Analyst highlights the legal, reputational and market valuation risks transnational corporations could face in Colombia

Published by Brent Patterson on

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Photo: A still from this video of eight social leaders from San Luis de Palenque in custody after protesting against Toronto-based Frontera Energy.

A recently published article in Americas Quarterly highlights the risks associated for transnational corporations in relation to human rights violations.

The article by Raul Gallegos, a Bogota-based Director at the global firm Control Risks and their head of the political risk practice in the Andean region, can be read in full at Companies Should Examine Their Troubled Pasts – Before Courts Do It for Them’.

Deals with the police could carry risks for companies

Gallegos writes: “Multinational companies operating in Colombia continue to strike financing deals with the police, the military and the prosecutor’s office in exchange for protection from criminals, armed actors and activists who sabotage their operations.”

He adds: “These controversial accords remain legal for now, but journalists and NGOs have repeatedly denounced them for fostering corruption within the security forces, and for possibly underwriting the killing and intimidation of activists and community leaders.”

In this report to the Human Rights Council last year, then-United Nations Special Rapporteur on the situation of human rights defenders Michel Forst raised (in point 30 on page 9) the situation of Toronto-based Frontera Energy signing contracts with the military that appear to be related to the subsequent criminalization of eight social leaders in San Luis de Palenque concerned by the impacts of this Canadian company on their community.

Relying on impunity is a dangerous underestimation of risks

Gallegos notes: “Companies also believe that being held accountable in a court of law remains unlikely. But in a world focused on fixing environmental, social and governance wrongs, this is a dangerous underestimation of legal and reputational risks ahead.”

Human rights violations can cut a company’s market valuation

He also writes: “Credit rating agencies are incorporating social and environmental considerations into the credit scores of sovereign and corporate bonds, which means lenders and markets will become increasingly sensitive to human rights abuses by governments and companies. A recent working paper by the University of Oxford’s Nathan Lane has shown that human rights accusations can already cut a company’s market valuation by an average of $100 million. “ For more commentary on that report, click here.

It should also be noted that Shin Imai and Sarah Colgrove of the Justice and Corporate Accountability Project recently reported that stock in Vancouver-based Tahoe Resources dropped from $27 to $5 a share after a string of lawsuits and violent conflicts related to Indigenous opposition to their Escobal mine in Guatemala.

Drummond executives could face jail for paramilitary killing of union leaders

And Gallegos cautions: “Colombia’s prosecutor general recently accused executives at [the Alabama-based] Drummond, a global coal producer, of links to paramilitaries who assassinated union leaders nearly 20 years ago – one of the highest-profile cases of alleged human rights violations by a company in a conflict zone. The case can mean potential jail time for senior executives if they are found guilty, a first in this war-torn nation.”

BNAmericas reported earlier this month that Drummond had passed a final qualification stage and was authorized to submit an offer for a fracking pilot project in Colombia by March 8 (for a contract to be awarded on March 30).

PBI-Canada continues to follow these issues raised by Gallegos particularly in relation to the weaknesses in existing mechanisms to address corporate wrongdoings as well as the concerns being raised by Colombian social leaders about the operations of Frontera Energy (noted above), Calgary-based Parex Resources and its Aguas Blancas operations near Simacota and the possible bid by Toronto-based Sintana Energy (in collaboration with ExxonMobil) for a fracking pilot project near Puerto Wilches.

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