Colombia’s Petro wants energy sector to fund social spending

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Stephen Ferry

During his first month in office, Colombian President Gustavo Petro has rattled the nerves of the country’s mining and energy sector with statements that announce an overhaul in the issuance of mining licences, community ratification of exploration projects on endangered wetlands and on indigenous territories, as well as heightened scrutiny by the Ministry of Mines and Energy for large-scale investments.

According to Susana Muhamad, the country’s Minister of Environment, many existing mining concessions were awarded during the previous administration of President Iván Duque without meeting environmental protection standards. “I think we have to be as strict as possible,” she remarked during the National Mining Conference in Cartagena.“There is laxity, and compliance is too flexible.” Muhamad also welcomed a ruling by the State Council (Consejo de Estado) that orders the National Mining Agency (ANM), Ministry of Environment and Ministry of Mines and Energy to “update the paperwork” for granting future exploration titles. The ruling also gives the Ministry of Environment powers to delineate areas where mining can and cannot take place.

Muhamad and the Minister of Mines and Energy, Irene Vélez, attended the National Mining Congress on September 1 to present the Petro government’s roadmap on decarbonizing the extractive economy, and plans to levy 10% export duties on oil, coal and gold exports. Vélez came under heavy criticism during the Congress after she affirmed that countries should “decelerate their economies to achieve a balance and so that climate change affect us less.” President Petro quickly came to Vélez’s defense claiming he studied the theory of economic “de-growth” of French academic Serge Latouche.

From a proposed 10% tax on gold exports above US$400 per ounce that was originally included in Petro’s planned tax reform – but scrapped by Finance Minister José Antonio Ocampo given that it was “uncontrollable” – the government’s first month in office appears to be improvising with the country’s energy security, and compounded by Vélez’s most recent affirmation that the nation’s electricity grid should be “democratized.” President Petro claims hydroelectric reservoirs are at high levels, yet the cost of electricity is more than double the 10% annual rate of inflation. The residents of six coastal cities, among them Barranquilla, Santa Marta and Riohacha, pay electricity rates four times higher than inflation.

Among the sectors that will see greater government oversight is gold mining given labor informality, smuggling and connections to transnational crime networks. A study released in July by the United Nations Office on Drugs and Crime (UNODC) claims 66% of alluvial gold exploitation is illegal and has impacted 84,000 hectares of land with deforestation, habitat loss for wildlife and contamination of rivers with mercury and toxic chemicals used in the extractive process. The State Prosecutor’s Office puts the number of illegal gold mines operating in the country at 85%.

With a key government objective to eradicate illegality in the mining sector and subsidize huge social spending with additional taxes for fossil fuels and a gasoline surcharge, President Petro’s energy agenda could well exacerbate already high costs of food, fertilizers and transportation, and yet another blow to vulnerable  Colombian households.