There may be a boom in open-pit copper mining in "Columbia," but this scenario is improbable in Gustavo Petro's Colombia.
Let me explain:
As a policy maker, Petro is a leader disinclined to deliver concessions since he is always more comfortable breaking the existing system than working under its current framework. He is known for being radical and adamant not only in his views but also in his political approach. If history is a good indicator, let me provide one of the many examples that come to mind: As Bogota's mayor, Petro was adamant that the city build a subway system. Even after being defeated and removed as mayor and commissioning a Chinese company to build an elevated railway, President Petro caused many delays and controversies. Just recently - and without real jurisdiction in Bogota's affairs - he used the National Development Plan to secure the financial resources for an underground solution.
We are seeing a very interesting scenario in Colombian politics related to natural resources. The 2022 - 2026 National Development Plan, subtitled "Colombia: World Power of Life," was approved by Congress and is pending the President's signature to become law. Yes, it does talk about Colombia aiming to become relevant in the EV metal space: Copper (currently a marginal producer with Atico's El Roble), Nickel (producer with Cerromatoso), lithium (no production) and cobalt (by-product in Cerromatoso's operation), all of which is positive. However, there is a significant problem: Colombia needs to balance mining ambitions with Petro's policies and campaign promises to move forward. Petro has said there won't be new open pit mining projects or tailing dams or mining near rivers/river sources/moors. Furthermore, During his presidential campaign, Petro made his opposition to Quebradona and Soto Norte crystal clear in public interviews. There is no ambiguity about that.
There is a significant level of uncertainty until the legal framework is clear, which can only happen after the new mining code is approved by Congress (Expected second semester of this year). Still, for now, there is a de-facto undeclared mining moratorium in the country in which it is unlikely that new building permits will be granted (For the record, RYR's Tim Coughlin initially presented this idea in a recent interview after a meeting with some govt officials in Colombia).
Petro's government just radicalized after the last political crisis that removed key ministers like Jose Antonio Ocampo and replaced them with junior loyalists while maintaining two of the most radical and criticized minister in his cabinet: Irene Velez and Susana Mohamad. Petro's government has become very unpopular according to recent polls. He has no majority in Congress after breaking a multi-party governing coalition and losing the Senator Roy Barreras (removed by the courts), his key negotiator in Congress. This is to show that if Petro wants support for his agenda, he will have to soften his radical reforms or gain somehow more congressional support.
With communities as the central actor that modulate the mining activity, it is impossible to identify what type of constraints will be placed on the mining areas. How community and environmental (water) concerns will be reconciled in those regions, and, what level of government support and/or participation in the industry will be mandated under the new legal framework.
Nobody is sure how this will play out in the end. At this point, the best I can do in my policy forecast is to judge Petro through his past record. If we do that, Petro most likely will have a long lasting impact in the mining industry in Colombia by defining a new legal framework for mining but he will be unable to generate the confidence and the investment climate required to position Colombia as player in the EV metal space .
Tags: #boardroom $LBC $MAX $CDB $OCG $ARIS $ATY #Colombia #copper #nickel #lithium #cobalt #CountryRisk #JurisdictionRisk
Disclaimer: "A week is a long time in politics" therefore my views will evolve as new facts and events are known. This article represent my opinion, and it is not intended as a investment advice, nor is it a recommendation to buy or sell any financial instrument in any of the company/companies hereto mentioned.
