Indefinite strikes brought coal mining operations of Alabama-based multinational Drummond Co. to a halt on Tuesday in the north of Colombia, further putting pressure on the country’s economy already facing strikes in other major sectors.
After negotiations failed between the Sintramienergetica union and Drummond Co. over wage increases, union workers declared an indefinite end to operations. The strike means a halt to the production of the world’s No. 4 coal-producing country.
Two coal mining companies, Drummond Co. and Cerrejon, account for 85% of Colombia’s coal mining industry. If Cerrejon, whose union went on strike early this year, also declare a cease of operations, Colombia’s GDP growth could fall significantly, Director of Economic Research Alejandro Reyes of Ultrabursatiles told Colombia Reports.
The two companies alone account for roughly 1.6% of Colombia’s GDP, said Reyes.
President Juan Manuel Santos has said that strikes in the coal mines could “damage the entire world,” and that “no one wins because every day that passes [there are] forgone royalties and foregone incomes that for the most part go to social investment.”
Colombia’s social spending budget benefits largely from mining royalties and other taxes, said Reyes. “But this isn’t going to affect international prices that much. Both Drummond and Cerrejon account for most of coal mining in Colombia. But that’s for export. Strikes won’t affect prices that much, but they could hurt Colombia’s GDP.”
Though the strikes might not hurt world coal prices, they could hurt Colombia’s political stability. President Santos now faces strikes in the agriculture, mining and oil industry. Students from across Colombia have agreed to join in a nation-wide strike scheduled for August. That, in combination with the pressure to wrap up peace talks by the President’s November deadline, could cause a perfect storm for the President.
MORE: Colombia strikes threaten to turn into Santos administration’s perfect storm
Colombia has touted its emerging economy as a strong, healthy environment for investment. And it has promised to keep the economy growing above 4%, though some analysts doubt the government will reach that goal. The strikes, if not mediated quickly, could put a serious drag on Santos’ economic promises.
During the dispute between Sintracarbon union workers and Cerrejon earlier this year, President Santos sent an envoy to the table in order to mediate negotiations.
Now, with Drummond’s workers, again it’s about wages. Drummond told Reuters news agency that the offer the company made to the union was close to what the union demanded. Yet the company would not budge on a demand for a fixed monthly salary with wages on top, which is what the workers want. The company only agreed to settle for wage labor conditions.
Gary Neil Drummond, the company’s CEO, turned to Colombia to set up operations in the mid 1990s as coal reserves dried up in Alabama, where the company was founded. The company’s operations have reportedly come under attack by FARC guerrillas, who have been at war with the Colombian government since 1964.
The southern US coal mining company has fallen under accusations of links to paramilitaries on the grounds that it hired hit men to assassinate union leaders in the early 2000s, reported Bloomberg. A string of lawsuits brought against Drummond are still being heard in International Labor Rights forums in US courts.
Sources
- Interview with Director of Economic Research Alejandro Reyes (Ultrabursatiles)
- Trabajadores de Drummond se lanzan finalmente a una huelga indefinida (La Republica)
- Drummond’s Colombia coal miners go on unlimited strikes (Reuters)
- Alabama Coal Billionaire battles murder suits as Prices Ebb (Bloomberg)