The mining industry in Colombia has a rich history and is still a leader producer of high quality minerals. Colombia is the largest producer of nickel and coal production in South America. It is the second largest global producer of emeralds and also holds large gold reserves. With this is mind, it is no surprise that foreign investors are getting involved with the Colombian mining industry through company formations and international trade.
Despite international volatility in the commodities market, the Colombian mining industry continues to be an attractive market for foreign investors, and the government is taking steps to further support growth in the sector.
Colombian Mining Law Considerations
The main mining authority in Colombia is the Mines and Energy Ministry (Minminas) and it is this body that regulates mining activities in accordance with the laws issued by the Colombian Congress. Congress and the executive branch issue all laws related to the mining sector.
In 2011 the mining authority INGEOMINAS was liquidated and the state bodies that regulate mining were reformed. Two new agencies and a new position were created:
- The National Mining Agency
- The Colombian Geological Service
- The Deputy Minister of Mines
Foreign persons and entities are equal to Colombian nationals in the eyes of Colombian mining law. You will however need a formally registered local operation (branch, subsidiary, or affiliate) before you can be granted a concession agreement. There are also important regulations regarding the making and receiving of payments relating to mining operations in Colombia by foreign persons and companies which you will need to take into consideration.
There is an increase in government interest to help foreign companies enter the Colombian market. This is prevalent through the the removal of legislative obstacles, streamlining of visa processes and improvements to the permit application and approval process for mining projects. The future for foreign investment in the Colombian mining industry looks bright.
Receiving and Making Payments
- Payments made to Colombian entities must be made in Colombian Pesos (COP), meaning that payments received from any invoice (irrespective of the currency) can only be in pesos and payments made can only be to a Colombian entity.
- Foreign companies in Colombia engaged in exploration services are subject to the foreign exchange special regimen.
- This exchange regime requires all money relating to foreign operations received from foreign companies into Colombia be channeled through the foreign exchange market (i.e. banks registered with the Colombian Central Bank).
- Branch offices that register to the foreign exchange special regime cannot obtain foreign loans of any kind.
- Branch offices however, do not have to reimburse funds related to export operations or services rendered to foreign entities to the Colombian exchange market.
- The payment of services can be received by a bank account abroad that is not registered with the Central Bank to the extent that the operations in question do not require foreign exchange market channeling.
- These branches may not use the Colombian exchange market and so may only bring foreign currency through the local banking system for expenses in Colombian pesos.
- Such branches may enter into contracts with other companies of the special exchange regime and receive the payment in foreign currency.
Colombian Business Services, as part of the Biz Latin Hub group can provide you further guidance regarding the key concepts and considerations for the Colombian mining industry. If you have any questions, please contact Craig here.