Colombia’s mining industry is growing up, but not wihout some growing pains

When thinking about Colombia’s burgeoning mining industry, it strikes me as similar to a rising Hollywood star. Colombia has become a household name in the sector. Its growth potential and untapped sources of gold and other resources have made it a red-hot mining destination, and international attention shows little signs of abating. Yet at the same time, it has a ways to go before it joins the ranks of its established mining nation peers.

Just ten years ago, Colombia wasn’t on the map as a mining destination. The country was riddled with guerrilla warfare and narcotics trafficking, which scared away large-scale foreign investment. Today, you hear daily chatter about Colombia and how it’s en route to becoming an international mining powerhouse.

This increased thirst for information on Colombia was evident in recent events PwC held in Toronto and Vancouver to packed rooms of mining executives on both sides of the country eager to hear about Colombia’s developing mining industry. The message from these events was clear: Colombia can become a world-class mining country, but much progress needs to happen before it achieves this status.

Colombia paints two different pictures in the minds of mining execs. For some, an old school view of Colombia still prevails as a high-risk area for foreign investment. But, Colombia is slowly but surely shedding its reputation. Over the past decade, military efforts have managed to contain (albeit not eliminate) the insurgent group FARC, helping make it a safer destination for miners. These ramped up efforts have reduced the amount of kidnappings and attacks on infrastructure that were once commonplace. A more modern view of Colombia is a relatively safe and politically stable country that has moved light years away from its violent and unstable past.

In the minds of Colombians, the mining industry itself also conjures up two differing perspectives. Among many local populations, an antiquated view of the mining industry still exists. This is a view that equates modern-day mining to centuries-old, small-scale informal mining methods that carried poor working conditions, safety records and environmental practices. However, formal mining using industry best practices is currently a far cry from these methods as technology has helped improve working conditions and lessoned the environmental impact of mining. Greater collaboration with local groups and more awareness is needed to help make this distinction.

Former President Alvaro Uribe (2002-2010) unlocked the door to modern mining in Colombia, and the current President Juan Manuel Santos has made it clear that the country is open to growing the mining industry for the long-term.

At our events, Antioquia’s Secretary of Mines, Nicolás López Correa, detailed major reforms the Santos administration is undertaking to help encourage growth in the sector and make it easier for global companies to mine in the country. This includes reforms to the current Mining Code to encourage more legal stability, licensing reform to make it easier for miners to navigate through the process, and the creation of a mining authority model to ease current regulation challenges. These reforms are a massive undertaking, but the vigour in which the government is taking to address existing challenges paints a positive outlook for the future.

Is the landscape perfect right now? No, but it will likely only get better. Aggressive reforms to the mining industry will encourage even greater foreign investment in the years to come. Of course, this hinges on Colombia’s ability to build infrastructure to meet rising demand-an issue termed “Colombia’s Achilles Heel” by our colleagues at Eurasia Group at our event. However, the Santos administration’s plans to invest $55 billion in infrastructure over the next 10 years and planned industry reforms should hopefully translate into rapid change.

In an impressively short amount of time, Colombia has moved from a country with mining potential to a recognized mining destination with staying power. The future looks bright for Colombia and for global mining companies looking to tap into the country’s rich territory, 80% of which is unexplored. The question is no longer will Colombia become a mining powerhouse, but when.

For access to event presentations seen at our Mining in Colombia events, please visit:www.pwc.com/ca/mining-in-colombia.