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5/3/10

IKN52 on Colombia: Mockus talks mining


Here's an excerpt from the "Regional Politics" section of yesterday's IKN Weekly, issue 52. The subject is Colombian presidential frontrunner Antanas Mockus as he talked about the effects of mining in Colombia on the country's economy in an interview last week. Enjoy.

Colombia: Antana Mockus talks mining
In a reported interview between Colombian presidential candidate (and now favourite for the post) Antanas Mockus and head of Colombia’s export body ANALDEX published Friday 30th , (10) the subject of mining was broached. Here in translation is the section that covered the issue. It should be pointed out here that the word “mineria” (translated here as “mining”) in Colombia is usually used to refer to all non-renewable extraction and therefore the Q&A also applies to the larger and more developed hydrocarbons industry as well. Here’s my translation, more comment afterwards:

Javier Díaz: How should we take advantage of the resources that mining is generating (for the State)?

Antanas Mockus: The mining boom is now years old and if we don’t take advantage of it to construct a more sophisticated production base (more added value manufacturers with incorporated know-how) we’re doomed.

JD: The mining boom will affect the foreign exchange rate. That’s where Dutch Disease (ottonote: put roughly this means too much country dependency on one product, but it is more complicated than that) appears.....

AM: That is a risk, but we are currently moving in the right direction. With high-level training programs for Colombians we will avoid wasting the extra resources internally. If this can be done not just with human resources, then even better. Using these extra revenues is good if the spending has a positive effect on the country.

JD: How will you explain to the country that exploring for and knowing how to produce mineral resources is not a sin?

AM: Sergio Fajardo (ottonote: Mockus’s running mate on the ticket) will be one of the people in charge of Science and Technology issues and the adjustment of the educational system towards productive vocations in every region. Some people say the (mining and hydrocarbon) royalties must go towards infrastructure and others say that educational progress should be the main target, because once the mining bonanza has gone we must have much better qualified citizens and the roads can be financed via concessions.

There are countries that use protectionism policies in the fields of research, technology and human resources. Therefore they don’t subsidize exports but make themselves super-competitive for those that need these sectors. In the same way, we must look at which sectors we are going to invest in and the non-approval of the Free Trade Agreement (with the USA) has helped the productive sectors to become more competitive. What’s more, I believe in (country) interdependency, as only the very rich and powerful countries have the luxury of auto-supply. Interdependency also means that any country that breaks off commercial relations with another puts pressure on its neighbours.”


IKN back. This excerpt shows pretty clearly that, whether you agree with his policies or not, Mockus is pragmatic, obviously pro-business and has a well-educated view of economic issues. There are also things such as opposing the current Venezuela trade embargo with Colombia and wanting to use “the mining bonanza” to greater effect on a national level. But there is an implicit message that a Mockus Presidency, as explained in the last two IKN Weeklies, will not be an automatic “anti-mining” agenda even though he is running on a Green Party ticket. He seems to view mining not as an end but rather as a mean to an end, using it to collect revenues in order to further country development from a central treasury. This may eventually lead to higher taxation and royalties but by definition mining will not be banned in the country all of a sudden.

Our bottom line analysis re. a possible Mockus presidency and mining has not changed: There is reason for investors to be cautious about events unfolding in Colombian presidential election because a Green Party candidate is leading the way, and that automatically brings baggage. However there’s no need to panic if you like the sector and you’re long Colombia. Finally, as mentioned previously this author avoids the country for junior mining investments at this time (for reasons previously explained) so any conclusion stays in the world of theory personally.