By Paul Harris in Huanuni
Hundreds of miners pack into a courtyard outside the offices of the Huanuni mining company in the high plains of Bolivia’s Oruro department, pushing past nervous riot police with semi-automatic rifles to register with state mining company Comibol, as part of a government plan to end a month of bloody confrontation that saw its 6,000 tin miners explosively set against each other.
Huanuni, 13,700 feet above sea level, seems like just another run-down and impoverished Andean town whose 19,000 largely indigenous inhabitants cling to existence under the punishing sun, but it shouldn’t by this way as Cerro Possokoni that rises over the town is one of the richest tin deposits in the world.
Tin is a metal used in solder for electrical appliances and electronics, and that forms the corrosion resistant coating on steel cans used for food preservation that sells for $9,700 a tonne.
Sargent Carlos Quenallata, 42, the latest victim of this internecine struggle, was taken hostage by self-employed cooperative miners, beaten and died two days after an explosive charge detonated near his stomach November 13.
Natural resources have a key role as President Evo Morales attempts to jump start Bolivia’s economy and spark desperately needed growth for the country to climb out of the poverty trap. The mining cooperatives were key supporters in Morales’ ascendancy to the presidency but the country was rocked when 16 people were killed at the Huanuni mine as opposing groups of miners threw dynamite at each other October 5 and 6 to gain control of the deposit.
“The miners are cold-blooded, they are not afraid of dying. They are the most powerful and disruptive element in the country. The cooperatives think that because [President Morales] is one of them that they own the mine. When they protest the people are scared, said Luis Mansuda, an Oruro taxi driver.
Morales responded to the violence with a decree nationalizing the Cerro Possokoni deposit October 31, terminating access to cooperative miners and forcing them to become employees of state mining company Comibol that operates the Huanuni mine. Over 3,200 cooperative miners have so far signed up and judging by the crowds thronging the company's offices to register, they appear to be in good spirits about it, all smiles and relief. "We are destroying ourselves as we work as small miners," said Fermin Calgue president of Karazapoto, one of four cooperative unions at Huanuni.
Once registered and trained cooperative miners will swap 15-hour shifts under extreme physical conditions for eight-hour shifts earning average pay of 3,300 bolivianos ($413) with health insurance, pensions and other benefits a month compared to 500-10,000 bolivianos as cooperative miners. "The idea is to absorb workers from the four cooperatives that work the upper levels of Cerro Posokoni,” said general manager Hector Arandia, which has been well received by many miners. "The majority are in agreement with joining Comibol because we suffer too much loading the mineral on our backs. Eighty-five percent of our miners are from Huanuni so we cannot go anywhere else to work. We will now work as brothers," said Calgue.
Not all the cooperatives are happy, with up to 400 members of the Playa Verde cooperative seeking continued access to the deposit, although the government has given a firm no. "At Huanuni there is not one square meter or one minute more for the cooperatives," said mining minister Guillermo Dalence, who said the request is from miners that have "the privilege to access high grade places inside the mine where they can take very rich mineral and with just two shifts earn their monthly income". "They think only of themselves. They want to get rich in a couple of years and leave," said Calgue.
Government action may solve the social/political problem at Huanuni but it creates a pending economic problem that could erupt in the future. Implementation of the decree increases Huanuni's workforce from 800 to 5,000 workers, quadrupling payroll costs, eating into its $800,000 a month profit and threaten its long-term viability if production does not increase. "This is a political solution, not a technical solution. We have tried for eight months to work out a technical solution but the government wants all the cooperatives to enter the mining company. Five thousand people is inefficient," said Calgue.
The government will pump $9.67 million dollars into the company to fund development and increase production from 800 to 1,500 tonnes per day of ore by mid 2007, although it is unlikely that the company will receive future government funding. "There are only the funds in the decree," said ministry spokeswoman Romina Montoya. Mine manager Hector Arandia admits that his biggest challenge will be generating investment capital from profits going forward. "We have to be self-sustaining after this initial investment," he said.
For Calgue, $9.6 million will not be enough. "The company needs more heavy machinery and equipment, and to condition all areas of the deposit for mining as it is full of holes," he said adding that wood is needed to shore up the tunnels made as miners worked along veins in an unplanned and uncontrolled manner.
Access to foreign investment is out of the question due to the political nature of Huanuni. Huanuni is an emblematic project on which the government has staked its political capital as it establishes it as a mining sector development model. "This will be a model of how we can have mining success in Bolivia in state hands. We can be self-sustaining so it is not necessary to have foreign or private investment. We will demonstrate that Huanuni is profitable," Arandia said.
Whether Huanuni can deliver is open to question. "With 5,000 employees, if they don't increase their production [soon] they are threatening their future," said David Rivero, general manager of the Vinto smelter/refinery that buys tin concentrate from Huanuni.
Finding a workable solution to the mining problems could be the key to stabilizing Bolivia. Miners have become the predominant social protest group, emerging as widespread mine closures forced laid-off miners to scrape a living from metal rich veins after metal prices sank during the 1980s. The other main choice was to migrate to the eastern Chapare region to grow coca.
The question now is whether President Morales can follow the political and social success he scored with the nationalization of the hydrocarbons sector that saw energy companies such as BG Group and YPF Repsol pass controlling stakes in their projects to the state, with a turnaround in mining. He may find that rolling over international oil and gas companies is a walk in the park compared to confronting 60,000 cooperative miners that are disposed to take things into their own hands to further their aims. "We are worried about [nationalization]," Calgue said.
ENDS
December 3, 2006
September 22, 2006
We are the best so pay us!
By Paul Harris in Antofagasta
With a strike at Escondida, the world’s largest copper mine, in its second week, striker morale remains high as they have no doubt as to the merits and eventual success of their claims. While the union and company management inch towards a new three-year collective contract, they do at least agree on one thing: that Escondida workers are the best in Chile. That cuts little ice in Antofagasta, the hub of Chile’s copper industry, a divided city in which there is a large dose of envy rather than sympathy for the miners’ above average salaries and generous bonuses, as Paul Harris reports from Antofagasta.
An encampment of tents housing an estimated 1,200 striking miners nestles in the grounds of Escondida’s sports complex, a baton round away from the company’s stylish copper coloured office block on the outskirts of Antofagasta that police are protecting. The encampment appears more like an army base than a picket line with workers camped together by section: haul truck drivers, oxide plant operators, sulphide plant operators, with discipline maintained by union officials. Far from sitting around, teams of miners have been active in the community cleaning beaches and painting a mural that is a homage to Escondida and the importance of copper mining to Chile. “We do these activities to keep occupied, maintain order and to keep attentive,” said hydraulic shovel operator Luis Valdes.
The camp demonstrates a high level of preparation, organization, discipline and solidarity amongst the strikers and an intention to hold out for what they want. “We began saving for four months to provide a kitty of 300,000 pesos per worker to fund the action,” says truck mechanic Danilo Noriega. “We are committed to the cause,” said Karla Zuelta, one of 11 women that work at the mine driving the massive 240-tonne haul trucks.
This is perhaps the best organized and well prepared strike in Chile’s history, a testament to the preparations undertaken in consultation with Law Investment Commerce Consult (LICC), a consulting team that includes lawyers, economists and finance experts that has helped the FMC union gets its finances in order and draft a collective contract proposal based on an economic analysis of Escondida and its owners BHP Billiton and Rio Tinto.
Chile’s unions have entered the modern age. “The union needs to fix its line of negotiation and argue it well from a solid base and based upon a long-term economic analysis, so we contracted a commercial advisor. This is an innovation, we have to modernize,” says union secretary Pedro Marin.
Escondida executives are unsurprised. "Escondida is a very professional company and we have the best professionals in Chile. They are very well prepared people and so it is no surprise that they are well organised in asking for what they want as they are the best," said Escondida corporate manager Pedro Correa.
The strikers are proud of their role in making Escondida the best mine in the world, but they want to share in that success. “When the copper price was at 76 cents a pound we pulled in our belts as the company asked us to with the austerity measures but now that the price is high the company says that it has to take care for the future so we are never going to share in this business,” says assistant controller Eduardo Diaz. “Escondida is a world force. If the copper price is in the clouds, we deserve to share it. We are only asking for 1 percent of the profits,” says mechanic Bernado Lobos.
The union claims that just 1 percent of Escondida’s profits – some $2.9 billion for the first half year – would be enough to meet its pay claim, which it lowered August 16 from an initial 13 percent rise to 10 percent to move towards an agreement. That is the profit on three days production. “They talk of the great family of Escondida but I do not feel like a child of this company at the moment. We are not important as human beings to them but we are a fundamental piece of this business, but a piece that is replaceable,” said one worker who did not want to reveal his name for fear of company reprisals.
Workers carry a card outlining the company’s core values that is signed by company president Bert Nacken that includes relations of mutual benefit that “create value for all parties” and that are based on relations of mutual respect that includes “open communication, the disposition to share”.
“The company’s attitude to our claim shows that this is worthless,” the workers said.
The miners attribute this to a change in senior management when Diego Hernandez became president of BHP Billiton’s base metals division and moved the regional headquarters to Chilean capital Santiago a couple of years ago. Chile, like other South American countries, still suffers from colonial-era class divides between the educated caudillos that executives tend to be drawn from and the mass of the working population, which is amplified by managers keen to provide the results demanded by their international pay masters. “When the company arrived [in Chile the American management] was very good to us. The change of administration to Chilean managers was a problem, from Diego Hernandez down,” says Diaz.
The union maintains that it is defending the rights of the country to benefit from its copper rather and sees increasing workers pay as one of the roads to achieve that. If miners earn more, money will filter through the economy and enable pay rises to be realised for other jobs. “How can Chile develop if they do not raise wages?” asks Noriega, pointing to a message written in large white letters on the hill overlooking the Escondida offices that strikers installed during the first days of the strike: ‘the copper is ours to the death’.
Adriana Ramirez who makes crab pies at the Jacques Cousteau sea food shack at Coloso in the shadow of Escondida’s concentrate load out terminal agrees with the miners. “I think it is good what they are asking for, for all of Chile,” she says.
Workers earn between 300,000 and 800,000 pesos a month before bonuses and are claiming a 10 percent pay rise and bonus package of about $30,000, which has generated little support amongst Antofagasta’s non-miner population, and has divided the city, according to taxi driver Joan La Fuente. “People think that they are crying like the child that does not want the toy it is offered,” he says. My father works at Escondida and we argue about this. Many people are envious because work at Escondida is well paid. Antofagasta is expensive but with 800,000 pesos a month you can live well,” he said.
