2011 Legislative Reform in Colombia

=Restructuring of Oil and Mining Royalties=

Santos passed a bill to Congress in August 2010, proposing that royalties received from mining and exploration by Colombia's local authorities are pooled into a general fund to be distributed nationwide. According to government officials, this was designed to cut inefficiency and corruption and would lead to the investment of 10% of the funds from natural resource exploitation in science and technology. Under the new arrangements the oil and mineral-producing regions would eventually receive around 25% of royalty transfers, rather than the previous share of 75%.

In a speech, President Juan Manuel Santos asserted that the new measures would "make a great effort to close the gaps of inequality in this country". However bill sparked protests in nine provinces of the country, who claimed that the interests of resource-rich regions were not sufficiently protected under the new bill.

The royalties reform project was approved in June 2011 by Colombian lawmakers. According to Finance Minister Juan Carlos Echeverry the rate received by the provinces where most oil and mining resources are located will fall from 75% to around 25%.

In the newspaper El Espectador Hernan Jaramillo warned that, while the redistribution of revenues is designed to reinvigorate areas such as science, technology and innovation on a national level, the danger is that political interests will interfere in the choice of which projects are financed, rather than allowing such decisions to be made in the regions themselves.

The redistribution of royalties income was due to begin in 2012.

=Creation of Sovereign Wealth Fund=

A further policy promoted by President Santos is the proposed creation of a sovereign wealth fund, where oil and gas revenues could be stored for investments in technology and infrastructure. This policy is also designed to reduce some of the inflationary pressure on the Colombian peso.

According to the Sovereign Wealth Fund Institute, Santos is "fully aware of the issue of Dutch Disease and how it can affect a fragile country that is trying to diversify into a number of industries" and is therefore seeking legislation to create such a fund.

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