Resource-rich Colombia will ramp up sanctions against companies in the booming oil and mining sectors that abuse the environment and fail to abide by protection norms, a government minister said on Wednesday.
The government will adopt a “carrot and stick” approach to raise the standards of firms that plough money into the Andean nation’s mountain ranges and jungles to extract oil, gold and coal, Environment Minister Frank Pearl said.
Colombia has attracted record investment over the last decade as a U.S.-backed offensive against rebel groups cuts the number of workers kidnapped and killed around mining and oil installations, making exploration for oil and minerals safer.
“The consequences should really have an impact,” Pearl told Reuters in an interview.
“The fines should no longer be a joke; the fines and sanctions are sometimes paid by companies out of petty cash … The fine has to hurt,” said Pearl, who took the post in September last year.
Colombia received almost $15 billion in foreign direct investment last year, up from just $2.1 billion in 2002 when guerrilla groups such as the Revolutionary Armed Forces of Colombia roamed almost freely across great expanses of mining territory.
Companies flocking to Colombia to take advantage of improved security and better financial terms have put a strain on Colombia’s institutions as requests for mining and environmental permits have soared.
Many companies complain of long waits for environmental permits, which along with infrastructure deficiencies have become a major bottleneck for the oil and mining sectors.
“We have very weak institutions today, it’s a newly created ministry … with a very small budget. We don’t have the resources or economics, neither human nor technological, nor in terms of organizational culture and processes to live up to the task we have today. There is a gap,” Pearl said.
Finding a balance between environmental issues and extractive industries when commodity prices are high is one of the main challenges for Latin America’s largest coal producer and fourth-biggest exporter of oil.
Pearl said he would clamp down on abuses by civilian and indigenous groups that fraudulently seek to benefit from social and economic programs in mining areas, holding up licensing for projects.
He cited delays in a coal mine, rail and port projects by Brazil’s MPX, which was supposed to start production late this year. The company says output has been stalled for at least 18 months.
“We are going to give more teeth … to avoid such abuses,” Pearl said. “Those people who want to blackmail private companies and blackmail the government can just forget it.”
Last decade, Colombia was on the verge of becoming a net oil importer. But as government troops battered rebel groups, pushing them deeper into heavy jungle, the nation has attracted dozens of multinationals.
Colombia will seek out international firms with strong environmental practices and have them train other companies, Pearl said, citing as an example the nation’s main coal exporter, Cerrejon, which is a joint venture between BHP Billiton, Anglo American and Xstrata.
“Colombia has a great opportunity, we have an enormous amount of riches and we have to take advantage of it correctly,” Pearl said.
“The investors that are spooked by environmental issues are the investors we don’t want to have. The investors we want are the sophisticated companies that understand environmental issues are a priority,” he said.