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Risks for oil and mining companies rising in Colombia – report

Colombia’s booming mining and oil industries are likely to be the centre of terrorist attacks over the coming months as soldiers and guerrillas fight on the battlefield, while their delegations hold peace talks to end the country’s half-century-old conflict.

In a note to clients on Friday Exclusive Analysis Ltd., a think-tank that specializes in forecasting political and violent risks to multinationals worldwide, warned these sectors are at the highest risk of kidnapping, small arms and improvised explosive device (IED) attacks.

“President Juan Manuel Santos has agreed to start peace negotiations with FARC guerrillas, with their first meeting scheduled for October 8 in Oslo, Norway. The smaller National Liberation Army (ELN) rebels have been left out of the peace process and are currently demanding to be included. Their inclusion would be likely to complicate the negotiations and we do not expect the government to invite them,” said in the note Carlos Caicedo , director of the Latin America division.

According to the analyst, the ELN is likely to increase its attacks against commercial assets to show the government that it is still a force to be reckoned with and that they deserve a place in negotiations.

“Such attacks are likely to remain confined to the ELN strongholds of Arauca, Norte de Santander, Nariño and Chocó provinces,” added Caicedo.

The ELN is now estimated to number around 2,500 combatants, compared to the 9,000 belonging to the Revolutionary Armed Forces of Colombia, or FARC by its Spanish acronym.

The group has carried out over 150 attacks so far this year, most of them targeting the oil industry.

The $4 billion Bicentennial pipeline project is a prime target. In February 2012, ELN kidnapped 11 Bicentennial pipeline contractors in Tame, Arauca. In June, the rebel group fired on two buses transporting 120 pipeline contractors. A month later, they kidnapped two Colombian contractors working for Itansuca and Conco on the project in Fortúl, Arauca.

In addition to oil facilities, said the report, ELN’s other target sets include mining and telecom and electricity towers. In July 2012, they occupied the Concarivana gold mine in Montecristo, Bolivar, forcing workers to leave the site and then destroyed the mine’s electricity plant with IEDs.

“Terrorism risks are unlikely to completely disappear, even if a peace agreement is eventually signed. ELN rebels primarily rely on kidnapping as their main source of income but are becoming increasingly involved in the drug trade,” said Caicedo.

Exclusive Analysis Ltd. expects some FARC cells to split from their top commanders and become criminal gangs if a peace deal is reached.

Something similar is likely to happen with the ELN if President Santos decides to hold separate talks with them, said the expert.

“Such criminal and drug trafficking gangs are still likely to engage in kidnapping and extortion and will remain a threat to firms operating in current rebel strongholds,” the report concluded.

Colombia’s economy, which is Latin America’s fifth largest, has grown four times as rapidly as Canada’s in recent years, with foreign investment quadrupling between 2002 and 2008.

The country holds vast and, until now, untapped natural resources, including coal, gold, silver and oil and the government has been taking a number of measures to boost the sector, which currently accounts for only 2% of Colombia’s economy.