Two recent international reports bring the trade in informal and illegal gold once again to our attention.
First, Insight Crime in a February report comments on the latest version of satellite imaging by MAAP (the Monitoring of the Andean Amazon Project), published in January. It shows that deforestation has been directly reduced in the area targeted by Operación Mercurio in Madre de Dios, but that deforestation is expanding elsewhere. It points to the continued rapid expansion in artisan and informal gold mining in the country as a whole.
The second is a lengthy report from three researchers for Thomson Reuters. It focuses on understanding the supply chain and how its nature complicates public policy, taking as its case study the township of La Rinconada in Puno, situated at 16,700 feet. It is infamous for the way it has grown rapidly in response to the spin offs from informal mining around the mine La Rinconada. The report contains a vivid description of the awful conditions that exist there.
Although the Insight report devotes most of its attention to the evidence of deforestation, it also discusses the linkages with informal mining in the high Andes.
While the evidence resumed has been well publicised in Peru over several years, the reports both serve to highlight and provoke reflection on the complexity of public policy in the area of the informal/illegal gold trade. The particular interest of Puno in the illegal gold trade story is the way the networks function and how they complicate public policy.
Positioned as Puno is, on the border with Bolivia, the intermeshing of various illegal activities make for a vicious circle. The Insight report cites Carlos Neyra, of El Comercio, on the close links that exist between illegal gold mining, drug trafficking and timber trafficking. According to Neyra, these underworld economies are complementary. As the timber traffickers clear the forest for illegal mining, the gold can be used to help launder drug trafficking assets. And gold is used to purchase the cocaine that is moved through to Bolivia and on to Chile and Brazil.
The deeper and more intricate that such networks become, the more difficult it is to conduct the necessary monitoring and control.
This is illuminated by the Reuters study. The researchers interviewed an environmental crimes prosecutor in Puno who has carried out this role for the past ten years. He emphasised that the state simply cannot rein in illegal trade in a place like La Rinconada “because it makes so much money for many people”.
The Reuters report shows up other aspects of the difficulty of monitoring and controlling small-scale mining. Reuters interviewed Lenín Valencia, the director of mining formalisation in the Ministry of Energy and Mines. He argues that compromises have to be made: “if we stuck to the law, there probably wouldn’t be enough jails in the country to imprison so many people.”
Metalor, the Swiss company taking part in the government scheme to integrate informal mining into the economy, stopped buying the gold in this part of Puno in early 2018, once public prosecutors moved in to investigate Minerales del Sur, the intermediary being used by Metalor under the government scheme. No charges have been issued so far and the case may be closed if insufficient evidence is found.
The CEO of Metalor argues that the nature of artisanal gold mining means that checking the legitimacy of all the gold means working with very small quantities from single units that are hard to monitor. ‘This adds end costs that many end-users are not yet willing to pay”, he rightly observes.
There are many dimensions to how illegal gold gets ‘whitened’ or laundered as it moves through the export process. These insights contribute to our understanding of the bigger picture.