Uncertainty fuels price rise for Colombian emeralds

A Colombian mine owner, speaking on condition of anonymity, takes a little white paper packet out of his shirt pocket and opens it. He hands out three 9ct gems – each carat, he says, is valued at $50,000.

“There you go, you have $1.35m in your hands,” he says, adding that the deep, butterfly-green tone that glows under a beam of light is “unrivalled”.

“That’s the price people are now willing to pay for Colombian emeralds,” he says. “Worth it or not, the truth is that they are unmatched. There’s nothing better because Colombia is still the mecca of great emeralds.”

The intensity of the natural green of the Colombian emerald is certainly unique. But emerald mining in the country has a bloody history. A decades-long turf war between rival groups for control of the lucrative business left thousands dead. Recently, the prospect of a return to violence has alarmed the Colombian government.

Last November, Pedro Nel Rincón Castillo, also known as Pedro Orejas, a powerful emerald trader in the north-central Colombian state of Boyacá who is now in jail, was injured in a grenade attack that reportedly left four people dead. Soon after, he said a “peace pact” had been broken.

Days later, close to the site where some of the world’s most prized emeralds are produced, Juan Manuel Santos, the country’s president, ordered his government to prevent violence among gem businesspeople.

He warned that Colombia, one of the world’s largest producers of emeralds, which has experienced an economic comeback in recent years after decades of violence, cannot suffer yet another “green war”.

Since a peace deal among emerald miners in the early 1990s, it is said that about a dozen powerful clans have stayed in control of some 80 per cent of Colombian exports. This represented about $128m last year, say local exporters who have the US, Switzerland, Thailand, India and, increasingly, Hong Kong as their biggest clients.

But conflict analysts in Colombia warn that battles could resurface after the death from cancer last year of Víctor Carranza, the “emerald tsar”, who brought a relative peace to the industry. Mr Carranza, who was believed to control at least 40 per cent of the country’s emerald business and who claimed gems “called to him”, warned in a 2012 interview of the possibility of a new rift, saying “the peace [pact] we signed …is cracking, it’s damaged”.

Some exporters and producers say the situation around certain emerald mines is tense. That threat, combined with slipping production, might be a reason behind the rise in the price of Colombian emeralds, which spiked 30 per cent last year alone, according to industry experts, and is expected to increase by at least 25 per cent this year. What is more, miners have to dig ever deeper, requiring more sophisticated equipment and formal investment. Some producers say this could become increasingly complicated, although a part of the Muzo mine already has foreign investment.

Colombian emerald exports have been falling, partly because mines such as Muzo and Chivor are becoming exhausted, adding to the rarity of the gems, say experts.

“The emeralds fetching the highest prices come from Colombian mines, and one of the reasons is that getting your hands on good gems is proving erratic,” says Ricardo Kling, president of Bauer, a century-old jeweller and one of Colombia’s largest.

According to data from Colombia’s national mining agency, production has dropped in recent years, from some 5.2m carats in 2010 to 3.4m in 2011, hitting a low of about 1.2m in 2012. However, there was a rebound last year to some 2.6m.

Some in the industry say that environmental licences and tax issues have added more pressure at a time when Colombia has been losing steam against rival producers such as Zambia and Brazil, which are catching up.

Still, according to Mr Kling, global demand for the Andean country’s green gem, historically sought-after by elite customers in the Americas, Asia and the Middle East, is on the up because it is the “preferred” one.

“Now, big jewellers such as Chopard, Van Cleef & Arpels and Cartier are making more pieces featuring emeralds, and that says a lot,” he notes.

For Eduardo Chiquillo, a Colombian emerald exporter with a growing client base in Asia, “more and more people are willing to pay more and more for fine, very fine stones”.