Problematising the relationship between Mining, Development and Foreign Investment in Colombia

Ximena Sierra-Camargo

In Colombia in the 1990s, a mining boom led to a significant increase in the extractive industries, including large-scale gold mining. This boom was provoked by legal and institutional reform of the framework of the Colombian constitutional State, and following the guidelines of transnational actors like the World Bank, who sought to standardise mining regulation across Latin America.

The new mining regime allowed the configuration of a (neo) extractivist model, with extremely favorable conditions for foreign investors, and that revived legal institutions such as the concession agreement, a usual contract in colonial and (post) colonial contexts. In turn, this new regime caused new forms of ‘accumulation by dispossession’—which implied different forms of exclusion reminiscent of earlier colonial hierarchies.

Deployed at the local level, the new resource extraction model was conceived as a global governance system for the mining sector that brought major benefits for foreign investors; local communities have suffered serious social and economic impacts. They have had to adhere to changes to their landscapes, and to contribute workers to offset the disruptive impact of these projects. A specific development discourse has been crucial in promoting these reforms. Emblematic of an anachronistic notion of development, Global South States have adjusted their own institutions and legislation to new political and legal forms to meet the demands of resources required by global value chains, while simultaneously excluding regional perspectives on development. 

The development discourse behind the mining reforms is key to understanding the role of actors from the Global North, such as foreign investors and international financial institutions, in shaping the new extractive regime in Colombia, and in the use of legal and institutional channels of the Colombian constitutional State—which are not only connected to powerful global economic dynamics, but are also framed in a transnational legal making process. On this point, it is important to highlight that the construction of a normative and institutional apparatus in the mining sector in Colombia should be understood as a process in which various actors, rationalities, norms, procedures and discourses intervene and operate both on a global and local scale.

The current mining code illustrates this point. It was approved by the Congress of the Republic of Colombia through the Law 685 of 2001, which in turn was promoted according to the World Bank policy: the ‘Mining Strategy for Latin America and the Caribbean’ of 1996. That policy, which was preceded in turn by the so-called ‘Mining Strategy for the African Continent’ of 1992, was issued within the framework of the political and economic transformations that took place in the world at the end of the 20th century, and which led to a ‘constitutional boom’, which in turn was connected to the ‘mining boom’ in the same period. The objective was to update and standardise the mining laws of the countries of the Global South. 

In the process of enacting the new mining regime in Colombia, the participation of other actors from the Global North was also crucial. For instance, the Canadian Development Agency (CIDA) played an important role in this process. According to the North-South Institute, the Canadian Energy Research Institute, under the sponsorship of CIDA, issued recommendations to strengthen the mining institutions in Colombia and establish ties with Canadian entities in the field of resource extraction. Likewise, recognised law firms in the mining sector, among whose clients are some of the larger mining companies that operate in Colombia, participated in the preparation of the new mining code draft.

It should be noted that the neoliberal turn that brought the ‘mining boom’ at the end of the 1990s was preceded by a period in which ‘developmental’ projects were promoted, and when the south global States had a more active role in different sectors of the economy, including mining. This period began after the Second World War and was characterised by the strong influence of a ‘developmental narrative’, under which a new classification was incorporated between the so-called developed States and the developing States, replacing the division between civilized and backward nations. 

During this period, the so-called ‘decolonisation process’ also took place, and the resource extraction activities played a fundamental role. The United Nations issued a series of resolutions concluding in Resolution 1803 of 1962, through which states recognised the principle of permanent sovereignty over natural resources (PSNR) empowering developing states to retain control over resources they would have been previously dispossessed of. According to the PSNR principle, States enjoyed direct control and sovereignty over their natural resources, as long as: (i) they did so efficiently according to the demands of the world economy; (ii) they were able to be part of the world economy; (iii) they cooperated with developed States; and (iv) they compensated foreign companies whose assets were expropriated in processes of nationalisation. 

In this way, since the post-colonial period of the mid-20th century, a system of protection of foreign investment began to consolidate, which has expanded significantly to this day. Currently this system has more than 3,000 international investment agreements and more than 1,000 lawsuits filed by foreign investors under the ISDS. Likewise, a third of the lawsuits filed are against Latin American countries. In Colombia, there are currently 17 lawsuits, of which at least 10 are associated with disputes over natural resources.

International rules to protect foreign investment that emerged in the postcolonial period and were reinforced during the neoliberal turn were also reflected in policies at the local level. For example, in Colombia, the so-called policy Apertura Económica promoted in the 1990s, allowed the creation of a legal framework to attract foreign investors and guarantee conditions of predictability and legal security. With regard to the mining sector, there was a transition under which the country went from being an ‘operator State’ to a ‘regulatory State’, giving priority to private foreign investors in the operation of mining activities.

The new mining legislation not only reintroduced the ‘concession agreement’, but also established the prohibition of ‘prohibiting mining’, limited the participation of local communities in mining projects and eliminated the classification between small, medium and large mining. This new regulation also relaxed the requirements for obtaining permits such as mining titles and environmental licenses, and created generous fiscal and tax incentives, substantially higher than the royalties paid by mining companies. It is estimated that, for every 100 pesos paid in royalties, the companies had a discount of more than 200 pesos. This means that the State has stopped receiving around 33 trillion pesos and that, the State ends up paying companies to extract subsoil resources. 

