COALspot.com - Colombia stands before one of the potentially largest, most diversified mining booms in the world. Untold reserves of gold, coal, copper, silver and other metals and minerals are luring prospectors, geologists and extractive companies—mostly Canadian multinationals, which account for more than half the world's mining activity.

But the foreigners descending on Colombia may be in for a rocky ride. Beneath an investor-friendly atmosphere are dangerous fault lines—social, political, environmental and community-linked fissures that could create shockwaves for the companies and the communities in which they operate across the country.

Colombia's burgeoning extractive sector offers an intriguing snapshot of an increasing global trend, one where fast-industrializing countries like China and India give international mining unprecedented importance, while bolstering growth in smaller emerging markets—in places like South Africa, Indonesia, the Ukraine, Kazakhstan, Mongolia and elsewhere in Latin America.

Metals like copper and fuels like coal are crucial as never before. Alternative energy projects and technology are dependent on minerals and metals, putting a premium on those materials. Precious metals like gold and silver, meanwhile, remain treasured commodities amid global uncertainties.

This year, according to the Metals Economics Group (MEG), a research consultancy, global spending on significant, non-ferrous metals alone soared to $18.2 billion—50 percent over last year, and double the $8.4 billion spent in 2009. Last year alone witnessed $132 billion in industry mergers and acquisitions.

A nation transformed

Colombia and its economic engine herald a wealth of opportunities. International businessmen are permeating the industrial capital of Bogota and its commercial hub, Medellin. The World Bank calls it the safest Latin American country in which to do business. Colombia's economy has grown four times as fast Canada's over the past 10 years.

Foreign Direct Investment (FDI) quadrupled between 2002 and 2008. Between 2010 and 2011 it grew from $6.8 billion to $14.4 billion. And as of last year, according to the United Nations Conference of Trade and Investments, Colombian FDI surpassed the rest of South America.

"Colombia has been transformed in the international scene—it's a place people see as stable and easy to deal with culturally," said Alexis Arthur, a program associate and expert on Colombia at the Inter-American Dialogue, a Washington think tank. "Colombia in general has become a regional leader."

Colombia boasts a savvy business community and a well-educated population; it is also the only South American nation never to have defaulted on a major loan. And despite decades of civil war and instability, it remains home to its strongest political institutions.

The picture isn't perfect. Colombia also has the worst income disparities on the continent. With unemployment well over 12 percent, well over half of Colombians live in poverty.

Colombia's promise lies in its metals and minerals—the centerpiece of President Juan Manuel Santos' domestic policy. And while mining represents just 2.3 percent of Colombia's economy—with $2.6 billion in investments last year—this is expected to change, fast. This year, Bogota anticipates $10 billion in mining and energy investments. To date, the government has set aside a 7.4 million-acre "strategic zone"—a land mass the size of Greece—for mining exploration.

Gold, most notably, is expected to draw $2 billion in FDI by 2015. Mining and Energy Ministry officials seek a 30 percent increase in gold output to 73 million tons. Proven reserves stand at 15,550 tons, according to the National Geological Survey. Giants like South Africa's AngloGold Ashanti and Canada's Barrick Gold are active on the ground.

As the world's fifth-biggest exporter, Colombia has more coal than any other Latin American nation. The government seeks a 35 percent increase to a 115-ton annual output by 2014, and hoping to double that by decade's end. The United States sources 75 percent of its coal from Colombia via entities like Drummond Company, Inc., an Alabama-based multinational. China has begun talks for constructing a $7.6 billion "dry canal" railroad, linking production sites to the country's Pacific Coast. Colombia has announced its own $3 billion, 1,000-mile rail project plans, with financing from the Inter-American Development Bank.

A Regional "Oasis"

Colombia stands out in a Latin American region where, since 2002, mining investment has doubled. Of the $60 billion Canada's mining sector has invested in developing nations, $41 billion has poured into Latin America. Latin America, according to the MEG, remains the world's leading target for mining investment.

Despite these inflows, "resource nationalism"—a worldwide trend wherein governments pursue greater shares of their natural wealth through increased taxes, regulation and outright nationalization—is no stranger to Latin America.

Last year, for example, Peru made changes to mining royalties, while in April the Argentine government announced plans to re-nationalize Treasury Petroleum Fields, a major company. Venezuela's President Hugo Chavez has made nationalization of foreign companies a signature political priority, while bringing outside investment to a trickle.

Not so for Colombian officials. Mining royalties linked to market prices and longer-lasting exploration permits have been primed for outsiders. "We don't want to scare off investors," Deputy Mining Minister Henry Medina Gonzalez said in April during an international exploration conference in Santiago. "We want to be as predictable as possible."

Against this backdrop and given irregular growth in China and stagnation in the United States and Europe, "Colombia is a kind of oasis in a convulsing and unpredictable world," Mining and Energy Minister Mauricio Cardenas told reporters at a Reuters Latin America Summit in May.

Such claims, however, have often contrasted with recent events. Days before the country celebrated its independence on July 20, guerrillas from the Revolutionary Armed Forces of Colombia (FARC) put on their own display by destroying a bridge, killing a police officer and sabotaging a railway at a foreign-owned coal mine—the biggest one in the country.

Prospective perils

Following decades of drug-fueled bloodshed by cartels, guerillas and paramilitary groups, many Colombians have since experienced the trappings of peace. Over the last 10 years, advanced security techniques and sophisticated military hardware along with a sweeping crackdown—and over $7 billion in U.S. aid—have turned the tables against violence.