Miners maintain that is just reward for the negative aspects of working 12-hour shifts at over 3,000 metres above sea level away from their families in a copper mine. “At that altitude the work conditions are very difficult and many people suffer from arterial hypertension,” says Lobos, something the company vigorously denies.
More galling for the miners is the disruption of shift patterns to their families and that contributes towards an estimated 40-50 percent of marriages failing, according to the union. “You miss everything. Birthdays, holidays, Christmas and Easter. Once every three years I get to spend Christmas with my family,” said Lobos. “No marriages last till people are 70. We all die alone and the men die first,” says Diaz.
Unlike many of their peers, mother of four Faviloa Sepulveda and her husband have held their marriage together through the 15 years he has worked at Escondida, but she has first hand experience of the risks miners run. “My father worked in the mines and he had a heart attack when he was 53. My husband is 44 and I don’t want him to have one. [Miners] get a lot of depression working 12-hour shifts at altitude. [My husband and I] talk about leaving the city as [Antofagasta] is not kind to the miners but we have four kids and the money is there in the mine,” she says.
Faviloa says that the miners’ wives will continue supporting the union and their husbands until they have a satisfactory solution. That may not be as soon as the copper market would like given that the union has a multimillion dollar war chest. “I cannot say how much we have but it is several million dollars, which is enough to maintain the strike until the end of August,” Marin said.
The outcome of the Escondida collective contract will set the tone for other contract negotiations later this year at state copper company Codelco’s Andina and Codelco Norte divisions. It will also raise the bar for Chile’s other private mining companies, whose executives privately fear the outcome both from the likelihood that they will have to pay their workers more and the possibility that they will lose personnel to Escondida.
ENDS
With a strike at Escondida, the world’s largest copper mine, in its second week, striker morale remains high as they have no doubt as to the merits and eventual success of their claims. While the union and company management inch towards a new three-year collective contract, they do at least agree on one thing: that Escondida workers are the best in Chile. That cuts little ice in Antofagasta, the hub of Chile’s copper industry, a divided city in which there is a large dose of envy rather than sympathy for the miners’ above average salaries and generous bonuses, as Paul Harris reports from Antofagasta.
An encampment of tents housing an estimated 1,200 striking miners nestles in the grounds of Escondida’s sports complex, a baton round away from the company’s stylish copper coloured office block on the outskirts of Antofagasta that police are protecting. The encampment appears more like an army base than a picket line with workers camped together by section: haul truck drivers, oxide plant operators, sulphide plant operators, with discipline maintained by union officials. Far from sitting around, teams of miners have been active in the community cleaning beaches and painting a mural that is a homage to Escondida and the importance of copper mining to Chile. “We do these activities to keep occupied, maintain order and to keep attentive,” said hydraulic shovel operator Luis Valdes.
The camp demonstrates a high level of preparation, organization, discipline and solidarity amongst the strikers and an intention to hold out for what they want. “We began saving for four months to provide a kitty of 300,000 pesos per worker to fund the action,” says truck mechanic Danilo Noriega. “We are committed to the cause,” said Karla Zuelta, one of 11 women that work at the mine driving the massive 240-tonne haul trucks.
This is perhaps the best organized and well prepared strike in Chile’s history, a testament to the preparations undertaken in consultation with Law Investment Commerce Consult (LICC), a consulting team that includes lawyers, economists and finance experts that has helped the FMC union gets its finances in order and draft a collective contract proposal based on an economic analysis of Escondida and its owners BHP Billiton and Rio Tinto.
Chile’s unions have entered the modern age. “The union needs to fix its line of negotiation and argue it well from a solid base and based upon a long-term economic analysis, so we contracted a commercial advisor. This is an innovation, we have to modernize,” says union secretary Pedro Marin.
Escondida executives are unsurprised. "Escondida is a very professional company and we have the best professionals in Chile. They are very well prepared people and so it is no surprise that they are well organised in asking for what they want as they are the best," said Escondida corporate manager Pedro Correa.
The strikers are proud of their role in making Escondida the best mine in the world, but they want to share in that success. “When the copper price was at 76 cents a pound we pulled in our belts as the company asked us to with the austerity measures but now that the price is high the company says that it has to take care for the future so we are never going to share in this business,” says assistant controller Eduardo Diaz. “Escondida is a world force. If the copper price is in the clouds, we deserve to share it. We are only asking for 1 percent of the profits,” says mechanic Bernado Lobos.
The union claims that just 1 percent of Escondida’s profits – some $2.9 billion for the first half year – would be enough to meet its pay claim, which it lowered August 16 from an initial 13 percent rise to 10 percent to move towards an agreement. That is the profit on three days production. “They talk of the great family of Escondida but I do not feel like a child of this company at the moment. We are not important as human beings to them but we are a fundamental piece of this business, but a piece that is replaceable,” said one worker who did not want to reveal his name for fear of company reprisals.
Workers carry a card outlining the company’s core values that is signed by company president Bert Nacken that includes relations of mutual benefit that “create value for all parties” and that are based on relations of mutual respect that includes “open communication, the disposition to share”.
“The company’s attitude to our claim shows that this is worthless,” the workers said.
The miners attribute this to a change in senior management when Diego Hernandez became president of BHP Billiton’s base metals division and moved the regional headquarters to Chilean capital Santiago a couple of years ago. Chile, like other South American countries, still suffers from colonial-era class divides between the educated caudillos that executives tend to be drawn from and the mass of the working population, which is amplified by managers keen to provide the results demanded by their international pay masters. “When the company arrived [in Chile the American management] was very good to us. The change of administration to Chilean managers was a problem, from Diego Hernandez down,” says Diaz.
The union maintains that it is defending the rights of the country to benefit from its copper rather and sees increasing workers pay as one of the roads to achieve that. If miners earn more, money will filter through the economy and enable pay rises to be realised for other jobs. “How can Chile develop if they do not raise wages?” asks Noriega, pointing to a message written in large white letters on the hill overlooking the Escondida offices that strikers installed during the first days of the strike: ‘the copper is ours to the death’.
Adriana Ramirez who makes crab pies at the Jacques Cousteau sea food shack at Coloso in the shadow of Escondida’s concentrate load out terminal agrees with the miners. “I think it is good what they are asking for, for all of Chile,” she says.
Workers earn between 300,000 and 800,000 pesos a month before bonuses and are claiming a 10 percent pay rise and bonus package of about $30,000, which has generated little support amongst Antofagasta’s non-miner population, and has divided the city, according to taxi driver Joan La Fuente. “People think that they are crying like the child that does not want the toy it is offered,” he says. My father works at Escondida and we argue about this. Many people are envious because work at Escondida is well paid. Antofagasta is expensive but with 800,000 pesos a month you can live well,” he said.
Miners maintain that is just reward for the negative aspects of working 12-hour shifts at over 3,000 metres above sea level away from their families in a copper mine. “At that altitude the work conditions are very difficult and many people suffer from arterial hypertension,” says Lobos, something the company vigorously denies.
More galling for the miners is the disruption of shift patterns to their families and that contributes towards an estimated 40-50 percent of marriages failing, according to the union. “You miss everything. Birthdays, holidays, Christmas and Easter. Once every three years I get to spend Christmas with my family,” said Lobos. “No marriages last till people are 70. We all die alone and the men die first,” says Diaz.
Unlike many of their peers, mother of four Faviloa Sepulveda and her husband have held their marriage together through the 15 years he has worked at Escondida, but she has first hand experience of the risks miners run. “My father worked in the mines and he had a heart attack when he was 53. My husband is 44 and I don’t want him to have one. [Miners] get a lot of depression working 12-hour shifts at altitude. [My husband and I] talk about leaving the city as [Antofagasta] is not kind to the miners but we have four kids and the money is there in the mine,” she says.
Faviloa says that the miners’ wives will continue supporting the union and their husbands until they have a satisfactory solution. That may not be as soon as the copper market would like given that the union has a multimillion dollar war chest. “I cannot say how much we have but it is several million dollars, which is enough to maintain the strike until the end of August,” Marin said.
The outcome of the Escondida collective contract will set the tone for other contract negotiations later this year at state copper company Codelco’s Andina and Codelco Norte divisions. It will also raise the bar for Chile’s other private mining companies, whose executives privately fear the outcome both from the likelihood that they will have to pay their workers more and the possibility that they will lose personnel to Escondida.
ENDS
May 27, 2006
Bolivia’s coca policy going bananas
Chimoré, Bolivia — A fireball shoots into the canopy of the Chapare jungle as soldiers torch a coca maceration pit, one of seven the unit destroys each day in the war on drugs.
Although President Evo Morales is maintaining the “zero cocaine” policy favored by Washington he draws the line at the U.S.-financed “zero coca” program. Since he took office January 22 Morales says Bollivia should be allowed to export legal coca-based products to stop the plant from finding its way into maceration pits.
Addressing the European Parliament this month (May), Morales asked why is coca “legal for Coca Cola but not for native peoples and peasants?”
Far from a rhetorical question, finding a workable solution to the coca issue is intrinsic to the country’s social, political and economic fabric, says Jim Shultz of Cochabamba based NGO the Democracy Center. It is also the main thorn in the side of Bolivia’s relations with the United States, according to US Embassy officials in La Paz.
As the populist Morales attempts to appease Washington and his political base, he has opted to continue with the consensual rather than forced coca eradication program of years past implemented last year by his predecessor, Carlos Mesa.
Like Mesa, Morales, who remains the president of the nation’s six coca growers federations, believes forced eradication creates social conflict and human rights abuses. Instead, security forces are concentrating on stopping the supply of chemicals used to produce cocaine as well as the destruction of cocaine laboratories and maceration pits.
Morales is also spearheading an international campaign to remove coca leaf from the list of controlled narcotics under the 1961 United Nations Single Convention on Narcotics. He hopes that Bolivia in the near future will export legal coca-based products, such as the tea that is available at the U.S. Embassy in La Paz that helps visitors cope with the effects of high altitude. Taking a packet of that tea out of the country is illegal.
The EU is sympathetic to Morales’ cause but he faces a Herculean task convincing the United States. Anne Patterson, assistant secretary for international narcotics says Washington will veto any attempts to amend current international law as it maintains its strict antinarcotics policy. "I do not think this idea is going to prosper in the future and the U.S. is not going to support the idea either. In our opinion, there is not international support for this idea. The treaties, the importnat treaty is very clear about the point, and so I am not goig to say more," Patterson said during a visit to Bolivia in early May.