In the years following the mining code reform, the new resource extraction regime continued to consolidate through the approval of new development plans, new standards, and the signing of International Investment Agreements (IIAs), including bilateral investment treaties (BITs) and free trade agreements, with investment chapters. For example, under the policy known as the ‘mining locomotive’, the Free Trade Agreement between Colombia and Canada came into force, protecting Canadian mining companies that have invested in Colombia. In this regard, it is important to note that the Colombian government argued that ‘to stop perceiving Colombia as a failed State, it was necessary to promote some legal and institutional reforms to attract foreign investment in the mining sector.’ According to the government, this sector was one of the main axes of the economy; due to the rise in metal prices in the international market, and the increase in mining activities in the country.

Within the framework of this policy, new institutions were created such as the National Mining Agency (ANM), the National Environmental Licensing Agency (ANLA) and the Vice Ministry of Mines. Moreover, the so-called ‘express’ environmental and social licenses were issued; and the so-called ‘Strategic Mining Areas’ were created with the purpose of reserving more than a fifth of the national territory, equivalent to 25 million hectares, to be exploited by foreign investors under concession agreements. Likewise, other mechanisms such as the so-called ‘revolving door’ also played an essential role in the configuration of this regime, and especially in the blurring of public and private interests in the mining sector.

Given the especially favorable conditions for foreign investors, a kind of ‘new Dorado’ emerged in the country, which caused the massive arrival of mining companies, of which 70 per cent were from Canada, and were in turn protected by the FTA between Colombia and Canada. This influx of companies was part of a global context in which the Toronto stock market brought together around 65 per cent of all mining companies worldwide, and which triggered a boom in Canadian mining investment, increasing by US$3-5bn in six years. 

Further, in the framework of this boom, gold was of great interest to new investors due to the special conditions for the extraction of this metal in the financial and stock market. These conditions were also reflected in the low level of gold royalties in Colombia equivalent to 4 per cent—the lowest in Latin America—and in the alarming increase in its price worldwide. Due to fluctuations and the financial crisis in 2000s, it went from US$270 to US$1800 per ounce. However, despite the large number of mining titles granted, and other significant benefits granted to mining companies such as tax exemptions, and the enormous social and environmental costs derived from such activities, only the 0.39 per cent of the value of GDP comes from the metallic minerals’ subsector.

In this sense, I question the relationship between mining, foreign investment and development in Colombia. I problematise the idea that large-scale mining projects carried out by foreign investors in Colombia bring development. I discuss how in the framework of a new ‘lex mercatoria’, global traders represented both in foreign investors and in international economic organisations, have shaped internal legal system in favour of their own private economic interests, using international law instruments inherent to transnational law and mechanisms such as deregulation and re-regulation.

I conclude that although the ‘coloniality’ process in the gold mining regime in Colombia, understood as a way of continuation of the colonial legacies through ‘modernity’, it has not been linear, but there are elements that persist and that continue to re-enroll the State in a (neo) colonial rationality. The adaptation of legal and institutional channels according to the legal and political forms of each time, and the collaboration of local elites have made it possible to continue exploiting gold to meet the demands of the old and new empires, today represented mainly in the Global North States, and in other key actors in the global governance system, such as foreign investors and international economic and financial organisations.

Throughout our history, foreign investors and States have been key actors in establishing this type of policies. Although the State is not a homogenous actor, it has operated as an indispensable intermediary agent. From a (neo) colonial position, it has adapted its own apparatus so that foreign investors are able to operate. Likewise, although this position has in some periods been loosely linked to nationalist policies to defend the ‘protection of the national’, the foreign investment element persists and prevails. 

Over time, transformations of the legal and political forms are adapted to continue the dynamics in which extractive activities are framed, granting extremely favorable conditions to foreign investors. The discourses of progress, development and modernity, on which foreign investment rests, have been prioritised over other development views and narratives. In this way, serious implications derive from mining activities for the territories and lives of subordinate actors such as indigenous, peasants and Afro-descendant communities, who suffer due to the state’s legal and institutional guarantees, which grow in sophistication.

On the other hand, in the gold extraction processes, some elements have also been maintained, such as the monopoly and control over the mines by foreign investors, and the need for circulating money by the State, which compels the State to grant favorable conditions. Although subordinate actors practise different forms of agency to face the impacts derived from that sort of projects, including certain legal channels, they continue to be excluded from their territories both by law and by force, and the means they have to resist remain limited. Actually, the 17 lawsuits against Colombia before the ISDS, some of them in response to State measures aimed at protecting the public interest and local communities, confirm the restrictions of law to protect local communities in contrast with the broad guarantees for foreign investors. The economic threat that the foreign investment protection system represents for States’ sovereignty shows the imbalance that exists between the instruments of international law aimed to protect the private interests of transnational economic actors, and the instruments aimed to protect the public interest and local communities. 

It is important to remark that the development narratives used to justify the decisions and policies that privilege foreign investors contrast with the serious social and environmental impacts faced by local communities settled in the territories where extraction activities are carried out. In this sense, I conclude that our relationships with gold, with mountains, with communities, with transnational mining companies and with the State itself, continue to be mediated by powerful instruments such as international law, which envelops and updates colonial logics of exploitation, framed in the relationships of hierarchy and division of the world that remain, but are re-signified in a postmodern format.

Ximena Sierra-Camargo is a postdoctoral Catalyst Fellow, Osgoode Hall Law School, York University (2021 – 2022). PhD in Law, Rosario University (Colombia). Visiting Research Fellow, Centre for Critical International Law (CeCIL), Kent Law School, The University of Kent (2015 – 2016). Visiting Fellow, Transnational Law Institute (TLI), The Dickson Poon School of Law, King’s College London (2016). Her research focuses on the colonial and postcolonial nature of mining policy in Colombia. She analyses how transnational agents (from the gold mining sector operating in Colombia) regulate through the rule of law domestic realities, and in doing so end up establishing a particular global economic order at the national level.

Photo by Ricardo Gomez Angel on Unsplash