Amidst warnings about the possible filing of a new tax reform, the mining sector could have more taxes. In this regard, Juan Camilo Nariño, president of the Colombian Mining Association (ACM), warned that this sector has no more room for its tax burden to increase. He said that the country could lose more competitiveness to attract investment and that the effects are already being seen in the growth of the industry and in its contribution to the economy.
How did the ban on exporting thermal coal to Israel come about?
This shows deep inconsistencies between public policies and the national conversation. The decree affects the seriousness of the trade agreements established by the country and the perception that this generates in investors. This, via decree, generates great uncertainty. Those who will be affected by this decision are the inhabitants, particularly those of La Guajira. This means US$450 million in foreign currency for the country and last year it generated some $600,000 million in income tax and royalties. Of these, $100,000 million went to La Guajira and Cesar. La Guajira is the department in which the Government has made the most profound call to take actions that generate more education, more health, more investment and more opportunities. However, when it comes to signing a decree that would affect the inhabitants of the department, it is at least inconsistent with what it communicates. What I ask for is more pragmatism when making these decisions.
Could this decision be overturned in a high court?
If there are lawsuits, they could take two years to resolve. I believe that the consequences of a public policy is an issue that corresponds to the State, to review whether the administrative acts are legal and constitutional. We warned that the non-deductibility of royalties was unconstitutional, and then the Constitutional Court made a definitive decision. We spent two years expending efforts and resources on something that the Government should have done before presenting the tax reform.
What impact do you see from the possible higher tax burden on the sector?
The government presented a budget with $12 billion of underfunding, without clear sources, and it cannot expect to receive more money from the salaries of all Colombians to cover this deficit. As we have all had to cut our expenses this year due to the previous tax reform, the government must also carry out a review to cut its expenses. The average income tax for companies located in Europe is 21% and in Latin America it is 23%. In Colombia we pay 35% and the coal mining industry pays up to 45%. It seems that what we all have to do, and what the world is doing, is to gain fiscal competitiveness. Here we are doing the opposite.
What exploration is taking place in the face of better tax conditions?
They are leaving, but not only because of tax conditions, but because of better conditions in relation to the regulations that these other countries are introducing. A regulation that attracts investment in exploration, as can be seen in Chile, for example, where investment in exploration grew by more than 20%, in Ecuador by 40%, in Argentina by 70%, all with investments exceeding US$300 million annually. In Colombia, this exploration did not grow at all, it remained at the same level as in previous years, around US$130 million.
Could the country lose more competitiveness due to the new measures?
With a discussion of a tax reform, again, which will burden people and the mining sector, without a doubt yes. That is why it is not convenient to do it, also with an underfunded budget, since that generates all kinds of doubts and drives away investment.
The DANE showed that mining is falling by 8.1%. This is not for nothing. This is due to a high tax burden, to uncertainty about the taxes to come, but above all to a large number of questions generated by these regulatory measures with decrees and laws that have been presented and are in force.
How does the sector feel about the weakening of security in the regions?
Insecurity in the territory has increased significantly, especially due to phenomena associated with the illegal extraction of minerals and the financing of criminal gangs. This is affecting gold mining operations in Antioquia and other regions. At a time when the value of gold is growing, this demands greater action from the State to control illegal activity.
The physical security of workers, families, and individuals in terms of theft, extortion, and so on has also deteriorated significantly. There is no better economic recovery than territorial security, and territorial security must be guaranteed by the State.
Will a state-owned mining company resolve the concentration of large mining companies in operation, as the Vice Minister said?
Of the 7,200 titles held by the country, 98% are for small and medium-sized mining, and only 2% for large-scale mining. In relation to the territory and production titles, 1.6% of the total has titles for mining production and of that area only 0.3% is dedicated to large-scale mining. Therefore, the justification for these measures cannot be that the Mining Code favours large-scale mining and multinationals. The figures from the National Mining Agency are different.
The DNP warned of irregularities in the execution of royalties. How do you analyze the Department’s warning?
In the last two years, the budget of the General Royalties System has increased significantly. In income tax and royalties alone, between 2022 and 2023, the sector has contributed $35 billion. That is an amount equal to the total contributions in the last 10 years. That money is now in the General Royalties System and is what mining has contributed to the current Government.
It is the State’s responsibility to execute it well and ensure that it brings benefits to the communities. In these two years, the budget has been better funded, but for this to become a reality, it must be executed. It is also necessary to monitor the efficiency and relevance of this social investment.
Daniela Morales Soler
Portfolio Journalist