Bolivian companies are ready, willing and able to develop coca products for export. La Paz based tea producer Windsor Hansa Ltda, a recipient of USAID funding, generates 10 percent of its $1 million annual sales from coca teas. Edgar Barco, medical advisor at La Paz based coca derivative products company Coincoca says “our industry is a natural pharmacy” but it suffers from “the stigma that it is synonymous with cocaine.”
Laboritario Hahnemann, in La Paz, the only Bolivian company with a license to export medicinal products to the United States, exports remedies using native plants such as maca and cats claw and would like to export coca-based products. “An excellent market for these products would exist, however while the US has a policy penalizing this product, there is no possibility of exportation,” said operations manager Jamil Rodas.
But according to a European diplomat, Washington has adopted a “new diplomatic stance” since Morales became president. It “does not mean that they are happy, but they have opted to wait and see and approach the problem with dialogue with the government.”
This détente is giving Morales room to stabilize his government, something the country desperately needs, given that it has gone through five presidents in five years. “There is an open dialogue (between the United States and Bolivia) and we are very relived about this. There are strong differences of opinion so it could fall apart, but they are sitting down and talking to each other. Both sides are really trying,” said Kathryn Ledebur of Cochabamba-based NGO Andean Information Network.
Washington remains unhappy about the discrepancy between Bolivia’s controlled substances law 1008 that permits 12,000 hectares (29,652 acres) of coca to be grown in the Yungas region north of La Paz for traditional uses such as tea and mastication and the 26,500 hectares (65,482 acres) that the U.S. State Dept says Bolivia grows (up from 19,600 hectares in 2000). It is assumed the difference is used for cocaine production.
Compared to Colombia and Peru, Bolivia is small fry in cocaine production. From the mid-1990s its cocaine production capacity has fallen from 255 metric tons to 70 metric tons according to the 2006 International Narcotics Control Strategy Report (INCSR) released by the Bureau for International Narcotics and Law Enforcement Affairs. Colombia is thought to produce about 430 metric tons while Peru is the largest coca grower at 38,000 hectares (93,898 acres) under coca cultivation.
However, eradication has slowed as coca plants are now taken out at the root, a more labor intensive process than the past practice of using chemical herbicides.
“We eradicated more before but we do not have deaths now. The level of eradication has fallen noticeably but is compensated by the form. There is no violence,” said Bolivian Lt. Col. Jose Soliz of the Joint Task Force. He and other soldiers say that “if the farmer denies us permission we cannot enter his land.”
Kathryn Ledebur of NGO Andean Information Network, that seeks peaceful long-term solutions to the social conflicts, injustices, and inequalities created and exacerbated by the U.S. war on drugs in Bolivia, counters that despite cooperative eradication “coca production is not growing at a faster rate than it did under enforced eradication.”
Bolivia’s anti-narcotics force known as FELCN (Fuerza Especial de Lucha Contra el Narcotrafico) now focuses on intercepting drugs and chemicals. In 2005 it seized 11.5 metric tons of cocaine/base, 540,774 liters of chemicals needed to manufacture cocaine such as acetone and diesel, and 298,815 metric tons of sulfuric acid and bicarbonate of soda. It also destroyed 2,619 cocaine laboratories. So far this year, in Chapare, 1,082 maceration pits that make cocaine base have been destroyed and 1,086 hectares of coca have been eradicated.
Coca production could increase given that Morales has protected the one cato (40x40 meters) of coca that each family is allowed to grow in the Chapare and Yungas regions. In a country in which more than 65 percent of inhabitants live in poverty, the 40,000 families in the Chapare are happy about this. Coca has been the lifeline for the miners-turned farmers from the western mining regions that were displaced following the collapse of metal prices in the 1980s. “People can subsist with the cato. In some areas it is their only income and people want the cato protected,” said Edwin Castillo, administrative official in remote Chapre village Puerto Villaroel.
Coca is the perfect subsistence crop says Ledebur as it grows easily in unfertile soil, provides up to four harvests a year and is easy to transport.
“Coca growers want to put food on their tables. With their cato they can earn $80-$120 per month per family,” she says.
The success of the cato means Morales is “stuck between a rock and a hard place,” said Jim Shultz of The Democracy Center. He is under “enormous pressure from cocaleros to increase coca production because this increases their members income,” he said.
Despite coca federation claims that self-regulation has caused no rise in coca production, the United States disagrees. Its International Narcotics Control Strategy Report (INCSR) report says that after years of declining coca production, it is now on the increase again. It says that in 2005, Bolivia’s coca cultivation increased eight percent overall — the fourth consecutive year of increase — even though the Government eradicated 6,000 hectares of coca. Still, Coca Growth is much less than before. But with about 26,500 hectares of coca planted in all Bolivia in 2005, this is still less than the highs of the early 1990s. In the chapare alone, according to the U.S. State Department, the areas planted with coca have fallen from 35,300 hectares in 1990 to 5,800 hectares in 2005 due to eradication policy.
One of the reasons for this decline is that, according to USAID, the area planted with legal crops such as bananas and pineapples have increased from 36,000 hectares in 1983 to 150,000 hectares in 2005 in the Chapare region. USAID pumps funds into the region to convert coca production into bananas, pineapples, oranges and palm hearts, but as coca is a higher value ‘crop’ many farmers like Edwin Castillo, who grows bananas and oranges, still grow the 40x40-meter cato the law allows because “it pays more and is easier to grow,” he said. “I have four hectares of bananas and produce 180 cases a week. Bananas are more work than coca. It is constant work,” added Geronimo Quispe, a farmer and father of four from the village of Nueva Canaan, who earns $124 per month.
Bananeros, through a growers association known as Caban, complain of being marginalized by the government. President Morales effectively ignores alternative crops as their success undermines his pro coca message that farmers have no alternatives to coca. His uneasy relationship with the bananeros stems from the road blocks organized by cocaleros in 2001 to impede banana exports when then, as now, he was leader of the coca federation.
“President Morales intends to damage the export of [bananas] to Europe to defend his thesis that people can only survive by growing coca in the Chapare. If we open the European market, his thesis about coca falls,” said Caban leader Miguel Zambrana.
Although President Evo Morales is maintaining the “zero cocaine” policy favored by Washington he draws the line at the U.S.-financed “zero coca” program. Since he took office January 22 Morales says Bollivia should be allowed to export legal coca-based products to stop the plant from finding its way into maceration pits.
Addressing the European Parliament this month (May), Morales asked why is coca “legal for Coca Cola but not for native peoples and peasants?”
Far from a rhetorical question, finding a workable solution to the coca issue is intrinsic to the country’s social, political and economic fabric, says Jim Shultz of Cochabamba based NGO the Democracy Center. It is also the main thorn in the side of Bolivia’s relations with the United States, according to US Embassy officials in La Paz.
As the populist Morales attempts to appease Washington and his political base, he has opted to continue with the consensual rather than forced coca eradication program of years past implemented last year by his predecessor, Carlos Mesa.
Like Mesa, Morales, who remains the president of the nation’s six coca growers federations, believes forced eradication creates social conflict and human rights abuses. Instead, security forces are concentrating on stopping the supply of chemicals used to produce cocaine as well as the destruction of cocaine laboratories and maceration pits.
Morales is also spearheading an international campaign to remove coca leaf from the list of controlled narcotics under the 1961 United Nations Single Convention on Narcotics. He hopes that Bolivia in the near future will export legal coca-based products, such as the tea that is available at the U.S. Embassy in La Paz that helps visitors cope with the effects of high altitude. Taking a packet of that tea out of the country is illegal.
The EU is sympathetic to Morales’ cause but he faces a Herculean task convincing the United States. Anne Patterson, assistant secretary for international narcotics says Washington will veto any attempts to amend current international law as it maintains its strict antinarcotics policy. "I do not think this idea is going to prosper in the future and the U.S. is not going to support the idea either. In our opinion, there is not international support for this idea. The treaties, the importnat treaty is very clear about the point, and so I am not goig to say more," Patterson said during a visit to Bolivia in early May.
Bolivian companies are ready, willing and able to develop coca products for export. La Paz based tea producer Windsor Hansa Ltda, a recipient of USAID funding, generates 10 percent of its $1 million annual sales from coca teas. Edgar Barco, medical advisor at La Paz based coca derivative products company Coincoca says “our industry is a natural pharmacy” but it suffers from “the stigma that it is synonymous with cocaine.”
Laboritario Hahnemann, in La Paz, the only Bolivian company with a license to export medicinal products to the United States, exports remedies using native plants such as maca and cats claw and would like to export coca-based products. “An excellent market for these products would exist, however while the US has a policy penalizing this product, there is no possibility of exportation,” said operations manager Jamil Rodas.
But according to a European diplomat, Washington has adopted a “new diplomatic stance” since Morales became president. It “does not mean that they are happy, but they have opted to wait and see and approach the problem with dialogue with the government.”
This détente is giving Morales room to stabilize his government, something the country desperately needs, given that it has gone through five presidents in five years. “There is an open dialogue (between the United States and Bolivia) and we are very relived about this. There are strong differences of opinion so it could fall apart, but they are sitting down and talking to each other. Both sides are really trying,” said Kathryn Ledebur of Cochabamba-based NGO Andean Information Network.
Washington remains unhappy about the discrepancy between Bolivia’s controlled substances law 1008 that permits 12,000 hectares (29,652 acres) of coca to be grown in the Yungas region north of La Paz for traditional uses such as tea and mastication and the 26,500 hectares (65,482 acres) that the U.S. State Dept says Bolivia grows (up from 19,600 hectares in 2000). It is assumed the difference is used for cocaine production.
Compared to Colombia and Peru, Bolivia is small fry in cocaine production. From the mid-1990s its cocaine production capacity has fallen from 255 metric tons to 70 metric tons according to the 2006 International Narcotics Control Strategy Report (INCSR) released by the Bureau for International Narcotics and Law Enforcement Affairs. Colombia is thought to produce about 430 metric tons while Peru is the largest coca grower at 38,000 hectares (93,898 acres) under coca cultivation.
However, eradication has slowed as coca plants are now taken out at the root, a more labor intensive process than the past practice of using chemical herbicides.
“We eradicated more before but we do not have deaths now. The level of eradication has fallen noticeably but is compensated by the form. There is no violence,” said Bolivian Lt. Col. Jose Soliz of the Joint Task Force. He and other soldiers say that “if the farmer denies us permission we cannot enter his land.”
Kathryn Ledebur of NGO Andean Information Network, that seeks peaceful long-term solutions to the social conflicts, injustices, and inequalities created and exacerbated by the U.S. war on drugs in Bolivia, counters that despite cooperative eradication “coca production is not growing at a faster rate than it did under enforced eradication.”
