Mining, Energy Still Crucial to Fix Colombia’s Weak Finances: Fedesarollo

Colombia’s top economic think-tank — Fundación para la Educación Superior y el Desarrollo (Fedesarollo) — on December 13 unveiled a report which finds that mining and energy projects will continue to be crucial to restoration of slumping national government finances.

Antioquia is Colombia’s biggest gold-mining department — and hence figures into the equation.

“The future of the mining and energy sector is key for the stability of foreign currency reserves and government finance for the coming years — and for social well-being,” according to the latest Tendencia Economica (economic trends) report from Fedesarollo.

“Nevertheless, the panorama for the [mining and energy] sector looks uncertain. Therefore it’s indispensable to create the necessary conditions to increase production of petroleum and other minerals in the mid-term,” according to Fedesarollo.

“While petroleum prices have recovered in the short term, there are various factors that could affect crude production in the future.The decline in [national crude] reserves is paired with relatively low rates of return in the sector. This provides little incentive to stimulate private investment in secondary recovery [at existing crude production sites] or for projects to exploit unconventional reserves through practices such as hydraulic fracturing [fracking],” the report adds.

However, fracking “faces hostility from many sectors of society as well as environmental authorities,” Fedesarollo’s report notes.

“On the other hand, production of petroleum, coal and other minerals confront important obstacles associated with institutional weakness and unstable rules [involving] government environmental licenses and community consultations” that could spell “grave economic and fiscal consequences for the nation,” the report warns.