Peru is the regional leader in the fight against illegal mining

On Monday, José Antonio Fernandez, the High Commissioner for Mining Formalization for the Presidency of the Council of Ministers, told Agencia Andina that Peru is the country in Latin America that has made the greatest strides in its fight against illegal mining. He added, “We have got a fiscal, judicial and police subsystem undertaking efforts in this this fight [against illegal mining]. We have improved a lot, compared to any other country in history.”

Fernandez specifically pointed to the two specialized courts that the country set up in Piura and Cusco to deal with environmental cases. In addition, Peru has received recognition from other countries in the region for its experience in combatting illegal mining. The High Commissioner proudly reported that 600 miners have completed the formalization process and another 32,000 have obtained their tax identification number, which will allow them to pay federal taxes.

In other mining-related news, La Republica published a piece on the ongoing social tension between anti-mining strikers and police and mining officials in the province of Islay. Protesters have shut down the area for over a week and attacked a convoy of workers of Southern Peru who were in the area to develop a copper mine. The article quoted sociologist José Lombardi Indacochea’s analysis of the situation. He said that the two sides are two radicalized, that the conversation should not be so polarized in regards to mining, and should instead discuss what viable economic alternatives to mining could exist in the area.

In oil-related news, Peruvian state-owned oil company Petroperú decided to scrap its plans to sell up to 49 percent of the company to private investors later in 2015. Petroperú president German Velasquez said that the sale of the minority stake would be delayed at least until 2016.

The story behind Colombia's massive 2014 oil discovery

Over the weekend, Colombian newspaper El Tiempo told the story of the discovery of the Orca 1 field in deep waters off the coast of the Colombian Guajira. The exploratory well discovered the equivalent of 264 million barrels, which made it the largest such discovery in Latin America last year.

According to Petrobras, the oil company that operates the oil field, the team first had to descend 4.2 kilometers into the deep sea, and then drill approximately 3.5 kilometers into the sea floor. Petrobras has a 40% stake in the Orca 1 block, which it owns jointly with Colombian state oil company Ecopetrol and Spanish oil company Repsol. According to El Tiempo, Ecopetrol plans to drill two exploratory wells in the coastal Tayrona block in 2015 and another two or three in 2016.

News of the woes in the Colombian oil industry is even being discussed on Venezuela. El Nacional  reported on Francisco Lloreda’s, the president of the Colombian Petroleum Association, appeals to the central Colombian government to stimulate the country’s oil sector. The author explained that the Colombia oil industry hopes to avoid a situation of decreased exploration that would jeopardize investments that have already been made in the sector, lower operational costs, free up financial resources, and promote difficult or low-margin projects.

                                                                                                           

In other news, Colombian Finance Minister Mauricio Cardenas remains bullish in Colombia’s growth prospects. This puts him increasingly at odds with outside experts, who predict that Colombia’s economy will grow between 3.2% and 3.7% in 2015. Cardenas however forecasts economic growth above 4% for both 2014 and 2015.

Social conflict over mining projects in Peru

The latest in a seemingly never-ending series of social conflicts over mining and oil sector projects in Peru occurred this week in the region of Arequipa. Reports have emerged that despite the Peruvian Interior Ministry ordering an additional 2,000 police officers to the region, protestors clashed with police, who used tear gas and rubber bullets to disperse the crowds. According to the local police chief, the protestors numbered between 600 and 700, while protest leader Juan Carrasco said there were more than 3,000.

In other mining-related news, Jesús Álvarez Quispe, the director of mines for the Regional Directorate of Energy and Mines in Puno, confirmed that, so far, 25 miners have completed the formalization process in Puno, the most of any of the regions in Peru. He explained that the rate of formalizations had been slowed by the previous general director for formalization, who wouldn’t allow miners to change their registered location. Quispe believes that, under the new director, 600 to 700 miners will complete the process this year in Puno.