Bolivia’s anti-narcotics force known as FELCN (Fuerza Especial de Lucha Contra el Narcotrafico) now focuses on intercepting drugs and chemicals. In 2005 it seized 11.5 metric tons of cocaine/base, 540,774 liters of chemicals needed to manufacture cocaine such as acetone and diesel, and 298,815 metric tons of sulfuric acid and bicarbonate of soda. It also destroyed 2,619 cocaine laboratories. So far this year, in Chapare, 1,082 maceration pits that make cocaine base have been destroyed and 1,086 hectares of coca have been eradicated.
Coca production could increase given that Morales has protected the one cato (40x40 meters) of coca that each family is allowed to grow in the Chapare and Yungas regions. In a country in which more than 65 percent of inhabitants live in poverty, the 40,000 families in the Chapare are happy about this. Coca has been the lifeline for the miners-turned farmers from the western mining regions that were displaced following the collapse of metal prices in the 1980s. “People can subsist with the cato. In some areas it is their only income and people want the cato protected,” said Edwin Castillo, administrative official in remote Chapre village Puerto Villaroel.
Coca is the perfect subsistence crop says Ledebur as it grows easily in unfertile soil, provides up to four harvests a year and is easy to transport.
“Coca growers want to put food on their tables. With their cato they can earn $80-$120 per month per family,” she says.
The success of the cato means Morales is “stuck between a rock and a hard place,” said Jim Shultz of The Democracy Center. He is under “enormous pressure from cocaleros to increase coca production because this increases their members income,” he said.
Despite coca federation claims that self-regulation has caused no rise in coca production, the United States disagrees. Its International Narcotics Control Strategy Report (INCSR) report says that after years of declining coca production, it is now on the increase again. It says that in 2005, Bolivia’s coca cultivation increased eight percent overall — the fourth consecutive year of increase — even though the Government eradicated 6,000 hectares of coca. Still, Coca Growth is much less than before. But with about 26,500 hectares of coca planted in all Bolivia in 2005, this is still less than the highs of the early 1990s. In the chapare alone, according to the U.S. State Department, the areas planted with coca have fallen from 35,300 hectares in 1990 to 5,800 hectares in 2005 due to eradication policy.
One of the reasons for this decline is that, according to USAID, the area planted with legal crops such as bananas and pineapples have increased from 36,000 hectares in 1983 to 150,000 hectares in 2005 in the Chapare region. USAID pumps funds into the region to convert coca production into bananas, pineapples, oranges and palm hearts, but as coca is a higher value ‘crop’ many farmers like Edwin Castillo, who grows bananas and oranges, still grow the 40x40-meter cato the law allows because “it pays more and is easier to grow,” he said. “I have four hectares of bananas and produce 180 cases a week. Bananas are more work than coca. It is constant work,” added Geronimo Quispe, a farmer and father of four from the village of Nueva Canaan, who earns $124 per month.
Bananeros, through a growers association known as Caban, complain of being marginalized by the government. President Morales effectively ignores alternative crops as their success undermines his pro coca message that farmers have no alternatives to coca. His uneasy relationship with the bananeros stems from the road blocks organized by cocaleros in 2001 to impede banana exports when then, as now, he was leader of the coca federation.
“President Morales intends to damage the export of [bananas] to Europe to defend his thesis that people can only survive by growing coca in the Chapare. If we open the European market, his thesis about coca falls,” said Caban leader Miguel Zambrana.
Mountain biking the world’s most dangerous road
The cold mountain air ripping past my face draws tears from my eyes as my mountain bike plummets down the Yungas Road as it carves its way down the precipitous Bolivian Andes. The majestic scenery is straight out of Lord of the Rings, but at 50 mph, my eyes are fixed firmly on the road ahead so that I don’t end up as another white cross beside the road. Welcome to the world’s most dangerous road.
Walking through downtown La Paz, between the dried lama foeti of the Witches Market, the robust Cholita women wearing bowler hats and the pickpockets lingering for their next victim with a bottle of ketchup or a mouth full of spit, Calle Sagárnaga screams out offers of mountain bike trips down the world’s most dangerous road. On offer is the chance to cycle 64 km down the Yungas Road that heads north out of capital La Paz from 4,700 metres above sea level in the snow-capped Andes down to the atrophying heat of the Amazon jungle near at 1,600 metres. This road is putting Bolivia on the adventure tourism map, attracting those seeking thrills in an exotic location underpinned by a very real element of danger.
This is why I am sitting in a minibus with ‘Gravity Assisted Mountain Biking’ painted on the side, at an hour of the day that seems far too early with an international group that includes English, French, Canadians and Americans, dissipating the clouds of sleep with Marvin Gaye and The White Stripes, while chewing coca leaves to minimize the effect of the altitude.
Gravity took its first paying customer in July 22 1988 and as its business has grown from four to over 80 bicycles, the Yungas Road has developed into one of the most exciting and talked about activities in Latin America, with an estimated 13,000 people cycling it in 2005.
We are blessed with a sunny day and clear blue sky at the summit as the three guides (including two gringos) unload the bikes and we get ready to ride. While I have done off-road mountain biking before, many in the group haven’t and I can see that a few nerves beginning to creep in as people get ready to confront a road with a reputation for giving severe punishment for any error. Some babble nervously as others clam up in introspective silence, but when Kory Kramer, our guide from Michigan, USA, gives his ‘fear of God’ speech, he has everyone’s attention.
“Keep your eyes on the road because if you look at the beautiful valley below, that is where you are going to go. We had a German guy last year who rode off the cliff without making any attempt to brake. We rescued him and asked him what happened and he said he was looking at into the valley and just went over,” he says.
Kory says that the key to enjoying the ride is to keep within your ability, and he talks about rules of the road, how to mount and dismount, what to do if a truck comes, or a car comes, riding position, riding style and how to corner. “You have disk brakes so you do not need to use a Kung Fu death grip to stop. With a Kung Fu death grip you will go over the handlebars, so just use a couple of fingers and feather the pressure on and off,” he says.
The villages we will pass also add their own four-legged hazards, he says. “There are pigs and there are dogs running about, so if you see domestic animals slow down. You don’t want to hit a dog at 40mph,” says Kory.
Gravity’s founder, New Zealander Alistair Matthew, says the fear of God speech is the key element to ensure that everyone has a good day. “The fear of God speech is to keep people focused and to stop them from getting too excited. It is when you are not concentrating that is when you are going to fall, and you can fall anywhere from 4 metres to 800 metres off the edge,” he says, adding that, “we work up the drama. People don’t want to feel it is too easy. We are about myth creation here,” he says.
Suitably briefed we form a circle and offer a tribute to Bolivian earth goddess Pachamama and ask her for a safe journey. We swig some raw alcohol and spit it out on the ground, offering her alcohol so that she won’t take our blood.
THE RIDE
The first part of the ride is a smooth and fast asphalt section that gives us an opportunity to familiarize ourselves with the bicycles under relatively controlled conditions, particularly the bodyline for riding at speed, such as leaning into corners with the inside pedal raised so as not to catch any rocks, and of course feeling out the brakes. I opted to pay the extra for a bike with full suspension and enjoy the extra comfort and control it gives me as the road squiggles down the mountain.
We are so high up in the mountains that we ride through pockets of cloud, losing sight of the sheer valley walls that rise around us save for damp black rocks that peep out once through the mist, before bursting into the sunlight that shines down on the lush green valley below. The cold air biting into my face is compounded by the wind chill of speed and I have to twist my head so that the rush of air clears the tears forming in my eyes. My desire to look at the scenery is tempered by Kory’s speech but I cannot resist snatching glimpses of the beautiful landscape.
The Yungas area hosts coca plantations and so the road has a couple of police checkpoints as part of the government’s effort to restrict the movement of precursors, the chemical raw materials used in cocaine production. We pass through the Unduavi checkpoint and stop at a hamlet called Pongo where the guides check the bicycles and brief us about the next stage. The feeling of speed is addictive and has hooked everyone in the group. “I was a bit tense at first as this is fastest that I have been on a mountain bike,” says Jane from Nottingham. “This is free-falling on a bicycle, the ultimate two-wheel adrenaline rush," says Canadian lawyer Ben.
After 20km we pass from asphalt onto an uneven dirt track that just wide enough for a truck to pass. Riding out of the saddle, my legs are getting a real good shaking and suspension seems to have been the correct choice after all.
Riding on dirt at speed is a very different challenge, and I almost don’t adapt quick enough. I approach a right-hand corner and brake hard, but not early enough and I enter the corner too fast. My speed means I run wide from the track cleared by the passing of countless trucks and buses and takes me into the gravel banked up on the outside of the curve. I have entered the margin of error, the 30cm of gravel that delimits the edge of the road from the empty space of the valley below. I am riding too fast to brake hard while turning on the gravel and can feel the tightening effect of fear that comes with the knowledge that I am in a bad place. I fight the impulse to tighten up, try to keep loose, and lean hard into the mountain, using my body weight to get round the corner. All this happens in an instant.
This is stupid. I am riding too fast. I remember the words of Alistair the night before: “It is not actually a dangerous road. What makes it dangerous is people getting over excited.” Danger is relative of course, but with the Yungas road, if anything does go wrong, the chances are your that your F**ked, and with a 10- to 20-degree angle of descent, whoo!, the speed just keeps on coming on!
The road curves and turns so much that I lose sight of the rider in front of me. The person behind me has probably lost sight of me and so the thought occurs to me that if I went over the edge now no one would ever know until the next rest point. A sobering thought.
We pass under the patchy cloud and into a warmer climatic zone with rich greenery clinging to the sides of the valley that glistens under the Andean sun. The mountains rise vertically around us and waterfalls cascade in white ribbons down their sides. The distant sound of falling water impregnates the air and mingles with the low static murmur of the tyres on the gravel and the occasional warning blast of tri-tone truck horns. Bamboo and ficus grow in abundance and a host of other plants and vines cling to the mountains and black, iridescent yellow and blue butterflies flit about. We have descended several hundred metres and the air tastes fresh and sweet, and is scented with eucalyptus. It feels good to be alive.
The road passes through picture postcard scenery with views to die for as I look forward at the road squiggling ahead into the distance, or peep into the valley below that has a vertical drop from the road averaging about 400 metres.
We stop about half way down to snack on chocolate and a banana before entering a section with the exquisite San Juan waterfalls falling over the road from over a hundred metres above, cloaking the road in a diaphanous rainbow mist. The water is ice-cold and each drop stings as they hit me like a lead weights as I pass underneath.
