Are the characteristics of the new Colombian mining code sufficiently competitive in attracting investment to the mineral sector?

Abstract

During the past 40 years, developing countries with non‐renewable natural resources have sought to develop their mining industries along lines parallel with the political climate current at the time. In the 1970s, the Colombian government followed the current trend in the developing world when they opted for direct participation, as owner‐operator in the exploitation of natural resources, especially coal, deeming it to be of great importance in Latin America. However in the 1990s, the country, in line with a changing global trend, adopted policies that focused its strategy on regulation of the mining sector, while leaving the operational risk in the hands of the private sector. The role of the state was redefined from ‘owner operator’ to ‘regulator’. The World Bank Group, Review of Legal and Fiscal Framework for Exploration and Mining, (chapter 4) (London, England: Mining Journal Books,). The new mining code of Colombia (Law 685/2001) is a contribution to the ongoing modernisation process in the mining sector, the aim of which is to develop a regulatory framework which can be used as an instrument to attract investment. This paper will attempt to identify the main characteristics of this new law and compare them with the idealised criteria defined by the World Bank for attracting mineral sector investment. It will also critically analyse the potential of this new law to serve as an effective means of attracting private investment in the context of an intensively competitive globalised mining industry.