The Energy Industry’s Role

Posted: October 21st, 2015

By Sergio Guzmán

Sergio Guzmán is Control Risks’ principal Colombia, Bolivia, and Suriname analyst. He provides business, security, and political risk analysis for the Andean Region and has particular experience in the Colombian Conflict, International Conflict Resolution, and Development. Before joining Control Risks, Guzmán was the Lead Specialist for Latin America and the Caribbean and Eastern Europe and Central Asia for Accion International, a global microfinance organization. He also worked at the Subcommittee on Western Hemisphere Affairs of the U.S. Congress, and at the Inter-American Dialogue. Guzmán holds a Masters in International Economics and International Relations from the Johns Hopkins University School of Advanced International Studies. He is a native Spanish speaker, and also speaks English and Portuguese.

Juan Manuel Santos’ administration and the Revolutionary Armed Forces of Colombia (FARC) kicked off peace negotiations in October 2012. The chosen methodology (“nothing is negotiated until everything is negotiated”) and the absolute secrecy of what is being discussed at the table have left society uncertain about the country’s future. There have recently been suggestions that the government will also start negotiations with the National Liberation Army (ELN), providing evidence that the government strongly intends to close Colombia’s “insurgency” chapter. The government, however, has not paid adequate attention to the oil industry’s unavoidable link to securing a post-conflict Colombia, nor considered whether the industry will agree with the negotiated outcome.

The oil industry plays a huge role in financing the Colombian government’s spending. The extraction of oil represents 22 percent of foreign direct investment, 52 percent of exports, and about 30 percent of fiscal revenue. As a result, the downward trend in international oil prices, coupled with dwindling Colombian reserves, makes for a worrisome economic outlook. It is uncertain whether the country will be able to finance the necessary undertakings, such as developing rural infrastructure, to secure a post-conflict period in light of its weak fiscal position.

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