As the road nears the bottom of the valley we see the village of Coroico, our destination, perched atop a spur. The road gradient softens and the gravel becomes a dusty surface that Kory says is more dangerous and slippery that the muddy sections.
Almost as if to prove this point, we pass a group of riders with Downhill Madness, another operator, who are gathered around an Australian girl who has just had a hard crash. It looks as though her bike slid out as she tried to turn with too much speed and she went slamming down on her right hand side. Her head is badly swollen, her eye closed, she has cuts all over her right leg and arm, and she is in a lot of distress but fortunately Kory is there to give her first aid since there is no sign of her group’s guide. We wait in silence as Kory helps her, the exciting fizz of our descent flattened by the reality of when things go wrong. “This is a sobering moment,” says Neil from Nottingham.
We ride the final section into Yolosa and gladly swap our mud covered bicycles for the cold beer that is waiting for us at the end of the road.
HOW DANGEROUS IS THE DANGEOUS ROAD?
The Yungas road has put Bolivia on the action adventure map. The many hundreds of deaths in vehicle crashes on the road serve to draw people from around the globe to flirt with danger. It is only as a result of this rush, and the explosion in number of tourists and operators, that people have died biking it. A handful of deaths over the years Alistair, a die-hard mountain-biker, admits that since he took his first paying customer in July 1988 that he has “created a monster”. “It is a legend, a myth. It is not about mountain biking in Bolivia; it is about the world’s most dangerous road.”
Gravity has grown from four to over 80 bicycles and an estimated 13,000 people cycled the Yungas Road in 2005, but just how dangerous is the Dangerous Road? Alistair is uncomfortable with the ‘Death Road’ sobriquet “because we have never had a death and we don’t think it is necessary to die on the road,” he says, because he takes safety very seriously including not riding in the rainy season, training his guides in first aid and rescue techniques and giving them regular days off.
Safety in part depends upon how much operators invest in their equipment. “Some companies operate with $50 bicycles but we import $1,000 Kona bicycles from the US, the mountain bike equivalent of a Clydesdale horse,” he says. On top of this, Gravity uses original Hayes hydraulic disk brakes that run $220 a pair and pads that retail at $22 a pair. “We go through 2,500 pairs a year. Other companies take sneaky shortcuts and may have a $1,000 bike with 50 cent recovered brake pads,” he says.
This difference was painfully clear for the Australian girl. She crashed because of brake failure; the brake plates had no pads on them, leading Alistair to speculate that they had been resurfaced with a substance that is little more than chewing gum and grit. Luckily for her, she had slid into the cliff. If she had gone the other way…
Safety boils down to individual responsibility and to this end travelers are perhaps their own worse enemy, seeing little difference between the different tour companies. “Tourists cannot assume that the difference between a $25 and $50 tour is the quality of the lunch. This is Bolivia. They cannot assume that there is a minimum safety standard here like there is in the US or Europe. The difference between what is promised by the operator and the product that is delivered can result in death, and since there is no investigation or follow up on accidents, there is little incentive for an operator to even try and meet the minimum safety standards that the tourist might assume will be in place,” he says.
The paradox is that in part it is the lax safety standards of many operators that have made the Yungas Road so popular. “Mountain biking could become a major attraction of the country but if there continues to be the safety issues to the level that exist it will turn people off. Or it will create the myth of the world’s most dangerous road,” he says.
Walking through downtown La Paz, between the dried lama foeti of the Witches Market, the robust Cholita women wearing bowler hats and the pickpockets lingering for their next victim with a bottle of ketchup or a mouth full of spit, Calle Sagárnaga screams out offers of mountain bike trips down the world’s most dangerous road. On offer is the chance to cycle 64 km down the Yungas Road that heads north out of capital La Paz from 4,700 metres above sea level in the snow-capped Andes down to the atrophying heat of the Amazon jungle near at 1,600 metres. This road is putting Bolivia on the adventure tourism map, attracting those seeking thrills in an exotic location underpinned by a very real element of danger.
This is why I am sitting in a minibus with ‘Gravity Assisted Mountain Biking’ painted on the side, at an hour of the day that seems far too early with an international group that includes English, French, Canadians and Americans, dissipating the clouds of sleep with Marvin Gaye and The White Stripes, while chewing coca leaves to minimize the effect of the altitude.
Gravity took its first paying customer in July 22 1988 and as its business has grown from four to over 80 bicycles, the Yungas Road has developed into one of the most exciting and talked about activities in Latin America, with an estimated 13,000 people cycling it in 2005.
We are blessed with a sunny day and clear blue sky at the summit as the three guides (including two gringos) unload the bikes and we get ready to ride. While I have done off-road mountain biking before, many in the group haven’t and I can see that a few nerves beginning to creep in as people get ready to confront a road with a reputation for giving severe punishment for any error. Some babble nervously as others clam up in introspective silence, but when Kory Kramer, our guide from Michigan, USA, gives his ‘fear of God’ speech, he has everyone’s attention.
“Keep your eyes on the road because if you look at the beautiful valley below, that is where you are going to go. We had a German guy last year who rode off the cliff without making any attempt to brake. We rescued him and asked him what happened and he said he was looking at into the valley and just went over,” he says.
Kory says that the key to enjoying the ride is to keep within your ability, and he talks about rules of the road, how to mount and dismount, what to do if a truck comes, or a car comes, riding position, riding style and how to corner. “You have disk brakes so you do not need to use a Kung Fu death grip to stop. With a Kung Fu death grip you will go over the handlebars, so just use a couple of fingers and feather the pressure on and off,” he says.
The villages we will pass also add their own four-legged hazards, he says. “There are pigs and there are dogs running about, so if you see domestic animals slow down. You don’t want to hit a dog at 40mph,” says Kory.
Gravity’s founder, New Zealander Alistair Matthew, says the fear of God speech is the key element to ensure that everyone has a good day. “The fear of God speech is to keep people focused and to stop them from getting too excited. It is when you are not concentrating that is when you are going to fall, and you can fall anywhere from 4 metres to 800 metres off the edge,” he says, adding that, “we work up the drama. People don’t want to feel it is too easy. We are about myth creation here,” he says.
Suitably briefed we form a circle and offer a tribute to Bolivian earth goddess Pachamama and ask her for a safe journey. We swig some raw alcohol and spit it out on the ground, offering her alcohol so that she won’t take our blood.
THE RIDE
The first part of the ride is a smooth and fast asphalt section that gives us an opportunity to familiarize ourselves with the bicycles under relatively controlled conditions, particularly the bodyline for riding at speed, such as leaning into corners with the inside pedal raised so as not to catch any rocks, and of course feeling out the brakes. I opted to pay the extra for a bike with full suspension and enjoy the extra comfort and control it gives me as the road squiggles down the mountain.
We are so high up in the mountains that we ride through pockets of cloud, losing sight of the sheer valley walls that rise around us save for damp black rocks that peep out once through the mist, before bursting into the sunlight that shines down on the lush green valley below. The cold air biting into my face is compounded by the wind chill of speed and I have to twist my head so that the rush of air clears the tears forming in my eyes. My desire to look at the scenery is tempered by Kory’s speech but I cannot resist snatching glimpses of the beautiful landscape.
The Yungas area hosts coca plantations and so the road has a couple of police checkpoints as part of the government’s effort to restrict the movement of precursors, the chemical raw materials used in cocaine production. We pass through the Unduavi checkpoint and stop at a hamlet called Pongo where the guides check the bicycles and brief us about the next stage. The feeling of speed is addictive and has hooked everyone in the group. “I was a bit tense at first as this is fastest that I have been on a mountain bike,” says Jane from Nottingham. “This is free-falling on a bicycle, the ultimate two-wheel adrenaline rush," says Canadian lawyer Ben.
After 20km we pass from asphalt onto an uneven dirt track that just wide enough for a truck to pass. Riding out of the saddle, my legs are getting a real good shaking and suspension seems to have been the correct choice after all.
Riding on dirt at speed is a very different challenge, and I almost don’t adapt quick enough. I approach a right-hand corner and brake hard, but not early enough and I enter the corner too fast. My speed means I run wide from the track cleared by the passing of countless trucks and buses and takes me into the gravel banked up on the outside of the curve. I have entered the margin of error, the 30cm of gravel that delimits the edge of the road from the empty space of the valley below. I am riding too fast to brake hard while turning on the gravel and can feel the tightening effect of fear that comes with the knowledge that I am in a bad place. I fight the impulse to tighten up, try to keep loose, and lean hard into the mountain, using my body weight to get round the corner. All this happens in an instant.
This is stupid. I am riding too fast. I remember the words of Alistair the night before: “It is not actually a dangerous road. What makes it dangerous is people getting over excited.” Danger is relative of course, but with the Yungas road, if anything does go wrong, the chances are your that your F**ked, and with a 10- to 20-degree angle of descent, whoo!, the speed just keeps on coming on!
The road curves and turns so much that I lose sight of the rider in front of me. The person behind me has probably lost sight of me and so the thought occurs to me that if I went over the edge now no one would ever know until the next rest point. A sobering thought.
We pass under the patchy cloud and into a warmer climatic zone with rich greenery clinging to the sides of the valley that glistens under the Andean sun. The mountains rise vertically around us and waterfalls cascade in white ribbons down their sides. The distant sound of falling water impregnates the air and mingles with the low static murmur of the tyres on the gravel and the occasional warning blast of tri-tone truck horns. Bamboo and ficus grow in abundance and a host of other plants and vines cling to the mountains and black, iridescent yellow and blue butterflies flit about. We have descended several hundred metres and the air tastes fresh and sweet, and is scented with eucalyptus. It feels good to be alive.
The road passes through picture postcard scenery with views to die for as I look forward at the road squiggling ahead into the distance, or peep into the valley below that has a vertical drop from the road averaging about 400 metres.
We stop about half way down to snack on chocolate and a banana before entering a section with the exquisite San Juan waterfalls falling over the road from over a hundred metres above, cloaking the road in a diaphanous rainbow mist. The water is ice-cold and each drop stings as they hit me like a lead weights as I pass underneath.
As the road nears the bottom of the valley we see the village of Coroico, our destination, perched atop a spur. The road gradient softens and the gravel becomes a dusty surface that Kory says is more dangerous and slippery that the muddy sections.
