NANCY LOPEZBOGOTA, Colombia (AP) â¿¿ Security gains and capitalist-friendly investment rules are spurring an unprecedented mining and oil boom in Colombia, a pro-business outpost on an increasingly leftist continent. Investors are deeming Colombia well worth the risk though many parts of the country where reserves are being exploited continue to be plagued by illegal armed groups. Even a car-bombing Thursday in the country's capital just a week into the new administration "won't be a problem for foreign investment," analyst Roberto Melzi of Barclays Capital said. South America's third-largest oil producer behind Brazil and Venezuela, Colombia is on track to generate more than 1 million barrels of crude a day by 2012 â¿¿ double its production in 2006 â¿¿ the government says. State-owned Ecopetrol accounts for nearly 90 percent of today's production. A full 80 percent of the $7.2 billion in direct foreign investment the country reaped last year went to petroleum and mining â¿¿ with investment in the latter sector nearly doubling to $3.1 billion. "Companies are looking for the next big thing â¿¿ an unexplored market â¿¿ and Colombia has been popping up on the radar," said analyst Patrick Esteruelas of Eurasia Group. By contrast, neighboring Ecuador, the continent's No. 5 oil producer behind Argentina, got a total of $312 million in foreign investment in 2009. Colombia is so bullish on the foreign investment bonanza flourishing under new President Juan Manuel Santos, a former foreign trade, defense and finance minister, that the government is forecasting a healthy jump in gross domestic product this year â¿¿ 4.5 percent. Colombia's foreign trade ministry says it expects Colombia to attract $10 billion in foreign investment this year, approaching the record $10.6 billion of 2008. The influx has so flooded Colombia with dollars that the U.S. currency has lost 12 percent of its value this year against the Colombia peso.
While Venezuela and Ecuador have alienated many energy investors by rewriting oil contracts â¿¿ increasing royalties and taxes so much that many multinationals pulled out â¿¿ Colombia's outgoing president, Alvaro Uribe, offered strong incentives."Colombia is one of the few countries in Latin America essentially that offers ironclad contractual guarantees over periods of 20 years," Esteruelas said. During Uribe's eight years in office, which ended Aug. 7, Colombia's known oil reserves rose 22 percent to 1.9 billion barrels with production jumping 45 percent. Colombia also has been the continent's No. 1 coal producer for 39 years running. It is increasingly competing for mining investment with Peru and Chile, historically safer bets due not just to proven reserves of gold, copper and other minerals but also greater political stability. Only about 5 million (19,000 square miles) of Colombia's 114 million hectares (440,000 square miles) have been explored, said Mario Ballesteros, the director of its Institute of Geology and Mining, though 40 percent of the country is legally off-limits due to natural reserves and environmentally sensitive regions. Even before Uribe took office, investors considered the country's gold reserves especially promising. Colombia is Latin America's fifth-largest producer. "It's only now that you're seeing the product of people's investigation coming through in the form of feasibility studies and project development," said William Tankard, an analyst with GMFS, a London-based precious metals consultancy firm. Last year, Greystar Resources Ltd., a Canadian mining company, projected it could extract from the Angostura deposit in the northeastern state of Santander a total of 511,000 ounces of gold â¿¿ worth up to $611 million at today's prices â¿¿ and 2.3 million ounces of silver. In its 16 years operating in Colombia, Greystar has invested $140 million. South African miner AngloGold Ashanti Ltd., meanwhile, has invested $159 million in Colombia since 2002 and believes it may have unearthed a monster mine, La Colosa, that could generate 800,000 ounces of gold annually, said Ivan Malaver, a company spokesman.
Both projects have run into regulatory hurdles, however, as people who live near the gold deposits object to the planned use of cyanide in open pit operations in both La Colosa and Angostura. They fear contamination of local water supplies."Colombia has to weigh the long term, maintaining the country's biodiversity and vast water resources, with the short term, which is the issue of mining," said Manuel Rodriguez, Colombia's first environment minister from 1994-98. La Colosa alone would require the removal of 600,000 tons of earth daily to extract the gold fragments dispersed underneath the surface â¿¿ meaning 90,000 tons of cyanide and 250,000 liters (66,000 gallons) of water per hour to distill the precious metal. Still, it's never been a better time to be in the gold business. The precious metal's price has reached unprecedented heights, now selling for more than $1,200 an ounce. What Colombia's investment boosters don't like to dwell on, however, are questions of security. The country's nearly half-century-old conflict with leftist rebels still simmers and sometimes boils over, especially in rural areas where mining and energy exploration tend to occur. Historically, Colombia's illegal armed groups have exacted "war taxes" from mining and oil producers. Those that refused were attacked. In 2001 alone, the 480-mile Cano Limon pipeline was hit by 170 acts of sabotage blamed on rebels. The attacks were curbed beginning in 2002 under Uribe, when Colombian military units began guarding the pipeline, said Mauricio Tellez, spokesman for state-owned Ecopetrol, which operates the pipeline. But not all the protection is by legally constituted forces. "The recent mining boom â¿¿ exploration and exploitation activities â¿¿ has been accompanied by the arrival of illegal security groups," said Ariel Avila, a researcher at the Nuevo Arco Iris think tank. Avila said he's found in field studies over the last two years that illegal armed groups linked to far-right militias and leftist rebels are providing security for oil companies in several regions, especially in the southeastern states of Meta and Guaviare.
He would not name the oil companies, for his own security.Companies operating or exploring in Meta and Guaviare include Canadian-owned Pacific Rubiales, Exxon Mobil Corp., Brazilian-owned Petrobras, and Petrominerales â¿¿ a Colombian affiliate of Canadian-owned Petrobank. "Part of the reason why Colombia, unlike many of its neighbors, was forced to provide so many tax incentives and regulatory sweeteners was precisely because they had to deal with that legacy of insecurity," Esteruelas said. Those incentives helped persuade Pacific Rubiales to begin investing in Colombia in 2004, said the company's vice president, Jose Francisco Arata. Colombia's second-largest oil company after Ecopetrol, Pacific Rubiales moved into formerly rebel-held areas of Meta and its production is now up to 125,000 barrels a day. Over the next year, the company plans to invest $235 million in further exploration in the eastern plains, as well as in the lowlands of the southern state of Putumayo â¿¿ both areas of continued rebel activity. "In areas that are considered a high risk, like in the border regions with Venezuela and Ecuador, military forces will accompany oil operators," said Armando Zamora, regulator for the National Agency of Hydrocarbons. Just last year, he said, the Revolutionary Armed Forces of Colombia, or FARC, burned some trucks and tried intimidating workers during an oil operation in the southern state of Putumayo, which borders Ecuador. He wouldn't detail the incident. To Rodriguez, the former environmental minister, the intimidation, violence and extortion are simply the price of doing business in Colombia. After all, he said, major coal operations began in Colombia during the peak of its conflict. "Historically, the country's violence hasn't been the biggest difficulty for outside companies," Avila said. "The biggest difficulty was that they didn't know the region. And now that they've done preliminary studies and know, they're investing more."