A peace deal with Colombia’s major rebel group, the FARC, would add 1-2% to the country’s GDP, according to the government.
Demobilizing militias and integrating their ranks into the wider economy would have a two-fold effect – formalizing large amounts of agricultural production, which is the guerrilla’s main source of employment and income, and enabling a more secure environment for infrastructure and project development, leading the way to more production and greater GDP.
If a peace deal was to be reached, and these types of changes began to take shape, there is one industry above most others that would be in a particularly profitable position: mining and oil extraction.
Since the early 2000’s, foreign investors arrived in droves to invest in the country’s then nascent oil and extraction industry after a series of business friendly reforms by ex-president Alvaro Uribe, including full foreign ownership structures.
Last year they invested nearly $8 billion, pushing oil exports up to more than half of total exports and 10.7% of Colombia’s nearly $380 billion GDP. The president has repeatedly called this sector the country’s growth “locomotive.”
FACT SHEET: Foreign investment statistics
But uncertainty and risk abound. Recent waves of guerrilla attacks on oil infrastructure and pipelines have put serious bottlenecks on production and exploration, driving down this year’s first quarter oil sector investment to its lowest levels since 2010. Government predictions of 1 million barrels per day oil production have been shaky at best, current wells have only about a 6-year life span remaining, and licensing and registration have become increasingly complex.
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Moreover, many promising extraction areas are in some way controlled by rebel forces, whether by employment and management extortion or by directly taking control of operations.
Lowering these types of risks via a peace deal agreement would open up large areas of the country to much needed exploration. The Deputy Mines Minister, Cesar Diaz, said that the mining sector could double or triple in size if Colombia reached a peace agreement and established a better regulatory framework.
According to the Deputy Minister of Mines, Cesar Diaz Guerrero, “there isn’t a town in Colombia where mining is not possible, it would allow us to develop mining activities throughout the entire country and to safely incorporate reinserted peoples into the region.”
Sources
- Colombia oil, mining industries push for leaner regulations (Reuters)
- ‘El sector llamado a ser el gran jugador en el posconflicto es la minería’ (El Espectador)
- DANE GDP Statistics