Almost as if to prove this point, we pass a group of riders with Downhill Madness, another operator, who are gathered around an Australian girl who has just had a hard crash. It looks as though her bike slid out as she tried to turn with too much speed and she went slamming down on her right hand side. Her head is badly swollen, her eye closed, she has cuts all over her right leg and arm, and she is in a lot of distress but fortunately Kory is there to give her first aid since there is no sign of her group’s guide. We wait in silence as Kory helps her, the exciting fizz of our descent flattened by the reality of when things go wrong. “This is a sobering moment,” says Neil from Nottingham.
We ride the final section into Yolosa and gladly swap our mud covered bicycles for the cold beer that is waiting for us at the end of the road.
HOW DANGEROUS IS THE DANGEOUS ROAD?
The Yungas road has put Bolivia on the action adventure map. The many hundreds of deaths in vehicle crashes on the road serve to draw people from around the globe to flirt with danger. It is only as a result of this rush, and the explosion in number of tourists and operators, that people have died biking it. A handful of deaths over the years Alistair, a die-hard mountain-biker, admits that since he took his first paying customer in July 1988 that he has “created a monster”. “It is a legend, a myth. It is not about mountain biking in Bolivia; it is about the world’s most dangerous road.”
Gravity has grown from four to over 80 bicycles and an estimated 13,000 people cycled the Yungas Road in 2005, but just how dangerous is the Dangerous Road? Alistair is uncomfortable with the ‘Death Road’ sobriquet “because we have never had a death and we don’t think it is necessary to die on the road,” he says, because he takes safety very seriously including not riding in the rainy season, training his guides in first aid and rescue techniques and giving them regular days off.
Safety in part depends upon how much operators invest in their equipment. “Some companies operate with $50 bicycles but we import $1,000 Kona bicycles from the US, the mountain bike equivalent of a Clydesdale horse,” he says. On top of this, Gravity uses original Hayes hydraulic disk brakes that run $220 a pair and pads that retail at $22 a pair. “We go through 2,500 pairs a year. Other companies take sneaky shortcuts and may have a $1,000 bike with 50 cent recovered brake pads,” he says.
This difference was painfully clear for the Australian girl. She crashed because of brake failure; the brake plates had no pads on them, leading Alistair to speculate that they had been resurfaced with a substance that is little more than chewing gum and grit. Luckily for her, she had slid into the cliff. If she had gone the other way…
Safety boils down to individual responsibility and to this end travelers are perhaps their own worse enemy, seeing little difference between the different tour companies. “Tourists cannot assume that the difference between a $25 and $50 tour is the quality of the lunch. This is Bolivia. They cannot assume that there is a minimum safety standard here like there is in the US or Europe. The difference between what is promised by the operator and the product that is delivered can result in death, and since there is no investigation or follow up on accidents, there is little incentive for an operator to even try and meet the minimum safety standards that the tourist might assume will be in place,” he says.
The paradox is that in part it is the lax safety standards of many operators that have made the Yungas Road so popular. “Mountain biking could become a major attraction of the country but if there continues to be the safety issues to the level that exist it will turn people off. Or it will create the myth of the world’s most dangerous road,” he says.
January 14, 2006
No change of pace
Seems like it's been a couple of months since I last posted. 2005 was a full year with visits to Peru, Bolivia, Colombia, and then three weeks in Brazil in December that took in five major cities and a number of smaller ones that left little time for sightseeing.
It is hardly surprising that I have had little time to buy anything for my new apartment, as you can see, although the main things have now been completed: the floor, the painting and the blinds. I should go and buy some furniture but it's so hot here that it seems more sensible to work on the tan as all will for anything else fades.
2006 is going to be another hectic year. Gavin and I will be working on at least three more books this year, I have a trip to Buenos Aires coming up and I am putting together some projects for Colombia, Bolivia and Brazil that will hopefully come together. And I hope to visit Europe in the July or August for a week's work and three weeks holiday, one of which I want to take a week in Spain or France, and maybe a week or two in Eastern Europe.
I should also be starting a Masters in International Studies in April.
Best wishes for the year ahead.
Paul
It is hardly surprising that I have had little time to buy anything for my new apartment, as you can see, although the main things have now been completed: the floor, the painting and the blinds. I should go and buy some furniture but it's so hot here that it seems more sensible to work on the tan as all will for anything else fades.
2006 is going to be another hectic year. Gavin and I will be working on at least three more books this year, I have a trip to Buenos Aires coming up and I am putting together some projects for Colombia, Bolivia and Brazil that will hopefully come together. And I hope to visit Europe in the July or August for a week's work and three weeks holiday, one of which I want to take a week in Spain or France, and maybe a week or two in Eastern Europe.
I should also be starting a Masters in International Studies in April.
Best wishes for the year ahead.
Paul
Spicing up IT with Open Source
By Paul Harris in Santiago (November 2005)
Chile is one of Latin America’s leading lights in the development of Open Source software, an upstart that is challenging the domain of licensed software. Open Source software is often labelled “free” software but that is neither accurate nor does it do the concept justice. Open Source may not mean much for anyone beyond the periphery of IT circles but Lan.com and Paris.cl are using it, which may make you curious about what it is and why should Chilean companies know about it?
Open Source software is software whose code is open for all to use and develop with software products generated by the Open Source community generally distributed free of charge, while the public is generally barred from access to code as found in Microsoft products that are traditionally available for a license fee.
In the computer world there are the server back end and the desktop front end. Open Source is having a big impact on the server software market and will become the dominant business model through the success of the Internet in facilitating new collaboration, production and distribution methods, says Tim Delhaes, product architect at Chile’s first Open Source company Humano2. “While Open Source is not an alternative all the time but if you are not considering it as an option you are definitely making a mistake,” he says.
By looking into Open Source you are in good company, he continues. “About 70% of all websites - Google, Amazon and Hotmail – run on Open Source software. Linux, Apache, My SQL and PHP – reffered to as LAMP - are the three infrastructure products that put companies on the net. Why pay for a licence for an e-commerce package when you can get the same software that Google uses for free?” he asks.
Cost is seen as the initial advantage as not having to buy software licenses either represents huge potential savings to companies or a change in their spending habits. Hardware companies love this because IT budgets are spent on hardware. “Software licences are like tomatoes as they have a limited life and then you loose them and have to buy more. The effect of Open Source software on the hardware market is like when you subsidise gasoline; people buy bigger and better performing cars, so big hardware manufacturers like IBM, Intel and Hewlett Packard are making lots of money, with Open Source related revenues of over $3 billion in 2003 according to eWeek.com,” he says.
Eduardo Pooley, Microsoft’s regional business and applications manager, counters that free Open Source software does not have zero cost because of the higher total cost that follows the zero initial payment due to development, training support and other costs that are incurred. “Overall it is still cheaper with a company like Microsoft,” he says underscoring the viewpoint divergence between the traditional and the new.
Open Source is certainly developing new business opportunities in local markets as companies form to provide services with different business models using Open Source such as Red Hat (packages and distributes code in distinct versions), MySQL (relational database server), JBoss’s business model is professional services such as consulting, integration and training while companies like Sugar CRM and Santiago’s Humano2.com pioneer web hosting services. “Open Source today is like the Internet was the moment that Jeff Bezos put books on the web,” says Delhaes.
Paris.cl - the online e-commerce store of retailer Almacenes Paris - works closely with another Open Source firm, Netred, to develop its business and its own developers commonly use Open Source development tools, says Patrico Perez, head of development projects for online sales at Paris’ parent company Cencosud. “Our developers use Open Source tools such as [development toolset] Eclipse a lot. It is very exciting and allows us to do things we couldn’t do before,” he says.
Despite some notable early movers, the IT industry is divided on just how much Open Source will change the industry and how fast its penetration will be. “Open source is still up to five years away from mainstream use in enterprise IT infrastructures, despite the progress made in the commercialisation of the platform,” www.silicon.com blogger Andy McCue said in September quoting a Gartner study.
Microsoft potentially has a lot to loose if Open Source software starts to erode its software license revenue base, but the company seems certain it is not going to loose out in the server market. “Microsoft has not lost out against Open Source. People don’t change Windows for Linux. It is a very dynamic sector and for each front end – the web, email, blogs – there is a server. Linux does well but it is only for techies as most people just want to plug and play. 90% of people just want software to function. How many companies really modify code?” asks Pooley.
DESKTOP
Despite its strength in the server environment Open Source software is just starting to gain strength in the desktop environment. The Open Source web browser Firefox celebrated its first anniversary in Chile in November, which is equal or better than Microsoft’s Internet Explorer in terms of security, velocity and functionality, according to Delhaes, who says it shows that the collaborative production methodology can produce higher quality products at a lower price.
Delhaes says Finnish cell phone producer Nokia is a key supporter of Firefox because it knows every cell phone will soon connect to the Internet and therefore need a browser. “Nokia has the choice between shipping a free Open Source browser like Firefox or paying millions of dollars in license fees to Microsoft for Windows,” he says. Google is even paying $1 to download Firefox with its toolbar.
Paris.cl has been one of the first Chilean companies to respond to the growth in the penetration of Firefox browsers. “In 2004 Internet Explorer accounted for 99.6 percent of our website traffic, this year it is 94.3 percent with Firefox having grown from 0.2 percent to 4.9 percent. The 5 percent implies the whole site has to work with Firefox, which has been the case since October 2005,” says Perez.
5% Firefox may not sound much but it is enough for Paris.cl to see an opportunity for differentiation while ensuring it does not lose potential customers, and from 2006, Perez says the company will undertake more commercial initiatives using Open Source software such as website plug-ins. In countries with higher penetration like Germany (25% Firefox) web businesses cannot afford to ignore it. “You cannot force a user to change their browser, but you can change your server,” says Delhaes.
The growth of Firefox is a big deal according to Delhaes who believes the browser is the desktop of the future, the application through which people access all the tools they need from email (Hotmail and Gmail) to office applications. “Whoever dominates the client interface in which the browser is an essential part, controls access to the network and what applications run,” he says.
Perez thinks Firefox competes well with Microsoft’s Internet Explorer. “I think Firefox is more secure and quicker than Internet Explorer because it is less popular and so is less subject to attack,” he said.
Microsoft’s Pooley says there are many popular myths about the company’s Open Source rivals, which he supports with a body of evidence including studies by respected research groups and industry commentators. As Firefox’s popularity grows hackers will take more interest in ransacking it destroying its reputation as secure application, a problem Microsoft has been dealing with for years for its Internet Explorer web browser. “Firefox was secure while it was unknown but attacks and viruses start with volume. It is difficult to have a program that has no problems of compatibility or security once it reaches a critical mass,” he says.
