Royalties reform in Colombia

Increasing opposition to a constitutional reform that would change the regional distribution of oil and mining royalties is emerging in Colombia’s Congress as the bill makes its way through the legislature. Senator Juan Lozano, the president of Juan Manuel Santos’ Partido de la U, argued in a debate last night in the Senate that there should be a discussion on current tax benefits granted to extractive companies. Lozano’s statement echoed that of Senator Jorge Robledo from opposition party PDA. Robledo also argued that the bill seeks to centralize management of royalties in the hands of the national government  to cover its deficit.

Finance Minister Juan Carlos Echeverry highlighted that Colombia’s government does not plan to modify royalty rates and that the bill in discussion would contribute to a more equitable distribution of royalties among sub-national governments, both for producers and for non-producers. Echeverry clarified that the national budget will not benefit from any changes in the royalties regime. This is the second of eight debates. The debate was postponed late last night and will resume today. The government will continue to face strong opposition, in particular once the bill reaches the lower Chamber’s floor in the third and fourth debates and legislators are preparing to support candidates for local elections in 2011. Royalties are a significant component of the income of sub-national government. Colombia’s government expects to receive COP 8 trillion in oil and mining royalties this year.

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