reporting directly to the Ministerio and of those associated Bank, 2003b§). In terms of purchasing power parity, it was the with it. In accordance to Article 320 of Ley 865 of 2001 (the 27th largest economy with $265.5 billion (World Bank, 2003a§). mining law), the Ministerio sought to continue to delegate some Colombia had a high rate of unemployment and was affected functions to the states in an effort to expedite the administration by the overall world economic stagnation. Since the late 1990s, of local mineral resources. when the GDP increased by 0.6% (1998) and decreased by 4.2% During the year, Decreto 2390 was passed. The purpose of (1999), the country restructured its financial system and made the decree was to legalize the informal mining activity (minería other significant changes that have resulted in a lower rate of de hecho) for mining activity that could be technically and inflation. In August 2002, a new Government took office. The environmentally sustainable. new Government put a great deal of energy into reducing the A new royalty law (Ley 756 de Regalías) was also passed country’s external debt, which had reached 50.7% of the GDP, during the year. The law modified Ley 141 of 1994. Article in part, because of the depreciation of the currency. Among 16 of the new law establishes the royalty to be paid for the other things, the Government approved reductions in the production of minerals at the mine mouth. Royalties for budget for fiscal year 2003, and the Congress passed important minerals (except petroleum range from 1% to 12%. For coal, fiscal changes aimed at decreasing Government spending and the royalty rate is 10% for )mining companies that produce more increasing Government revenues. The Government planned than 3 million metric tons per year (Mt/yr) and 5% for those that to restructure by reducing the size and number of Government produce below that level. The highest levels of royalty are for agencies and the number of its civil workforce (Banco de la nickel and salt (12%). Radioactive minerals have a royalty rate República and Ministerio de Hacienda y Crédito Público, 2002). of 10%. In general, metallic minerals have a royalty rate of 5%. In January 2003, the International Monetary Fund approved The rate for gold and silver, however, is 4% with the exception a 2-year Stand-By Agreement with Colombia (International of alluvial gold in concession contracts, which has a rate of 6%. Monetary Fund, 2003). Despite these important changes, Royalties for nonmetallic minerals and construction materials Colombia continued to be affected by violence, especially are 3% and 1%, respectively. after peace talks between the Government and guerrillas broke The royalty law established a system of variable royalty down in early 2002. In April, the guerrilla group Ejército de payments of between 8% and 25% for the oil sector; the Liberación Nacional (ELN) declared the Government and some amount was based on the level of production. The law would of the private petroleum companies to be military targets. In be applicable to new discoveries, discovered but not developed the past, guerilla groups had concentrated their attacks on fields, and projects of incremental production. The law provides pipelines. With this announcement, the ELN indicated that the stimulus for development of new gas and heavy crude fields. attacks would expand to all other infrastructure (Oil and Gas Subsequently, the Government, through Decreto 3176, regulated International, 2002§). Articles 3 and 10 of Ley 756. The decrete also defines the term Colombia’s mineral production was dominated by the fuel “incremental production.” The Government also was working sector. The country was the fifth largest producer of petroleum on several reforms by decrees of new law projects to address the in Latin America (BP p.l.c., 2003b§). Colombia was also the issue of theft of petroleum and natural gas (Ministerio de Minas largest producer of coal in the region. Historically, the country y Energía, 2003, p. 70-76). In November 2002, the Government and the petroleum 1 References that include a section mark (§) are found in the Internet industry formed a working group with the purpose of References Cited section. THE MINERAL INDUSTRY OF COLOMBIA—2002 8.1 accelerating the pace and increasing the exploration activity in Mineral exports (excluding petroleum) totaled $1.97 billion, Colombia to fight the illegal market of natural gas, petroleum, or 16.3% of total exports. Coal was the largest export item with and petroleum derivatives (Ministerio de Minas y Energía, $1.01 billion, which was a 14.6% decrease compared with that 2003, p. 69). Also, the group, which was represented by various of 2001. The main areas of export for Colombian coal were ministries (including the Ministrerio del Medioambiente), the Europe (55%) and North America (31%). Exports of ferronickel Government petroleum producer Empresa Colombiana de totaled $268.3 million; this was an increase of 14.1% compared Petróloes, S.A. (ECOPETROL), and the Asociación Colombiana with that of 2001. Official export of emeralds remained at the de Petróleo, which represented the private sector, was working same level as that of 2001. Exports of gold, however, increased on accelerating the terms of granting environmental and other by 72% despite a lower production level (Ministerio de Minas y permits. Another topic for the working group to evaluate Energía, 2003, p. 83). was ways in which ECOPETROL could work to foster new Colombia exported about 40 crude minerals and more than investment by the private sector. 10 processed minerals. In 2002, exports of platinum totaled $8.85 million. All platinum was exported to the United States. Environmental Issues The value of exports of dimension stone (marble and granite) was $4.29 million. Exports of cement, ceramics, and coke were The Ministerio del Medioambiente is Colombia’s highest $73 million, $38.9 million, and $16.3 million, respectively Government authority with responsibility for environmental (Ministerio de Minas y Energía, 2003, p. 83) matters. The Corporaciones Autónomas are responsible for administering natural resources and controlling environmental Industry Structure deterioration associated with production activities, such as mining. The Ministerio de Minas y Energía y Minas was the Under Decreto 266/2000, the time allowed for a project’s Government entity entrusted with the oversight of the minerals environmental evaluation was reduced, thus decreasing the and energy sectors. Several agencies either report directly to licensing process for mining projects. As means of protecting the Ministerio or are associated with it; some of these are the indigenous and black communities, the decree also requires Dirección de Energía, the Dirección de Gas, the Dirección de the Government entity Instituto Geográfico Agustí Codazzi to Hidrocarburos, the Dirección de Minas, Empresa Colombiana produce a map of the areas occupied by indigenous and black de Gas, ECOPETROL, Ingeominas, Minercol Ltda., and the communities before project development can begin. Unidad de Planeación Minero Energética. In 1999, the Ministerio del Medioambiente adopted several The production of minerals and energy was by the public and environmental management plans for prospecting (Resolución private sectors. Coal and nickel were produced in their entirety 1167), mining and cement manufacturing (Resolución by the private sector. Natural gas and petroleum were produced 1168), industrial minerals (Resolución 1169), production of by the Government through ECOPETROL and in partnership sedimentary materials (Resolución 1170), and production of with the private companies with direct contracts between gold (Resoluciónes 1171 and 1172) (Empresa Nacional Minera ECOPETROL and the companies. By law, ECOPETROL has Ltda., Instituto de Información e Investigación Geocientífica to have a minimum of 30% in joint ventures with the private Minero-Ambiental y Nuclear, and Unidad de Planeación sector, which owned and operated the country’s petroleum Minero-Energética, 2000, p. 19-21). refinery production. Production Commodity Review In terms of production value (after petroleum), coal, emerald, Metals gold, and platinum were Colombia’s principal minerals. In 2002, the production values of these minerals totaled $1.25 Gold.—Gold production in 2002 decreased by 4.6% from that billion. The values of coal and nickel (ferronickel) production of 2001 to 20,799 kilograms (kg) (table 1). The Departments were 50.7% and 24.4%, respectively, of the total. For the of Antioquia, Bolivar, and Cordoba produced 90% of the most part, production levels of the minerals canvassed by the total (Unidad de Planeación Minero Energética, 2003, p.