Colombian government to slash taxes on oil industry

On Monday, Colombian Minister of Mines and Energy Tomás González said in a press release that the government would give a 25 percent income tax break and an exemption from VAT and customs charges for contracts related to certain offshore Colombian oil blocks. González explained that the government is taking these steps in order to drive greater interest in investing in the promising potential of Colombia’s offshore oil deposits in the Caribbean.

This move by the MEM has been long awaited by expert observers in the Colombian oil industry, who have been clamoring for the Colombian government to do whatever it can to stimulate investment in the sector. Colombia is running out of oil, and at a time of depressed oil prices, the country needs to do everything it can to grow its oil industry.

The oil crisis has also affected the many thousands of Colombians who work in the oil industry. Beleaguered Canadian oil company Pacific Exploration & Production was mentioned by Colombian daily El Espectador as one of three companies that will soon fire a massive number of its Colombian employees, along with Hyundai and Archies. The article shows that the pains experienced by the Colombian oil industry are also being shared by the many thousands of Colombians who work in the industry.

Peruvian economy grew 3% in September

On Thursday, the National Peruvian Institute of Statistics and Information announced that the Peruvian economy grew by 3% in September. This strong GDP growth was driven by the outstanding performance in the mining and hydrocarbons sectors, which crew by 10.86%, its highest growth so far this year. Central Reserve Bank president Julio Velarde added that it’s possible that the economy actually grew by 3.1 or 3.2%, but that will depend on information to be released on November 15^th.

Nonetheless, BBVA Research published a report warning that unless mining investment in Peru is quickly restarted, the country’s mining sector will start losing its momentum as early as 2018. The study’s authors, Yalina Crispin and Francisco Grippa, explained that the large mining projects in Peru are entering the final phases of construction, and in the short term, there are no plans for new projects.

They added, “Mining is an important and productive sector for Peru, as it is a source of investment and adequate employment. Also as a source of fiscal revenue.” The BBVA report noted that, for the years 2015 through 2017, the mining sector will contribute 1 point towards Peru’s GDP growth. This steady growth in the Peruvian mining sector will be driven by increasing production, not a change in copper and mineral prices.  

Indian state oil company sets its sights on Colombia

Earlier this week, Colombian business journal Portafolio reported on Indian state-owned oil company ONGC’s plans for international expansion. ONGC already has a presence in Colombia, and according to the company’s international director for exploration, Sudhir Sharma, the company is eager to participate in the next round of auctions by the National Hydrocarbons Agency of Colombia.

Sharma told Portafolio that ONGC aims to double its production within the next four years, and he believes that the company’s expansion in Colombia will be key to achieving this goal. Given the collapse in global oil prices and the total freeze on oil investment in Colombia, the Colombian government and oil industry must be overjoyed to hear that ONGC is so eager to invest in the future of their country’s oil industry. 

In mining related-news, Colombian daily El Tiempo reported on the developing story of the shuttering mines in the Colombian town of Segovia. According to the report, more than 35,000 people in the town will join the miners’ strike to protest the decision by the country’s attorney general to close eight mines that the government has deemed illegal. A national leader for miners’ rights told El Tiempo that, “The business and transportation communities and the mayor are with us. Now we have come to the decision to start a strike that goes against the Machiavellian decision by the Attorney General.”

In other news, the Colombian peso finally started a long-awaited recovery, climbing to below 2800 COP per USD. This was due to the announcement by the Colombian Central Bank to raise interest rates. Until this point, the value of the peso had closely tracked the rise and fall of oil prices.

Peru's mining industry dominates headlines

The Peruvian mining industry is the main driver of the country’s economy, and has featured prominently in both business and political news. Earlier this week, the Miami Herald reported on the story of the Andean mining town of Morococha. Two years ago, the Aluminum Corp. of China (Chinalco), paid to completely relocate the small town five miles away so that it could build a massive open-pit copper mine.

The Herald article quoted locals as saying that the new town is a significant upgrade over the previous town.  A Chinalco official also told the Herald that this investment in building good relations with the local community shows that Chinese companies have learned from past mistakes.

In other mining-related news, Peruvian business journal Gestión reported on the fall in investment in the Peruvian mining industry. According to statistics from the Peruvian Ministry for Energy and Mines, investment so far in 2015 is 15% below the previous year, but this is in line with industry estimates.

Gestión explained that this is because large investments in various mega projects are finally coming to an end as the projects come online, and there are no projects of similar magnitude left in the pipeline. The article also noted that this trend is not limited to just Peru, but has in fact affected the global mining industry. Not to worry, though, as this means that within a few years, the lack of new projects will surely lead to a rise in mineral prices.

Colombian mine closings affect 4000 miners in Segovia

Over the weekend, RCN Radio reported on mine closings in Colombian mining boomtown of Segovia. According to RCN, the Colombian Attorney General gave the mayor of Segovia three days to shut down eight illegal mines in the area. The report noted that the shuttering of these mines would put almost 4,000 miners out of work.

Rubén Darío Gómez, the secretary general of the National Confederation of Colombian Miners noted that the mines have existed for a long time, exacerbating security problems with illegal armed groups.

In other news related to illegal mining, late last week Peru and Colombia finalized a series of agreements to increase their joint operations against illegal mining in their Amazon border region. Peruvian president Ollanta Humala told the press, “Means of coordination between the public forces are increasing to carry out joint actions against illegal mining, and drug trafficking, especially in the tri-border region.”

Lastly, the Colombian press covered with fanfare the first phase of the startup of the expanded Cartagena Refinery, owned by Colombian state oil company Ecopetrol. This new refinery will rid Colombia of its need to import gasoline and will boost Colombia’s 2016 GDP by an estimated 0.6%. Energía16 noted that while the project is very important to the Colombian government, it attracted significant controversy for vastly exceeding its original $3.4 billion budget, with the final tally of construction costs coming at $8.01 billion.

Martial law ends at Peru's Las Bambas mining project

At the end of last week, the Peruvian government allowed the 30-day state of emergency to expire in six provinces of the Apurimac and Cusco departments. Martial law was originally implemented after protests against the massive Las Bambas copper mining project turned violent.

During the last month, the Peruvian Ministry of Energy and Mines scheduled a series of information workshops in the areas to educate the local communities about the mining projects and the benefits that they will bring to the region. President Humala said, “Firstly, we regret this situation and the loss of lives, which is irreparable. Second, Las Bambas is the largest mining project in Peru and the second largest in Latin America. Today Las Bambas is almost ready to begin operations. The government via the mining and energy and the housing ministries with deputies in food, agriculture and health are meeting people in the region.”

Peru Reports noted that the local communities do not oppose the project as such, just the location of a molybdenum plant and the replacement of a pipeline with heavy trucks to transport the raw ore.

In political news, former Peruvian president and current presidential candidate Alan Garcia has made the mining industry a central pillar of his presidential campaign. Garcia has pledged that Peru would attain a minimum of 6% GDP growth each year if he were elected. He would accomplish this through a massive growth in public works projects, and encouraging investment in mining projects by cutting the red tape needed to receive regulatory approval.