Interview: Sergio Guzmán Outlines Political Risks and Success Strategies for Colombia’s Mining Sector

Sergio Guzmán is perhaps Colombia’s best known political risk expert, sought after by news organizations and corporate clients from around the world. He spent a few minutes during CGS 2024 – Colombia Gold Summit, Loren Moss, executive editor of Finance Colombia to discuss the challenges facing investors and executives active in Colombia during these more turbulent times.

Click on the above image to see the video.

Finance Colombia: So I’m here with Sergio Guzmán. It’s always good to see you again, my friend. I think since the last time I saw you in person you were a bachelor, so I want to congratulate you on your recent marriage.

Sergio Guzmán: Thank you.

Finance Colombia: So that’s always a good thing. And we’re back here at CGS 2024, the Colombia Gold Summit, as originally known. Now, of course, it has expanded, and it covers copper, and it covers silver. A great event put on every year by Paul Harris and his organization. Sergio, we’re in a time right now where we are two years into the current administration, and I know that you are a specialist in political risk. And you got up, and you opened the session talking about the different challenges and the risk that we have. Now, we see that there are some concerning trends when it comes to crime and insecurity, but then we also have political uncertainty. Some other presenters talked about the growth and lack of growth in the sector.

Tell me about- if you could just briefly, within 30 seconds or so, recap the message that you gave this morning when it comes to the political risk for the mining sector.

Sergio Guzmán: Absolutely. Well, I think if we look at political risk in Colombia in general, it’s doing much better than the government’s antagonists expect.

And much worse than the government proposes. And so it’s somewhere in between. The truth is usually somewhere in between. Colombia is not a country that’s in an active coup d’état, but it’s also not a country that is a haven for investment and great opportunities. What is true, I think, is something that I’ve tried to get across: Colombia is not for the faint of heart. It’s a country that needs to be explored and analyzed meticulously and not just looked at from a surface level. So if people are interested in investing here, if people are serious about long-term opportunities here, they need to do their homework.

Finance Colombia: Let’s talk about this, and I don’t want people to panic or anything like that, but there has been an uptick in insecurity. We look at things in the north of Colombia, the Urabá region, also down around Tumaco and things like that. Have we seen a material effect on crime and insecurity when it comes to mining development?

Sergio Guzmán: I think three things are going on at the same time. The first one is that insecurity in urban areas is getting worse. The perception of insecurity is also getting worse. In parallel, the government is trying to negotiate simultaneously with nine different armed organizations, right? And that’s led to a bilateral ceasefire and a relative cooling of some fighting between the government and these armed groups. And then the third, and I think you know, many of these armed organizations no longer depend exclusively on drugs as the principal source of income. Now, they’ve diversified their portfolio, so to speak. They have illegal mining, they have human smuggling, they have extortion, right?

And so Colombia’s violence is becoming more complex, much more interwoven into global illegal economies. And, of course, the mining sector can’t choose where it operates; it has to operate in the areas where there are resources. And so, in some of those areas, there are specific local dynamics of crime that need to be addressed or need to be mitigated. Then, there are also interwoven elements that correspond to these insurgent groups or criminal organizations and insurgencies that also need to be understood well. All in all, I think the perception of violence and the perception of crime are getting worse in Colombia. The capacity of some of these groups is improving, and the intent to target, you know, has remained unchanged. However, some of these bilateral ceasefires have created a relative calm in that we haven’t seen, you know, major kidnapping events, or major terrorist attacks against critical infrastructure, as there used to be back in the day. So I think, you know, it’s a mixed bag. It’s not as positive as the government would want it to sound, but it’s also not chaos.

Finance Colombia: You know, I’ve seen where companies have had success when they go in and work with the local people, not just rely on the politicians in Bogotá, but they’ve come in first and engaged with the local community to make sure that the populace is on their side. There’s a talk going on right now about how mining companies, big commercial mining companies, can work with artisanal miners rather than compete or have a conflict with them, but work kind of in the form of symbiosis.

What advice would you give to mining operators if they’re looking at maybe either taking on a project in Colombia or looking, obviously, with the long-term vision? What is the best strategy that you’ve seen work to mitigate the different types of risk, the political risk, the physical risk, and then, of course, the financial risk of their investment?

Sergio Guzmán: I think in your question, you sort of framed the answer as well. I think having a long-standing, positive and collaborative working relationship with local communities is the best security, both in social terms and security terms, that companies can have. If the local actors perceive that the company is 1) there to stay, 2) will help strengthen their economy, and 3) will not, you know, go away and leave them hanging when things get tough. Those are three elements that the local community will stand up for the company when things go south. And those are three elements that the company needs to work with a very, very intentional mindset from the very beginning of the exploration.

Finance Colombia: You are, in my universe, the foremost expert on risk, and you have your consultancy firm, I know that you have a founding partner, but Colombia Risk Analysis, how can people find out–I know that you have a website, and you have both kind of free summaries and then also more in-depth report. Give people an idea of how they can communicate or how they can find out more about Colombia Risk Analysis.

Sergio Guzmán: Absolutely. People can find out about Colombia Risk Analysis by going to our website, www.colombiariskanalysis.com. All our socials are @ColombiaRisk, and we offer both subscription services for the general person that wants to understand, to more bespoke conferences or reports that can be written according to whatever a client wants, both in English and Spanish. And I think that’s something that makes us unique in Colombia as well.

Finance Colombia: Sergio, it’s always great to talk to you.

Sergio Guzmán: Thank you so much, Loren.