AMERICA BUSINESS AND ECONOMICS COMMUNITY ENVIRONMENT

The Age of BRI: Chinese Extractive Activities in Colombia Is Social Acceptance Needed in Light of New Regional Conflicts?

By Jingyi Pan, Xiaoyi Lyu

China, in the recent years, has become the second-largest trading partner (right after the U.S.) for the region of Latin America, with bilateral trade growing from $12 billion to $306 billion (1999-2018). The Belt and Road Initiative (BRI), since its start in 2013, has played a big role in pushing for both diplomatic ties and economic codependency between China and the region. Colombia, being one of Latin America’s four largest economies and one of U.S.’s closest regional allies, has yet to sign on to BRI. However, it has been closely following the trend created by the appeal of a lucrative Chinese market.

Before 2016, Colombia suffered greatly due to an ongoing guerilla warfare led by the Revolutionary Armed Forces of Colombia (FARC). The countless lives lost, severe economic downturn, and safety concerns are all factors that prevented foreign countries from investing in Colombia. The conflict eventually came to an end in 2016 with the signing of a peace accord between FARC and the national government of Colombia, which resulted in an overall increase of regional stability.

Many foreign companies have become more inclined to bring their business to Colombia post-FARC. With China growing as both an import and export partner, Colombia’s extractive sector is starting to occupy a significant part of the country’s GDP. Even before 2016, the process of realizing the country’s potential in feeding the global demand for extractive commodities had started. The extractive sector grew from being 2% of the country’s GDP in the 1980s to 8% in 2010s; and with China’s growing interest in the region, the numbers are only rising. This international partnership raises new possibilities for China’s insatiable need for natural resources and Colombia’s wish to access the incredible Chinese market; however, Colombia is now faced with the new challenge of balancing between economic gains and social push-backs.

The clear economic benefits of the extractive industry has resulted in mining titles given to companies being increased significantly; sometimes even bypassing legal restrictions in areas such as national parks. More than a third of Colombia is technically considered mining-appropriate, an alarming fact when considering the country’s level of biodiversity. These issues point towards the overarching problem of unresolved clashes between national interest, corporate interest, and local interest of the Colombian people. In the post-2016 world, both the Colombian government and Chinese extractive companies that wish to have a sustainable future in the country need to reconsider their approaches to solve for local grievances in an effort to obtain social acceptance and more peaceful regional development.

Corporate interest vs. Local interest

In order to avoid local grievances as much as possible, effective communication between government, communities, and companies is crucial in terms of transparency of practices, environmental assessments, and reparations of harms done. However, this seems to be missing in many regions where the extractive activities have caused significant local grievances.

In an interview with Dr. Fabio D. Miranda from Osaka University, who has extensive fieldwork experience in Latin American communities impacted by mining, Dr. Miranda commented on the necessary pushback from the locals due to “corporate governmentality.” Although commenting on the region of Morochocha in Peru, his area of expertise, the regional problems concerning the mining corporations certainly can be somewhat analogous to the situation in Colombia.

He characterized “corporate governmentality” by saying that “It is more about managing the population. In Morococha’s case, it is an outgrowth of a historical way of managing local population in the area. They were enclaves, in the 20s and 30s, owned and governed by American corporations. Sure, companies had relations with the national government, such as indegenous issues, but that is less relevant now. By corporate governmentality, I mean how the corporations are managing the local populations and their social institutions outside of the mining structure. It is a market-based governmentality.”

Although without the same historical context as Peru, the clash between corporate interests and power with the locals’ wish for more agency and governing power are evidence for the relevancy of “corporate governmentality” and its harms in Colombia.

One example would be in Florencia, where the Chinese oil company Sinochem has been the target of local protests and contempt. Before the 2016 peace accord, the FARC governance took away agency from the people of Florencia and disabled them from planning out their ideas for regional development. The arrival of the Chinese mining firms post-2016 signifies for the locals yet another overwhelming power within the region that could bring in new conflicts from the lingering disbanded militias with the lucrative oil industry’s flow of capital. Not to mention the industry disabling the local initiatives to develop other productive industries that are more “long-term” than limited extractive operations.

Jesus Alfredo Gomez, a leader in Morelia, believes that there are fundamental differences, even conflicts, between the envisioned regional development plans between locals, government, and the companies. While recognizing the differences in the degrees and day-to-day impacts of environmental harms caused between mining and the oil industry, the local communities’ sentiments towards them can certainly be analogous.

The local communities’ wish to further agriculture and export of coffee, cocoa, fruits, etc is in direct clash with the intrusion of oil exploration. These concerns of the locals are not baseless; in the same years when the increase from extractive sector being 2% of the country’s GDP in the 1980s to 8% in the 2010s, productive sectors (industrial, agricultura, etc) in Colombia decreased by about 10%.

On top of that, the benefits of the extractive sector come with reservations. Extraction sites are usually present in poor areas with delicate ecosystems and weak social institutions. Rising mortality rates from respiratory issues in infants, children, and adults are often the results of open pit mining. Not to mention how the lack of local production and dependency on non-renewable resources make the enclave economies vulnerable in the face of volatile prices.

Local communities often complain that they only suffer the loss of land without sharing the benefits of mineral wealth. Mining contributes little to local economies where it is estimated that only around 1-2% of the total income is used to purchase local goods. They are also reluctant to hire local help, which results in low job creation.

Sinochem has refused to comment on local protests and disruption on their efforts to conduct seismic testing. Furthermore, they have failed to effectively deal with accusations of having a general lack of transparency in their environmental impact assessment reports. Social leaders in the regions have criticized Sinochem for feeling entitled to the land of the region due to governmental approval and purchasing of land. All of these point to the clear conflicts that exist between corporate interests and local interests in the mining regions of Colombia.

