Projet Accompagnement Solidarité Colombie

The rival economics of mining in Colombia

13 June 2013

Colombia is paying a high price for the boom in mining, which is producing unrecognized costs due to the preeminence of a narrow and deficient economic philosophy, according to a new book on the subject.


The country is at the forefront of external investment in Latin American mining, with tens of millions of hectares of land being auctioned off in mineral exploration concessions. Nationally, it is predicted that foreign companies will invest $45 billion over the next five years through the extraction of gold and other minerals, spurring the sector’s rapid expansion.

But the true cost of this boom is not being accounted for, according to economist Aurelio Suarez, author of the newly published book whose title translates to ‘The Colonial Mining of the 21st Century: All that Glitters is not Gold’. Suarez argues that mining carries a range of negative social, environmental and economic consequences which are not currently being charged to the companies reaping benefits from mineral extraction.

“Externalities are the costs of mining that societies must pay” he told Colombia Reports, “such as the cost to public health. A lot of people have health problems as a result of mining. Cajamarca, home to the La Colosa Mine and owned by AngloGold Ashanti, is the area in Tolima with the highest HIV-positive population. And who will pay this cost? The state, because the company doesn’t pay.” He further mentions mine workers who suffer silicosis and local residents whose mental health is affected by constant explosions.

Farmers in Doima, Tolima, have claimed that AngloGold Ashanti’s drilling into the region’s subterranean aquifer has already polluted water supplies they rely on for drinking water and irrigation. Suarez notes that environmental degradation is a further externality of mining affecting the agricultural and tourism sectors of the economy. Such concerns are part of the reason why the book was written in the first place: The author recalls a meeting held in Cajamarca to discuss the Colosa project where perspectives were evenly divided: “50% said the mine would bring employment and royalties, while 50% said it would bring poverty and damage agriculture and the environment. It was not possible to make an accord, so I returned to Bogota and said I must write a book that solves this question. And so I wrote this book: Colonial Mining in the 21st Century.”

The work has three parts; The first is a history of the development of mining from ancient times to the contemporary era, moving from the subterranean gold mining by slaves in Ancient Egypt, to alluvial mining in the medieval period, to the first use of cyanide and the California gold rush, and finally, to modern opencast mining based on financial capital. The second part is a study of the externalities of mining in Colombia, while the third explores the concept of ‘ecological economics’ as a way to fully evaluate the costs and benefits of mining.

Environmental economics, he says, is “...a proposal for a new public policy on this issue, distinct from approaches based on neo-classical economics. Environmental economics can be the basis for building a new policy because it is multi-criterial; It doesn’t just rely on financial cost-benefit relations. Besides recognizing and accounting for the environmental, social, and labor costs of mining, as well as the impacts on other economic sectors like agriculture, I ask: Does the real GDP of Colombia reflect the actual numbers? Why don’t we deduct from the GDP the natural patrimony that is destroyed? Should our economic targets be GDP growth alone? Should we not aim for sustainability and attempt to make the energy sector accountable to the Colombian population?”

A new public policy on mining is urgently needed, he argues, adding that foreign investors have also complained of a lack of clarity in the legislative framework of the industry. “In the absence of a clear state policy, the self-regulation by companies is in fact the policy. One month ago in Congress, President Santos said ‘[companies] must obey the requirements, and these various demands are the public policy.’ The check list of requirements is the policy, and that is a violation of Article 334 of the Constitution.”

With a well-developed mining policy, Suarez says, the state would be able to fully evaluate mining proposals, and then say to prospective partners: 'This will be the income, and these will be the costs: if you don’t have the equity for this scheme, you must go.'
If the costs are not currently being accounted for, nor, claims the author, is the income. “When the head of AngloGold Ashanti in a speech says that La Colosa had 20 million ounces of gold, with 3.3 pounds per ton of ore, the shares of the company go up, as does the value of the market and the mine. But Colombia receives nothing for this additional value.”

The auctioning of mining exploration concessions causes the Colombian peso to increase in value. This model endangers the country’s manufacturing sector, given that, according to evidence presented in the book, Colombia already shows symptoms of ‘Dutch Disease’, the process by which increased mining and natural resource exploitation (and other direct foreign investment) causes a strengthening of the currency, which harms exports of manufactured products and other goods.

Suarez argues that the national mining sector is rapidly changing. Where it was once characterized by small and medium-sized enterprises, it is increasingly marked by large-scale opencast mining, supported by transnational financial capital. The development of the industry is being shaped by the dominance in national policy circles of neo-classical economics, with direct consequences for communities and the environment throughout Colombia.

Much of the burden of mining is being borne by the country’s indigenous peoples. Suarez finds it particularly telling that former Mining Minister Mauricio Cardenas told a meeting of investors in Toronto that the new Vice-Ministry of Mines existed to keep them happy, to solve their problems, and that, while the investors needed to consult indigenous peoples, there was no indigenous veto. This is legally questionable given that the country has ratified International Labour Organisation’s Convention 169 on the rights of indigenous and tribal peoples.

In the absence of a national mining policy and a more comprehensive analysis of economic and other costs and benefits, there are also concerns over the principle of self-government on a national level, says Suarez. The dynamics at play in the current arrangements (or lack thereof) mean that opencast mining is the dominant form of mineral exploitation – a model that has the greatest impact on society. Despite its associated externalities, Suarez notes that “...the royalty charged is 3%, the same rate that was set five centuries ago by the queen of Spain.”

Sources
La Minería Colonial Del Siglo XXI (Aurelio Suarez)
Interview with Aurelio Suarez
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Author: 
Robin Llewellyn