MS Risk Blog

Controversy around ZIDRES law points to potential risks for investors in the agroindustrial sector in Colombia

Posted on in Uncategorized title_rule

A number of members of Congress have taken out a lawsuit against the recent passing of the Zidres law (Spanish abbreviation: developing agricultural areas of interest for rural, social and economic development), underlining the potential significant challenges that this recent economic initiative will face in Colombia. Since early conversations around the law in Congress, NGOs such as Oxfam, CODHES,  the Comisión Colombiana de Juristas, and others have voiced their outright opposition to its passing. However, Zidres is a key focus of the current government and its aims to increase investment in rural regions, particularly profiting on the likely signatory of the peace process with the FARC later this year.

One of the key elements of the law, and what is causing the most controversy, is that to fulfil its requirements, companies will have to present their projects to the Ministry of Agriculture. However, it is the companies themselves who are responsible for taking into account considerations around sustainable environmental issues, security, and the participation of local communities and individual landowners in the zones that they are keen to develop. Companies will have to navigate the complex legal challenges around who has the property rights for the areas included in any project proposals, in ways that may contradict or endanger already existing local and regional land claims or usages. Three points are worth keeping in mind to understand the potential risks posed by these projects.

At its core the Zidres law offers the potential for national and multinational companies to invest in a number of agroindustrial projects across the country. However, it is crucial that companies and organisations interested in participating in these joint initiatives move with care, carrying out thorough due diligence at a local level into the potential impacts any investment could have in these regions. Though the law has been declared unconstitutional, the national government under President Santos has underlined their commitment to pushing forward with the initiatives to tackle agroindustrial development in the country.

In the context of the expected signatory of the peace process between the government and the FARC later this year and the changing rural environment to one of post-conflict, it’s important that foreign companies looking to invest in opportunities in rural Colombia monitor two key areas. On the one hand, it is paramount to develop good relations with communities and local organisations that live and work in the project regions. Each community has a different historical and social claim and use of the land. It is important to respect social and political processes behind them to not put these communities in a vulnerable position, which would likely only hinder any long-term progress of the project.

On the other hand, companies must be fully aware of the illicit activities of armed groups in the region. Some may attempt to use the land rights issues to increase their property titles and then make financial gains by re-selling this land, or offer services that could put pressure on local communities living in these regions. In particular, future investors will have to carry out significant due diligence at a local level to understand the dynamics armed groups may play in any future investment, and ensure they are fully compliant with international and Colombian laws, to protect their ability to operate in a peaceful environment.

Tagged as: