Colombia Ranked in World’s Top Ten for Oversight of Natural Resources Despite Concern Over Management of Revenues

• Governance of Colombian oil, gas and mining industries judged “satisfactory” in worldwide index
• Deficiencies identified in oversight of environmental and social impact on local communities
• Colombia’s sovereign wealth fund, the Savings and Stabilization Fund (FAE), scores highly for governance and transparency
• Gap identified between legal framework and practice, particularly in mining sector
• Better transparency needed at Colombia’s state oil and gas company, Ecopetrol

BOGOTA, 28 June 2017—A global index assessing 81 countries’ oversight of natural resources has given Colombia’s mining sector 69 of 100 points, judged a “satisfactory” score and ranking it 10th among 89 extractives sector assessments around the world.

The 2017 Resource Governance Index (RGI) gives the country’s oil and gas sector a score of 71 of 100 points, ranking it seventh in the overall index and third in Latin America and the Caribbean — behind Chile and Brazil.

Colombia’s mining sector has been the subject of debate between the national government, keen to attract investment, and environmental and social movements concerned with local impacts and benefits. The sector outperforms many of its Latin American and Caribbean peers in governance of extractive policy areas, according to the study. It scores a satisfactory 73 of 100 points in taxation, for example, as a result of transparent rules and oversight mechanisms.

However, the Natural Resource Governance Institute (NRGI), which produces the index, has identified a gap between Colombia’s laws and its practices, in particular around environmental and social issues in the mining sector. Combined with the surge in illegal mining in recent years – a 2011 study found that between 60 and 90 percent of mining units were operating without a mining title – this lack of enforcement is cause for concern, NRGI experts say. As a result, communities and civil society are demanding more local participation in resource decisions.

Fernando Patzy, Latin America senior officer for NRGI, said: “Colombia achieves a satisfactory score for the legislative framework around its resource industries. However, local communities are concerned about the social and environmental impacts of these types of activity, and deserve a greater say in decisions.”

Colombia’s highest score in the index is for governance of its sovereign wealth fund, which receives 100 points and is ranked first globally. NRGI accorded the Savings and Stabilization Fund (FAE) the highest marks because it produces quarterly reports on its balance, deposits and withdrawals; its management is based on clear rules; and its annual reports are audited by the comptroller general.

Colombia’s oil and gas sector is the world’s best performer in governance of revenue management and in this category outperforms Norway and Chile — the two high-ranking countries in overall resource governance. Colombia’s oil and gas sector is closely followed in governance of revenue management by its mining sector.

Patzy added: “There are some positive findings here. Colombia is the fourth-largest oil producer in Latin America and the Caribbean and in 2015, over half of Colombia’s exports consisted of hydrocarbons. Effective resource governance can therefore play a huge role in the country’s future after years of armed conflict.”

However, the index suggests that the national oil and gas company, Ecopetrol, could be improved by better transparency. The legislature does not participate in oversight of the company, and Ecopetrole commodity sales are not governed by clear rules. NRGI considers this problematic, as Ecopetrol is not only responsible for selling oil produced in its own operations and partnerships, but it also sells the oil that is paid in kind to authorities by all hydrocarbons companies operating in Colombia.

Patzy said: “Governance of the hydrocarbons sector will improve if a public cadaster of contracts with detailed and geo-referenced information is implemented. Furthermore, Ecopetrol can easily become one of the governance leaders of the oil industry by making available information on its own oil transactions and on its shared production contracts.”

Full results from the Resource Governance Index globally are available at www.resourcegovernanceindex.org.

Note to editors:

The Resource Governance Index is the sum total of 89 sector-specific assessments in 81 countries (in eight countries NRGI assessed both oil and gas and mining sectors), formulated using a framework of 149 critical questions answered by 150 researchers, drawing upon almost 10,000 supporting documents.

For each assessment, NRGI has calculated the composite score using the scores of three index components. Two of the components comprise new research based on expert answers to the questionnaire, and directly measure governance of countries’ extractive resources.

The first component—value realization—covers the governance of allocating extraction rights, exploration, production, environmental protection, revenue collection and state-owned enterprises. The second—revenue management—covers national budgeting, subnational resource revenue sharing and sovereign wealth funds. The index’s third component assesses a country’s enabling environment. This component draws on pre-existing research to measure the broader governance context.

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Camila Franco
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Lee Bailey
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Natural Resource Governance Institute (London)
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