The Colombian government is now openly beckoning Canadian extractive companies. The relationship between Canada and Colombia was deeply pronounced at a 2011 event hosted by the Canadian Council of the Americas, where President Santos was anointed "Statesman of the Year." The Toronto Globe and Mail went on to credit Santos as "respecting the human rights of all."

There's no question Bogota has made decisive progress against violence: 54,000 paramilitaries are recorded demobilized; kidnappings are down 90 percent, terror attacks down 71 percent; homicides have been halved. (Former general Oscar Naranjo is now security advisor in cartel-ravaged Mexico, and Colombian military units are training police in Afghanistan.)

But a more troubling, if quieter, narrative has analysts' attention, too. The 40-year-old FARC remains active in 25 of Colombia's 32 municipal departments, while violence from government-formed paramilitaries and criminal gangs—and murky alliances between all three—is re-emerging.

A history of violence

"You hear this victory line—everything is great, it's all peaches and cream," said Vanda Felbab-Brown, a senior fellow at the Brookings Institution and an expert on illegal economies. "Washington succumbs to that, but there's a lot of stuff that hasn't improved."

Since all the "illegal" armed actors were never fully neutralized, rural Colombia remains unstable and drugs remain a serious problem. Colombia continues producing more cocaine than any other nation, according to the U.N. Office on Drugs and Crime, and precious metals themselves increasingly fuel the fire.

In November, armed forces intelligence commander General Javier Fernandez Leal announced that terrorist group financing is "50 percent mining and 50 percent narco-trafficking."

Larger-scale mining and huge profits, many believe, means the Colombia of yesteryear is poised for a comeback. "Colombia is at a typical Colombia moment," added Felbab-Brown. "The center systematically ignores the periphery—it has yet to extend a multifaceted state presence."

The violent reach of this periphery has been invisible to foreigners for years. On May 15, however, a FARC explosion shattered the silence, killing two in Bogota's financial district. In response, authorities deployed 3,000 members of the Colombian Army.

The events bear all the hallmarks of an ongoing trend. In 2011, according to Nuevo Arco Iris, a Colombian think tank monitoring illegal groups, there were 2,148 attacks nationwide—the most in 15 years—with a steady increase and sophistication in FARC attacks since 2009.

In this context, a mishandled resource expansion in Colombia, some believe, could trigger Latin America's severest civil unrest. "It's an eye-opening moment," said Patricia Vasquez, author of "Oil Sparks on the Amazon" and a fellow at the U.S. Institute for Peace. It's "the only place where conflict could be like Africa."

Santos is "right that the FARC are not the same as in the 1990s and are no strategic threat," in taking over Colombia, Nuevo Arco Iris Director Leon Valencia told RCN Radio. But "in several regions," he added, "the FARC are strengthening."

Evolving tactics, shifting alliances

The FARC rank-and-file are believed to have fallen from 17,000 to 8,000 members in recent years. Nonetheless, said Nuevo Arco Iris in a 17-page report, despite past successes "decapitating" FARC leadership, Colombian security forces are beginning to lose ground—with dire consequences.

The immediate FARC response has been Plan Pistola: The deployment of insurgent cells—with fewer than 30 members—as agile, hard-to-track infiltrators of cities. "Hit-and-run" tactics, with sniper ambushes and improvised explosives, have inflicted further military casualties.

This decentralization has made negotiations more difficult, according to observers like InSight, a risk analysis firm focusing on Latin America's organized crime. "As the FARC is stripped of its key military and political leaders," InSight reported in January, it "becomes more fragmented and similar to a criminal gang, focused on drug dealing, kidnapping and extortion"—frontal threats to foreign mining companies.

This, in turn, has created what's regarded the gravest threat to state security, according to Bogota: Bandas Criminales (BACRIMS)—a fusion of FARC guerrillas, ex-United Self Defense Forces of Colombia (AUC) paramilitaries and members of defunct drug cartels from Medellin and Norte de Valle.

Their nebulousness makes them hard to counteract, noted Vanda Felbab-Brown of the Brookings Institution. "The groups are much more elusive—the allegiances are very fluid," she said. "It's far less straightforward than counterinsurgency."

International observers say the BACRIMS are the worst human rights violators. Since 2010, according to the Office of the U.N. High Commissioner for Human Rights (OHCHR), they bolstered a 40 percent uptick in civilian massacres; the U.S. State Department blames them for surges in urban homicides.

These neo-paramilitaries have great strength and scope in terms of political violence—and connections with the pinnacles of Bogota's power elite. In a "parapolitics" scandal last year, 40 former members of Congress were convicted of paramilitary ties, including Mario Uribe, an ex-president of Congress and second cousin of former President Alvaro Uribe.

Military abuses have also been well documented. The OHCHR says the army committed more than 3,000 extrajudicial killings between 2004 and 2008. A recent "false positives" scandal, in which civilians were deliberately slain and identified as combatants, also caused an international outcry.

There is much to suggest natural resources are behind much of this dislocation and discord. The National Mining Company Workers Union, for instance, has reported 87 percent of displaced populations coming from energy and mining-heavy regions—where 80 percent of the country's human rights abuses have taken place over the past decade.

But Canada's Parliament has responded with relative silence. In fact, in May, MPs shelved a human rights report within the Canada-Colombia Free Trade Agreement. The move was met with broad condemnation, as the report's provision was critical to the law's passage nine months earlier. (Part Two)
By: Joseph Kirschke

About Joseph Kirschk
Joseph Kirschke is a communications consultant for the Extractive Sector and Corporate Social Responsibility.

He can be reached at joseph.kirschke@outlook.com.

The above article was also published on worldpress.org. Views and opinions / conclusion expressed herein are personal views of the author and not that of COALspot.com.