In the Peruvian oil sector, Juan Castillo, a senior leader of the workers union in the Peruvian state oil company Petroperú, told Reuters that the Peruvian government wants to cancel Petroperú’s 25% share in oil blocks 3 and 4, that it had planned to develop with oil conglomerate Grana y Montero.  According to Castillo, Minister Rosa María Ortiz, is behind the decision, as she believes that partnering in the development of blocks 3 and 4 would violate a law that requires Petroperú to prioritize upgrading its Talara refinery.  

Reuters noted that if this were true, it would mark a reversal on Peruvian president Ollanta Humala’s campaign promises to allow Petroperú to participate in oil production for the first time in over 20 years. This is part of a larger strategy to transform Petroperú into a regional oil player like Brazil’s Petrobras and Colombia’s Ecopetrol.

Colombian oil sector union suspends strike

Despite voting earlier this month to go on strike at any point after March 26^th, the USO, the main Colombian oil workers’ union, changed course and suspended the planned strike. USO President Edwin Castaño said, “We have decided to suspend the indefinite strike for now. We trust the government will resolve the problems confronting the oil sector.”

Reuters explained that the strike had been planned to protest job cuts in the Colombian oil sector and to act on fears that the government would sell some of its 88% stake in Colombian state oil company Ecopetrol. However, Ecopetrol reassured USO leaders that the government has no intention of privatizing Ecopetrol, and pointed out that the oil company has yet to cut any jobs, but instead has simply stopped hiring new employees. According to Reuters, all of the job losses that have occurred so far have been among outside contractors involved in construction projects.

On Wednesday, the Colombian business journal Portafolio published an editorial exploring the question of whether or not Colombia is an “oil country.”  The author explains that the oil sector makes up a small portion of Colombia’s economy and employment, especially when compared to traditional “oil countries.” Nonetheless, the oil industry generates 25% of the Central Government’s revenue. The author concludes that Colombia does not have an oil economy, just oil spending. He encourages Colombia to accept the fact that it is not an oil country and focus its energy on being productive and competitive in other sectors of the economy.

In other oil-related news, Portafolio discussed the specter of a possible return for Colombia to being an oil importer, while El Tiempo commented on a report that the Orca 1 oil discovery in the Colombian Guajira was the biggest oil discovery in Latin America in 2014. These contrasting visions of the future of the Colombian oil industry imply that there is more oil to be found in the country, but the key will be encouraging companies to maintain their investment in exploration.

Peru's long and winding road to mining formalization

Los Andes published an opinion piece on Tuesday explaining why the central Peruvian government has struggled so much in its campaign against illegal mining in the country. According to the author, it all comes down to politics, especially local politics. Although the federal government in Peru steadfastly opposes illegal mining, the regional governments do not have the same executive legal authority or financial resources. As a result, while the regional governments receive orders from on high in Lima, they do not have the capacity to carry them out. Furthermore, as the other explains, these regional governments are also beholden to their political base, and the informal miners are acutely aware of their own political power to block the government’s mining formalization initiatives.

In related news, GlobeNewswire published a revealing, in-depth analysis of Inca One’s business model. According to its CEO Edward Kelly, “Inca One is not a traditional mining company.” The Canadian-based company has a gold milling plant in Peru that services the country’s artisanal miners. Kelly added, “The fact is - our business model is not easy to build or copy – because it involves relationships based on trust with miners, metallurgists, labs, truckers, chemical companies, shippers, security firms and government agencies. That trust takes years to build.” This article provides an interesting look at Peru’s artisanal mining industry.

In other mining-related news, protestors from the Valle del Tambo in the region of Arequipa have gone on an indefinite strike to protest the Tia Maria copper and silver mining project. According to Jesus Cornejo, the leader of the protestors, they are speaking out against the environmental damage that the mine will cause to the area, and are calling on the Peruvian government to do something before it is too late. The Telesur report noted that in 2011, the Tia Maria project was put on indefinite hold after violent protests broke out. However, in August of last year, the Peruvian Mines and Energy Ministry gave the mining project the environmental go-ahead.