National interest vs. Local interest

Former Colombian president Juan Manual Santos promised the farmers in the Amazonian region of Morelia that the 2017 development plan for prioritization of regional development in places most impacted by the previous conflicts would be a plan that centers on “bottom-up” local initiatives rather than “top-down” enforcement of governmental interests. The message sent by this promise, or the failed attempts to materialize it, is where the heart of the conflicts lie.

Between the years 2006 – 2010, mining and hydrocarbons combined accounted for 28% of the tax revenues Colombia government obtained. Mining alone accounted for nearly 12% of the national GDP. In theory, the benefits of the extractive activities should benefit the local economy; however, reality says otherwise.

Studies have shown that the municipal officials in mining regions get higher per-capita incomes while the public’s standard of living in the same areas are lower than the national average. There are clear discrepancies between the interests of those governing and the people who take the blunt of the hit from the harms of the mining industry.

Extractive activities, as previously mentioned, often take place in poor areas with sensitive environments and subpar social institutions. Outside of the problem that the mining activities harm the basic living conditions like water and air quality for the local population, another issue is how mining profits incentivize authorities to turn a blind eye.

The problem was made worse in 2011. Colombia’s system of royalties, which is the avenue through which revenues from extractive activities paid to the government can be distributed, has experienced a reform. As opposed to the previous system where about 80% of the revenues paid goes toward municipal government and are later often mismanaged and misused, the reform effectively allows for the national government of Colombia to receive most of such revenues and distribute them to different regions harmed by the extractive industries.

The downside to such reform is that the national government of Colombia started to paint the picture of extractive industries being socially beneficial and the companies’ environmental assessments, such as that of water contamination and endangered species in Florencia, are all trustworthy. The lack of communication already existing between companies and local communities, coupled with the close relationship between the national and local governments with these foreign operations signals to many people in Colombia that there is little left of their agency in their own regions.

Need for Social Acceptance Oriented Course of Action

Extractive industries operating in Colombia have engaged in Corporate Social Responsibility (CSR) actions, following a long tradition of corporate efforts to ease regional tension. However, they do not seem to be working.

The often self-congratulatory nature of many CSR efforts does not seem to solve any real issues for the population that can be impacted. Corporations hope to curb relevant issues and public complaints by engaging in arbitrary actions peripheral to the core interests of their operations.

For example, Sinochem, before their operations, hosted community information sessions to present their environmental damage assessment as “moderate negative impacts” and listed their regional public welfare programs in their annual CSR reports. The local population did not respond to such efforts because they lacked transparency into the company’s actual operations. Many complained that these reports resembled “one-sided lecture.” People are also reluctant to believe that the environmental impacts of these extractive activities cause only “moderate” harms when potential oil spills, contamination from open-pit mining, and dislocation of endangered species can all be of legitimate concern.

Social acceptance, unlike CSR, cannot be self-awarded. A “social acceptance oriented course of action” entails corporate actions that take accountability for harms done. These actions differentiate themselves from CSR fundamentally because they actually require corporations to address specific impacts of the companies’ operations rather than engage in branding efforts without solvency.

The unwillingness of the public to give social acceptance to mining companies should not be overlooked, as it can be the sole reason behind the industry’s substantial loss of interest.

In 2013, the citizens of Piedras tried to shut down the South African firm AngloGold Ashanti’s goldmine, a company known for receiving the “Public Eye Award” in 2011 for being the “worst corporation of the year.” They were the first in Colombia to utilize their legal power and engaged with the democratic mechanism of “popular consultation,” namely a public referendum. This inspired other multiplicities to do the same thing. In 2017-2018, the people of Cajamarca, despite having to fight a long legal battle with the national government of Colombia, shut down “La Colosa,” what would have been the largest gold mining effort in the country by AngloGold Ashanti. The region’s people, whose interests do not align with the local government and gold mining company’s plans, rely heavily on agriculture such as that of rice production and were displeased that the daily contamination of water and the general environment would be detrimental to their lives. The lack of social acceptance, in this case, goes directly to show that the discrepancy between local interests and national and foreign interests can substantially impact companies’ profits.

In the post-FARC era, Colombia has shown its willingness and ability to take part in China’s BRI. The exciting potential economic opportunities brought by BRI also have their down side. Residents of Colombia, due to the country’s growing extractive sector, are becoming no strangers to severe environmental contamination, pervasive corporate governmentality, and vulnerable economy to the volatile energy market. There are also the increasing concerns that the extractive activities restrict the development of other productive industries that are more “long-term” and the national government’s willingness to bypass democratic institutions and regulations for economic gains. In a world where Colombia does not seem to have the ability to pursue alternative development models that are independent of the extractive sectors, Chinese mining companies, as a new player in Colombia, currently face both opportunities and challenges.

Public pushbacks on the proliferation of mining and the complacency of the government pose real threats to the country’s development and the international partnership. In order to ease public tensions, companies follow the traditional routine of implementing CSR actions. However, the plans are just to mitigate problems by scattered and short-sighted actions while offering no fundamental solvency. Social acceptance, in contrast, is a concrete process in which companies have to make real efforts to achieve and, more importantly, to maintain their promises.

Given diverse lessons learned from other Latin American countries such as Peru, it is all the more important for both the Colombian government and Chinese corporations to work together to gain long term social acceptance in order to mitigate local conflicts and ensure future sustainable development.

Shunji Wan and Mingya Wang contributed to the story

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