Colombia has experienced high levels of economic growth in recent years, making its economy one of the stand-out performers within Latin America. This has largely been supported by a significant and sustained increase in foreign investment, especially into the resources sector.
Resources Sector in Colombia – Foreign Investment in Colombia
Foreign investment has grown from USD$7Bn in 2009 to over USD$16Bn in 2014, notable over USD$6.3Bn of this was invested directly into the resources sector (combining both Mining and O&G). This has resulted in oil production increasing from 830,000 bbl/d in 2008 to over 1,000,000 bbl/d in 2014, albeit this level is becoming hard to sustain due to the current oil price. Likewise, coal production has also seen massive growth, in 2014 Colombian Coal production reached 88.6 million tonnes, making Colombia the worlds fourth-biggest coal exporter according to the National Mining Agency. By value in 2013, crude and refined petroleum products made up approximately (52%) of Colombian exports, whilst Coal another (12%).
The Colombian economy has experienced unprecedented growth, largely attributed to foreign investment into the resources sector, however, there have been recent headwinds that risk continued growth. Specifically, low commodity prices, coupled with a lack of Government direction, a rise in strong anti-mining groups and the on-going internal conflict are all having a negative impact on foreign investment. Notable that Colombia saw a decline in foreign investment in (2015) and is expecting a further fall in 2016.
The Resources Sector in Colombia
Nevertheless, foreign investment has fallen, there have been bright spots; as the resources sector is often regulated by regional authorities and is heavily impacted by local events, a number of projects have managed to advance such as the Red Eagle Mining Gold Project and the Continental Gold Project. Also notable there have been signs of an increased focus by the National Government to promote Colombia as a pro-friendly investment jurisdiction and to streamline permitting processes for resource projects.
Resulting in Bogota being rated as the 5th best city to do business in Latin America according to the annual ranking of AméricaEconomía magazine. Additionally, significant strides have been made with the on-going peace talks between the government and the largest insurgent group in Colombia, with hopes that a peace deal will be achieved in 2016. The Colombian resources sector is under pressure and is experiencing significant change, albeit there are positive signs, combined, this presents an attractive investment environment, whereby project valuations are significantly depressed when considering there value only a few years ago.
However, it is important that investors understand the local landscape and engage a suitably qualified and experienced company, such as Biz Latin Hub to undertake a complete and thorough financial and legal due diligence on any project prior to investment. For help, and/or further details about the services offered by the Biz Latin Hub, please ask for a free consultation. Our experienced team of lawyers, accountants, and market analysts are able to carry out targeted market research. Feel free to contact Craig here.