‘Ottawa’ FARC Ceasefire Makes Colombia’s Resources Attractive for Canadian Firms, But Challenges Remain
The Colombian government has reached a landmark ceasefire agreement with the country’s largest rebel group, a move that could make its resource sector more attractive for companies in Canada and elsewhere.
The historic signing of the agreement between the Colombian government and the Revolutionary Armed Forces of Colombia (FARC) took place in Havana, Cuba on Thursday. If the peace is maintained, this deal will end a bloody conflict that has lasted more than five decades, caused more than 200,000 deaths and displaced millions. President Juan Manuel Santos and FARC leader Timoleon “Timochenko” Jimenez signed the accord, with UN Secretary-General Ban Ki-moon looking on.
“Let this be the last day of the war,” Timochenko said, according to reports.
This ceasefire is expected to provide a boost to the economy by improving public safety and broader economic stability. Experts said it should immediately make Colombia more attractive for foreign investment, and Santos previously stated that a peace agreement with the FARC could boost annual gross domestic product by 1.5 per cent. The Colombian Peso rallied this week on the settlement.
“If both sides are really honest about making this work, it’s going to be an incredible thing for the country because it will create stability and foster growth,” said Anna Stylianides, executive chairman of Eco Oro Minerals Corp., which has a gold project in Colombia.
For Canadian firms, Colombia’s rich oil and mineral resources have been the country’s biggest draw. And while several Canadian firms have had success in Colombia, rebel groups have been a major cause of concern. In 2011, FARC rebels abducted 23 oil workers employed by Talisman Energy Inc. (Fortunately, nearly all of them were quickly rescued.) In 2013, the National Liberation Army (ELN), another far-left rebel group, kidnapped a Canadian executive with Braeval Mining Corp. He was detained for seven months before being released.
Even though the FARC’s activities are largely confined to small geographic areas and are far from most resource projects, the rebels were still disruptive. They frequently attacked oil pipelines, causing major economic damage.
However, resource companies in Colombia have been plagued by bigger problems that have nothing to do with security. In mining, the biggest challenge has been the regulatory environment. Some projects have faced years of permitting delays with no end in sight.
“The laws haven’t adapted to the pace that mining companies require. They’re still lagging behind the urgency of how quickly these companies consume capital,” said Igor Dutina, a spokesman for Atico Mining Corp. However, he does think positive progress is being made.
The regulatory framework works better in the oil and gas sector, but production in Colombia seems to be plateauing and new discoveries have been scarce. Also, protests and community relations have been a problem for some energy firms.
While the demobilization of the FARC should vastly improve Colombia’s security situation, experts noted the issue will not go away. The ELN and other armed groups remain active, and many FARC members could join the ELN and continue to engage in criminal activities.
The peace agreement still needs to be ratified to go into force. Santos wants to complete a deal by July 20.
One risk to the ceasefire is that it remains highly unpopular in some political circles. Santos’s approval ratings are very low in Colombia, and former President Alvaro Uribe — who spearheaded a fierce crackdown on FARC rebels while he was in power — has been extremely critical of the peace talks.