Jorge Enrique Robledo, Bogotá

August 17, 2012

According to contracts 866 and 1727 of 1963 and 1971 respectively, September 30, 2012, ought to be a day for celebrations in Colombia. Beginning on that date and for the next thirty or more years, Colombia would appropriate more than 100 million dollars annually for the nickel produced in the Córdoba Department, plus taxes and royalties to be paid by Cerro Matoso, S.A., owned by BHP Billiton. The estimate of this new and important revenue stream which could go even higher is based on the return to Colombia of the mine and equipment which produced that level of profit for Billiton in 2011. But instead that date could turn into a very unlucky day for Colombia. That will occur if President Santos through his Minister of Mines kowtows to Billiton, also the owner of the coal mining at El Cerrejón, which is attempting to substitute the 1996 contract 051 for the ones cited above. 051 is a notoriously one-sided and illegal contract which prompted Colombia’s Office of the General Comptroller to issue a warning against its application. 051 has been rejected by many analysts and all Colombian congressional members who addressed the issue during the hearings in the pertinent Fifth Commission of the Colombian Senate.

According to the 051 contract Billiton’s assets in Cerro Matoso will indeed be transferred to Colombia at the end of September. However at that same moment the Colombian government is obligated to lease said assets back to Billiton which will continue the mining exploitation until 2029, and possibly to  2044 because this maneuver also provides an extension to contracts 866 of 1963 and 1727 of 1971, something explicitly prohibited by the Code of Mines during those years. It that’s not enough, contract 051 established that the assets in question –about 700 million dollars, have to be leased back to Billiton at 1.25% of the annual profits of the operation, after taxes! This percentage applied to the 100 million dollars in profits equals an abysmal 0.18 of the value of the assets.

In cold cash Colombia would lease, for a million and a quarter dollars annually to Billiton, property with profits of over 100 million dollars annually. It is the same as renting an apartment valued at 700, 000 US dollars for 100 dollars a month. What is this, if not defrauding national wealth?

The 051 contract was a malicious act calculated to hide and justify illegal extensions of contracts 866 and 1727 and to take over a fabulously profitable business bit by bit. These latter contracts represent 96% of nickel reserves and 100% of nickel production. The area covered by the 051 contract, sixteen years after it was signed, is not even under exploitation. Its only function has been to allow Cerro Matoso Billiton to illegally modify those contracts that are truly profitable. Billiton’s justification that this is a consequence of privatization because Colombia owned 48% of Cerro Matoso merely confirms what is known, namely that the history of privatizations in Colombia is one of swindles of the national wealth.

BHP Billiton had a million reasons to set things up that way. But what about the Colombian officials that helped them? There are two possibilities: foolishness or corruption. And it is well known that high government posts are not occupied by fools.Obviously Colombia’s interests will suffer unless the government starts by postponing its decision until after September 30. This would serve to lift off the pressure, declare 051 lapsed, and allow control of this profitable enterprise to pass from Cerro Matoso, S.A. to state hands. Afterwards the best option should be chosen to operate the mine and produce ferronickel. In my estimation that would be a Colombian state enterprise which would appropriate one hundred percent of the profits which today enrich Billiton, the largest mining multinational in the world.

The difficulty lies in the fact that President Santos decided to make 051 legal and plead with great fanfare with Cerro Matoso, S.A. to give the government a few dollars more than stipulated in that illegal and abusive contract. These proverbial colonial colored beads cannot hide the swindle but will be used to absolve a government lacking the necessary civil courage to defend the national interest. That’s why President Santos has a Minister of Mining like Mauricio Cárdenas. According to seven national and international media sources, Cárdenas told three hundred executives of mining multinationals that he had named a Vice-Minister whose “job it is to keep you happy and to make sure that all of your problems have been resolved.” He’s clearly keeping his promise.