You have to sympathize with Glencore. In the good old days when the company was a private trader, ensconced in the sleepy Swiss town of Baar, its global reach barely registered for media attention outside of the metals industry. Now, as a major mining corporation listed on the London market it is constantly in the glare of publicity. Although the latest news hasn’t exactly hit the front pages it has the potential to be deeply damaging to the economics of one of Glencore’s jewel assets, it’s Colombian coal mines.
Colombia has always been a difficult place to do business, particularly if you have significant sunk assets you have to find a way of living with what came close to being a failed state but certainly one in which violence is a near-daily threat and the rule of law is poorly applied.
Attention on Glencore has been heightened by a recent report entitled “The Dark Side of Coal, Paramilitary Violence in the Mining Region of Cesar, Colombia” produced by a Dutch Non-Governmental Agency called PAX which contends that international mining companies colluded with, even hired, paramilitary organizations to facilitate the operation of their assets in Colombia from the 90’s to the present day.
As the area was fought over by rival groups, company property and personnel came under repeated attack and kidnappings. PAX gathered the testimony of former Army Officer and, later, Glencore contractor, Jose del Carmen, in which he claims to have set up a meeting between company security officials and local AUC paramilitary commanders to discuss an arrangement in which Glencore would provide material and financial support to the AUC in exchange for the protection of company infrastructure and personnel an article in Colombia Reports states. US based Drummond, owner of another major coal mining asset in the region is accused of funding paramilitaries to the tune of millions of dollars.
Whether accurate or not, you understand how such a situation would come about. According to estimates, based on national police figures, paramilitaries that operated in the region in the 90’s and early 2000’s were responsible for 2,600 selective assassinations, 500 massacre killings, 240 disappearances, and 59,000 forced displacements, figures the report says are conservative due to the low rate of reported incidents.
It was, and remains, a dangerous place to do business and multinational corporations doing business there may have felt compelled to reach accommodations with local groups to maintain their operations and safeguard their personnel. Testimony from former employees at Drummond say money was paid to the Colombian Army to support the operation of paramilitary groups to protect company assets, naturally the company vigorously denies the claims and has successfully defended its position in a US court.
Accusations in the PAX report against Prodeco, Glencore’s subsidiary, are not as well-supported with multiple witnesses submitting testimony in the case against Drummond and Prodeco only being tainted by association. Indeed, evidence as would stand up in a court in the US or Europe, may not exist but that may not stop power generators in Europe, destination of some 50% of Colombia’s coal, from quietly dropping contracts when they expire or steering spot purchases to other sources. Association with the phrase blood coal has, as intended, unpleasant associations with blood diamonds out of Africa, a human rights coup that changed the nature of diamond trading.