Pooley’s view is shared by blogger George Ou, an advanced networking and server architecture expert. “Now that Firefox has become the first viable contender to Microsoft Internet Explorer in years, its popularity has brought with it some unwanted attention. Firefox not only has more vulnerabilities per month than Internet Explorer, but it is now surpassing Internet Explorer for the number of exploits available for public download in recent months,” he said.
Delhaes counters that because software is produced using Open Source methodologies does not mean it is open to hackers and viruses. All software has failures or vulnerabilities but as more and more people are looking at the source code, there will be fewer and fewer errors.
Businesses adopt new technology at different rates depending on their fears and risk profile. Although part of a larger group, the nature of Paris.cl’s business allows it to accept a higher degree of risk to explore future technologies. The website has a big change coming up as it is working towards migrating from its IBM 4.1 platform to the IBM 5.6 platform to have a full Java [Open Source] e-commerce store. “Big companies are trapped and have no liberty to change [software platforms]. We are not a traditional company, we have more flexibility, are not tied to any [software system] and can take technological change initiatives through developing the parts of the business that are not sensitive to change,” Perez said.
However, he notes that flexibility comes at a price. “We have two development teams and it is costly to develop in parallel,” he says, noting that “in 2006 we are going to seriously analyse whether we can make [Open Source] changes in the heart of the e-store.”
DIGITAL DIVIDE
Delhaes says Microsoft completely misses the point. “Microsoft talks about total cost of ownership or TCO, but it is not a question of how much money but where the money goes. Does it go to Microsoft or stay in your country?” he asks.
The money spent on license fees is staggering: over $120 million a year just by Brazil’s federal government and more than $100 million a year in Chile says Delhaes. Savings on license fees through Open Source can release funds for other uses such as health and education and help breach the digital divide.
Breaching the digital divide is increasingly on the agenda of Latin American governments that do not want to get too far left behind by the developed world. The topic has been given added impetus this year through an initiative by MIT Media Lab founder Nicholas Negroponte with a plan to build a $100 Linux PCs. Argentina has stolen a march on its neighbours and committed to manufacture up to one million of these PCs.
Chile has yet to move on the initiative because of a big software lobby, says Delhaes. “Instead of spending $100 million on software licences the government could give one million $100 laptops to kids in schools,” he says.
Breaching the digital divide is about more than cheap computers and concerns developing local IT industries. Open Source provides a great opportunity by allowing local firms to develop and fix software rather than simply re-installing it or relying on expensive engineers from foreign companies. “By offering the possibility to develop and fix things yourself through Linux server software countries develop their own capacity to fill the digital divide. The dollars stay in country not at multi-national software companies,” says Delhaes. “
However, reports from China, where the government has supported Open Source initiatives, say enthusiasm is waning. “The strong support for the free operating system has been detrimental to the development of software products in the country,” says Zou Bian, a researcher at the Chinese Software Industry Association (CSIA) according to Chinese English language news website China Daily, due to the difficulty of generating income streams. But as Delhaes points out, “there are many business models and not all work.”
Microsoft says it is doing its part too, through its participation in the My First PC initiative that Pooley says removes the three barriers of price, fear and availability. In its first three months 60,000 of the PCs have been sold which contain a simplified, cut-down version of Windows that is one third of the cost of traditional Windows. The PCs cost 249,000 pesos payable in 36 instalments.
What is certain is that through the Internet the Open Source is here to stay and will spread to other sectors says Delhaes. “Open Source software is not an isolated phenomena. Open Source is part of global change in intellectual property. In many industries the Internet suddenly reduced the cost of distribution as well as R&D. The most affected industries – including software, music and bio technology – are undergoing radical changes. This change is creating great opportunities for everyone: customers, IT companies, and governments,” he says.
ENDS
Uribe clears road to El Dorado
By Paul Harris in Medellin (November 2005)
The kidnapping of a Canadian mining contractor by Colombia’s FARC guerrilla group was the final straw for Toronto exploration junior Greystar Resources. The much publicised kidnapping lasted six-months after which the company, like many other miners, packed up shop and abandoned the country in 1999 amid a deteriorating security situation and a plummeting gold price.
While the reality of Colombia’s civil conflict is not bombs failing through the air as portrayed in the Brad Pitt film Mr & Mrs Smith, horror stories like Greystar’s made Colombia a pariah for most mining investors.
“We went in with a high degree of ignorance of the conditions. We had minimum security and worked on the ‘good faith’ principle,” says exploration vice president Frederick Felder of the company’s early days in Colombia.
But Greystar knew there was gold there, and with a rising gold price, Felder returned with his exploration team in 2003 to find it. Greystar now has eight drill rigs working and the company’s successful return has made it something of a poster child for Colombian authorities keen to show that the country is safe for investors and ripe for investment.
ECONOMIC POLICY
Since he was elected in 2002 President Alvaro Uribe has re-established government control through much of the country with hard-line military intervention and the miners are starting to return following dramatic falls in both the murder and kidnapping rates. "Colombia will be attractive for investors," Uribe told a Medellin convention hall packed with miners November 18. “Colombia is ready to be a major mining country,” he said.
Economic development is a key part of the peace process and Uribe believes attracting foreign investment to kick-start the economy is paramount to bring about change. Political stability is allowing Colombia to start catching up with its Latin peers and direct foreign investment grew 34.7% in 2004 to $2.4 billion. This is better than Peru and Venezuela but behind the growth rates of Mexico, Chile, Brazil and Argentina, according to Eclac, the United Nation’s economic commission for Latin America.
Mining is already 14 percent of GDP. Colombia produces about 55 million tpy of coal of which 50 million tonnes is exported to Europe and the US by Alabama’s Drummond Co and Cerro Cerrajon (owned by three of the world’s four largest coal miners BHP Billiton, Rio Tinto and Glencore). Even without modern mining Colombia produced about 50 tonnes of gold in 2004. “This 50 tonnes implies gigantic potential to develop gold mining activity,” says Eduardo Chaparro, mining analyst at Eclac, adding that Peru’s gold production 20 years ago was 50 tonnes and today it is over 400 tonnes.
Colombia is gold country and has attracted adventurers, plunderers and pirates for almost 500 years and with gold at US$500/oz and world production falling to an eight-year low in 2004, foreign miners are warming to the country. Colombia’s three belts of Andean cordillera have not been tackled with modern technology but they contain gold, silver, platinum, copper, tin and nickel. It is “very probable that there exist large undiscovered reserves,” says Archak Bedrossian, an international gold consultant and trader.
“The odds of finding a large ore body may be greater than in highly explored nations such as Canada, Peru, Indonesia, the Philippines,” says Dr James Otto, international mining law expert at the University of Colorado.
Canadian financier James Sikora, president and CEO of Primecap Resources, is so impressed with Colombia that he relocated his family to Medellin in July from Edmonton, Alberta so he can work on the gold-silver Golondrina property the company acquired in southwestern Narino department. "There are great projects at really great prices here. We think Colombia has so much potential that we are going to seek a listing here," he says.
MAKING THINGS RIGHT FOR MINING INVESTORS
Good geology is seldom enough to attract mining investment. Miners want stable business conditions and a favourable tax regime, aspects Colombia has been working to improve. A new mining code in 2001 aimed to “bring legal conditions for mining in Colombia in-line with world trends … to obtain better competitiveness as a nation with other Latin American states," says Beatrice Duque, of the ministry of mines and energy.
Mining institutions have also been overhauled which has seen the creation of Ingeominas to unite resource administration and geological services in the same office to improve efficiency and more services are being made available on-line.
Uribe has also implemented some of the most compeititive taxation conditions in the world, not just Latin America. "Congress has approved a law so that we can form tax stability agreements with investors and we are working to reduce taxes,” Uribe said during a remarkable three-hour discourse at the Medellin mining event where he demanded delegates ask him what needs to be done to make Colombia more attractive for miners.
Uribe’s personal commitment is winning converts in many quarters of the international mining community. "Colombia is a lot better than I thought. Seeing President Uribe [in Medellin] was impressive," says Peter Baxter, exploration manager of Vancouver's Bema Gold.
“We regard President Uribe as, perhaps, one of the most driven, dedicated, intelligent and engaging heads of state we have ever come across,” says Colin Andrew, managing director of London-based Cambridge Mineral Resources that announced during the Medellin event that it had signed options on several gold properties in Antioquia department. “Colombia has distinguished itself in the world economy by passing laws facilitating investment and getting rid of red tape associated with forming and operating a business,” says Sikora.
TURNING THE CORNER
Uribe’s efforts are already bearing fruit. Colombia jumped seven spots in the World Economic Forum’s 2005 Global Competitiveness Report to 57 of 117 countries, placing it above emerging mining nations such as Russia, Mozambique, Indonesia and Mongolia. In Latin America it is bettered only be Chile, Uruguay, Mexico and El Salvador.
Mining sector GDP grew 7.0 percent between 2003-2004 while the country grew 3.5 percent. Foreign investment in mining reached $1.246 billion in the same period, and mining exports increased 24.0 percent $3.098 billion.
However, most North American miners spend their dollars in countries that score favourably in the Fraser Institute mining attractiveness rankings. While Chile scores 91 out of 100, Peru 82, Brazil 74, Argentina 59 and South Africa 56, Colombia has yet to be ranked.
Gold giant Barrick Gold, active in Chile, Argentina and Peru, says it is “not ready for Colombia. It is the kind of place where the larger companies look to junior’s to go in and see what is there. Large companies see what comes up and go in and either indirectly fund exploration or take a stake,” says vice president Vince Borg.
COMPETITION WITH OTHER COUNTRIES
Colombia has strong competition for mining investment dollars but it is looking a better bet according to Daniel Linsker, Latin American analyst of UK-based risk consultants Control Risks Group. “Colombia is very institutionalised and offers a more stable political regime, lower taxes and the best security of tenure for mining companies [compared to Peru and Venezuela], ” he says.
Chile is the leading regional mining light generating $16.9 billion in mining exports in 2004 from a total of $29 billion. Mining posted $6.9 billion in Peru from a total of $12.5 billion, but in Colombia mining generated $3 billion of $16.5 billion in exports.
Colombia also beats out most of Africa according to Linsker. “You face the same problems Colombia has in Africa but without the political stability,” he says, and miners are coming around to this thinking. “Whether or not kidnapping outweighs the dangers of malaria, AIDS … or military action is a debateable point, but I would rate Colombia well ahead of much of west and central Africa in terms of its potential and ability to do work. If stabilization continues [Colombia] will become one of the most sought after addresses in the mining world,” says Andrew.
