Copyright© GIZ/Magali Mander
CONNEX Negotiation Support
Yet, many developing and emerging countries do not have the resources, capacities, or the necessary know-how to negotiate with investors on an equal footing. To provide partner countries with needs-based support in complex contract negotiations in the extractive sector, the CONNEX Initiative (Strengthening Assistance for Complex Contract Negotiations) was launched at the G7 Summit in Brussels in 2014.
In 2017, the CONNEX Support Unit was established as the implementation structure and tasked with coordinating the global CONNEX activities. The CONNEX Support Unit assists partner governments in complex negotiation processes with international investors by providing the negotiation teams with international multidisciplinary experts. The areas of expertise include, among others, law, financial analysis, geology, environment, and strategy advisory.
CONNEX’s advisory approach is currently unique in international cooperation and complements the long-term approaches of German and international development cooperation because of the precise and short-term support character it offers. Since its foundation, CONNEX has established itself as an effective, trusted, and recognized support partner for developing countries and emerging economies. So far, 23 projects have been supported in 18 different partner countries: from South America to Sub-Saharan Africa and Central Asia.
CONNEX support enables the mobilization of domestic revenues to finance sustainable development in partner countries. Well-negotiated investment contracts foster the investment climate, allow for greater economic value creation in partner countries and are a prerequisite for the establishment of social and environmental standards. CONNEX thus actively contributes to the sustainable development of these countries and to achieving the Sustainable Development Goals (SDGs).
This contribution has been particularly evident during and after the COVID 19 pandemic, as governments are under increased pressure to mobilize revenues and revitalize the economy. At the same time, the strong increase in demand for critical mineral for the energy and mobility transition (including cobalt, lithium, copper, bauxite) will spur investments in resource-rich partner countries. In addition, the promotion of a sustainable raw materials supply chain begins with responsible extraction. Anchoring sustainability aspects in investment contracts plays a central role in laying the foundation for socially and environmentally responsible and climate-sensitive mining.
In Ecuador, the government received support in developing a tax pricing formula to adequately respond to changes in production volumes, commodity prices or project profitability. In a support project in Colombia, the responsible provincial government was encouraged to demand greater integration of renewable energies into the power supply of a large mining project. This can significantly reduce the need for diesel generators and the associated greenhouse gas emissions. In Liberia, the government expressed its gratitude for the CONNEX Support Unit's assistance in renegotiating an iron ore agreement under which the government was able to negotiate a direct back payment of US$4.4 million and a total increase in future revenues from the project of up to US$17 million.
CONNEX is an excellent option to provide support to governments that require specialized technical support. In the case of Ecuador, this assistance provided greater knowledge for adequate decision making in relation to management and public policies for a favorable development of the mining industry.
The most important aspect is that it put us on the same level, technically speaking. We are the mining authority, the authority, but we knew that technically, we were not at the same level. The company had large firms and experts and we were five people sitting in a room reading their reports which took them years to create. When CONNEX experts supported us, we were speaking at a different level.
The wide experience of the teams of experts provided by CONNEX in each of the different topics addressed is a guarantee of the success of the services provided.