Attracting foreign investment for Colombian oil and mining projects

Since 2003, Colombia has enjoyed a boom in foreign investment in oil and mining projects, but this enthusiasm began to ebb in the last year. Nonetheless, the Colombian government is aware of this problem and is trying to rectify it. On Wednesday, the National Hydrocarbons Agency released a 150-page manual full of guidelines advising companies on how to consult with local communities before entering new areas. Reuters noted that the Colombian state-run oil company, Ecopetrol, had said that social conflicts with local communities had affected its second- and third-quarter earnings. According to Reuters’ report, one of the fundamental causes of these conflicts is a lack of communication and expectation management.

Portafolio.co, a Colombian business journal, published a lengthy interview with Antonio Sanclemente, one of the leading oil and gas lawyers in Colombia and the world. Sanclemente, whose firm primarily represents foreign investors in the Colombia oil industry, stressed that the Colombian government needs to be wary not to scare off investors. He explained that foreign investors have two main worries: security conditions in their areas of operations and the frequent changes in the regulations governing the country’s oil industry. According to Sanclemente, globally, the average tax on oil profits is between 15 and 25 percent, but in Colombia, the tax regime has undergone frequent changes over the last few years and currently, the total tax on profits reaches 34 percent. Sanclemente remembers the days when foreign oil companies were afraid to invest in Colombia, and cautions that the government must be sensitive to investors’ needs, or they will go elsewhere.