Big mining companies continue to poke around neighbourhoods that make Colombia seem benign. Arizona’s Phelps Dodge is working on a copper project in the DR Congo, which is virtualy at the bottom of political attractiveness and security tables.
THE RETURN TO EL DORADO?
The first major to engage in Colombia is South Africa's AngloGold Ashanti which has amassed a “huge land package” in Antioquia and Bolivar departments through subsidiary Sociedad Kedahda says exploration manager Chris Lodder as it looks for deposits containing over 5 million oz. Bullish exploration by AngloGold Ashanti could create opportunities for other miners according to Bema Gold’s Baxter. "They may pass on opportunities that do not have significant impact on their balance sheet and farm them out to smaller opportunities," he says.
But it is a Canadian junior Greystar Resources that is in the vanguard of Colombia gold mining renaissance, as it puts the troubles of the past behind it and works towards a feasibility study for its 10 million oz Angostura gold property near Bucaramanga, in Santander department, having so far spent $48 million on the project. “It is always good to be in a country that has been overlooked," says Felder.
Colombia has a golden future and with President Uribe permitted and willing to run for re-election in July 2006, many feel it will achieve it.
Safety first
President Uribe has taken great steps to improve Colombia’s security situation and to improve the safety of investors, but this does not mean that the country is out of the woods yet as Felder found out when he returned to Angostora in 2003.
“We returned and found that there were about 300 land mines on the property,” he says. The ties Grerystar Resources had fostered with Colombia’s army following the kidnappings had made the company a military target. Looking for microscopic particles of gold is difficult at the best of times but drilling in densely foliated minefields is not something they teach at mining schools.
“We didn’t know what to do. We had to get a commitment from the military to help us and for two years and eight months we had a team of three people and two dogs working on a metre by metre grid checking for mines,” says Felder.
“We had to tackle a different kind of mine engineering back then,” says company president David Rovig, who can make light of the situation now that the property is cleared.
ENDS
The kidnapping of a Canadian mining contractor by Colombia’s FARC guerrilla group was the final straw for Toronto exploration junior Greystar Resources. The much publicised kidnapping lasted six-months after which the company, like many other miners, packed up shop and abandoned the country in 1999 amid a deteriorating security situation and a plummeting gold price.
While the reality of Colombia’s civil conflict is not bombs failing through the air as portrayed in the Brad Pitt film Mr & Mrs Smith, horror stories like Greystar’s made Colombia a pariah for most mining investors.
“We went in with a high degree of ignorance of the conditions. We had minimum security and worked on the ‘good faith’ principle,” says exploration vice president Frederick Felder of the company’s early days in Colombia.
But Greystar knew there was gold there, and with a rising gold price, Felder returned with his exploration team in 2003 to find it. Greystar now has eight drill rigs working and the company’s successful return has made it something of a poster child for Colombian authorities keen to show that the country is safe for investors and ripe for investment.
ECONOMIC POLICY
Since he was elected in 2002 President Alvaro Uribe has re-established government control through much of the country with hard-line military intervention and the miners are starting to return following dramatic falls in both the murder and kidnapping rates. "Colombia will be attractive for investors," Uribe told a Medellin convention hall packed with miners November 18. “Colombia is ready to be a major mining country,” he said.
Economic development is a key part of the peace process and Uribe believes attracting foreign investment to kick-start the economy is paramount to bring about change. Political stability is allowing Colombia to start catching up with its Latin peers and direct foreign investment grew 34.7% in 2004 to $2.4 billion. This is better than Peru and Venezuela but behind the growth rates of Mexico, Chile, Brazil and Argentina, according to Eclac, the United Nation’s economic commission for Latin America.
Mining is already 14 percent of GDP. Colombia produces about 55 million tpy of coal of which 50 million tonnes is exported to Europe and the US by Alabama’s Drummond Co and Cerro Cerrajon (owned by three of the world’s four largest coal miners BHP Billiton, Rio Tinto and Glencore). Even without modern mining Colombia produced about 50 tonnes of gold in 2004. “This 50 tonnes implies gigantic potential to develop gold mining activity,” says Eduardo Chaparro, mining analyst at Eclac, adding that Peru’s gold production 20 years ago was 50 tonnes and today it is over 400 tonnes.
Colombia is gold country and has attracted adventurers, plunderers and pirates for almost 500 years and with gold at US$500/oz and world production falling to an eight-year low in 2004, foreign miners are warming to the country. Colombia’s three belts of Andean cordillera have not been tackled with modern technology but they contain gold, silver, platinum, copper, tin and nickel. It is “very probable that there exist large undiscovered reserves,” says Archak Bedrossian, an international gold consultant and trader.
“The odds of finding a large ore body may be greater than in highly explored nations such as Canada, Peru, Indonesia, the Philippines,” says Dr James Otto, international mining law expert at the University of Colorado.
Canadian financier James Sikora, president and CEO of Primecap Resources, is so impressed with Colombia that he relocated his family to Medellin in July from Edmonton, Alberta so he can work on the gold-silver Golondrina property the company acquired in southwestern Narino department. "There are great projects at really great prices here. We think Colombia has so much potential that we are going to seek a listing here," he says.
MAKING THINGS RIGHT FOR MINING INVESTORS
Good geology is seldom enough to attract mining investment. Miners want stable business conditions and a favourable tax regime, aspects Colombia has been working to improve. A new mining code in 2001 aimed to “bring legal conditions for mining in Colombia in-line with world trends … to obtain better competitiveness as a nation with other Latin American states," says Beatrice Duque, of the ministry of mines and energy.
Mining institutions have also been overhauled which has seen the creation of Ingeominas to unite resource administration and geological services in the same office to improve efficiency and more services are being made available on-line.
Uribe has also implemented some of the most compeititive taxation conditions in the world, not just Latin America. "Congress has approved a law so that we can form tax stability agreements with investors and we are working to reduce taxes,” Uribe said during a remarkable three-hour discourse at the Medellin mining event where he demanded delegates ask him what needs to be done to make Colombia more attractive for miners.
Uribe’s personal commitment is winning converts in many quarters of the international mining community. "Colombia is a lot better than I thought. Seeing President Uribe [in Medellin] was impressive," says Peter Baxter, exploration manager of Vancouver's Bema Gold.
“We regard President Uribe as, perhaps, one of the most driven, dedicated, intelligent and engaging heads of state we have ever come across,” says Colin Andrew, managing director of London-based Cambridge Mineral Resources that announced during the Medellin event that it had signed options on several gold properties in Antioquia department. “Colombia has distinguished itself in the world economy by passing laws facilitating investment and getting rid of red tape associated with forming and operating a business,” says Sikora.
TURNING THE CORNER
Uribe’s efforts are already bearing fruit. Colombia jumped seven spots in the World Economic Forum’s 2005 Global Competitiveness Report to 57 of 117 countries, placing it above emerging mining nations such as Russia, Mozambique, Indonesia and Mongolia. In Latin America it is bettered only be Chile, Uruguay, Mexico and El Salvador.
Mining sector GDP grew 7.0 percent between 2003-2004 while the country grew 3.5 percent. Foreign investment in mining reached $1.246 billion in the same period, and mining exports increased 24.0 percent $3.098 billion.
However, most North American miners spend their dollars in countries that score favourably in the Fraser Institute mining attractiveness rankings. While Chile scores 91 out of 100, Peru 82, Brazil 74, Argentina 59 and South Africa 56, Colombia has yet to be ranked.
Gold giant Barrick Gold, active in Chile, Argentina and Peru, says it is “not ready for Colombia. It is the kind of place where the larger companies look to junior’s to go in and see what is there. Large companies see what comes up and go in and either indirectly fund exploration or take a stake,” says vice president Vince Borg.
COMPETITION WITH OTHER COUNTRIES
Colombia has strong competition for mining investment dollars but it is looking a better bet according to Daniel Linsker, Latin American analyst of UK-based risk consultants Control Risks Group. “Colombia is very institutionalised and offers a more stable political regime, lower taxes and the best security of tenure for mining companies [compared to Peru and Venezuela], ” he says.
Chile is the leading regional mining light generating $16.9 billion in mining exports in 2004 from a total of $29 billion. Mining posted $6.9 billion in Peru from a total of $12.5 billion, but in Colombia mining generated $3 billion of $16.5 billion in exports.
Colombia also beats out most of Africa according to Linsker. “You face the same problems Colombia has in Africa but without the political stability,” he says, and miners are coming around to this thinking. “Whether or not kidnapping outweighs the dangers of malaria, AIDS … or military action is a debateable point, but I would rate Colombia well ahead of much of west and central Africa in terms of its potential and ability to do work. If stabilization continues [Colombia] will become one of the most sought after addresses in the mining world,” says Andrew.
Big mining companies continue to poke around neighbourhoods that make Colombia seem benign. Arizona’s Phelps Dodge is working on a copper project in the DR Congo, which is virtualy at the bottom of political attractiveness and security tables.
THE RETURN TO EL DORADO?
The first major to engage in Colombia is South Africa's AngloGold Ashanti which has amassed a “huge land package” in Antioquia and Bolivar departments through subsidiary Sociedad Kedahda says exploration manager Chris Lodder as it looks for deposits containing over 5 million oz. Bullish exploration by AngloGold Ashanti could create opportunities for other miners according to Bema Gold’s Baxter. "They may pass on opportunities that do not have significant impact on their balance sheet and farm them out to smaller opportunities," he says.
But it is a Canadian junior Greystar Resources that is in the vanguard of Colombia gold mining renaissance, as it puts the troubles of the past behind it and works towards a feasibility study for its 10 million oz Angostura gold property near Bucaramanga, in Santander department, having so far spent $48 million on the project. “It is always good to be in a country that has been overlooked," says Felder.
Colombia has a golden future and with President Uribe permitted and willing to run for re-election in July 2006, many feel it will achieve it.
Safety first
President Uribe has taken great steps to improve Colombia’s security situation and to improve the safety of investors, but this does not mean that the country is out of the woods yet as Felder found out when he returned to Angostora in 2003.
“We returned and found that there were about 300 land mines on the property,” he says. The ties Grerystar Resources had fostered with Colombia’s army following the kidnappings had made the company a military target. Looking for microscopic particles of gold is difficult at the best of times but drilling in densely foliated minefields is not something they teach at mining schools.
“We didn’t know what to do. We had to get a commitment from the military to help us and for two years and eight months we had a team of three people and two dogs working on a metre by metre grid checking for mines,” says Felder.
“We had to tackle a different kind of mine engineering back then,” says company president David Rovig, who can make light of the situation now that the property is cleared.
ENDS
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