Illegal gold mining becoming the scourge of the Amazon

Published : 12 Aug 2023 06:57 PM

What can the rich countries of the world do to help preserve the Amazon? The European Parliament passed a law in April that would require companies selling commodities such as soy, beef, cocoa and coffee in the European Union to verify they were not grown on land deforested after 2020. The EU is also trying to attach new environmental conditions to ratify an agreement with Mercosur, the South American trade bloc.

Neither of these initiatives have proved particularly popular among the leaders of the eight Amazonian nations gathered this week the Brazilian city of Belém located in the Amazonian state of Pará for a summit to discuss strategies to stop the degradation and destruction of the world’s largest rainforest. If there is a commodity the rich world should ban, identified unanimously by indigenous leaders and environmental activists in Belém as one of the most destructive products to come out of the region, it is illegally mined gold.

Brazil exported 104 tons of the precious metal in 2021, according to the latest government statistics. Buyers in Group of Seven countries bought more than half of the mineral. Almost 33 tons went to Canada. Switzerland took another 25. What neither the Canadians nor the Swiss are likely to brag about is that much of it likely originated in illegal mines torn into the rainforest.

According to the Instituto Escolhas, an organization pushing for new strategies to preserve the Brazilian rainforest, 47% of the 500 tons of gold commercialized in Brazil from 2015 to 2020 is suspicious. This means from land overlapping indigenous territories or otherwise protected areas, with paperwork claiming origins in “mines” where there is no evidence of activity or are in areas outside designated mining zones. “All of Brazil’s gold production is exported,” Sergio Leitão, who runs Escolhas, told me. “This international trade is polluted by extremely serious traces of illegality.” 

This is not an exclusively Brazilian story. Gold mining is the biggest driver of deforestation in Venezuela and one of the largest in Bolivia. Peru, the largest producer in Latin America, churns out around 150 metric tons of “artisanal” gold every year, according to the Artisan Gold Council, much of which is illegally produced.

There are 4,472 localities where illegal mining is happening in the Amazon region, according to RAISG, the Amazon Network of Georeferenced Socio-Environmental Information. Half are in Brazil and about a third are in Venezuela. They affect over 17% of protected natural areas in Amazonia and 10% of indigenous territories. 

It is big business. So-called “artisanal” mines, known in Brazil as “garimpos,” commonly evoke the stunning images of miners swarming enormous mud pits in the Serra Pelada mines, captured by Brazilian photographer Sebastião Salgado in the 1980s. They project a sense of grit: impoverished workers with few alternatives chewing a livelihood from the earth. 

But while not all garimpos are illegal, the wildcatting imagery is misleading. Many of these mines are large operations, using mechanized equipment to dredge rivers and tear through the earth in forested areas. Left behind are lakes infused with mercury, which is used to separate gold ore from other sediment, that flows into the rivers and through the food chain, and poisons communities hundreds of miles downstream. One study found that 61% of Brazilian gold deemed illegally mined in 2019 and 2020 came from mines controlled by six proprietors; 71% was purchased by three financial institutions.

And it is spreading fast, encouraged by a doubling in the price of gold since 2015 to a record of around $2,000 an ounce. More than 10,000 hectares were cleared for illegal mining in Brazil in 2020 compared to some 5,300 in 2017, a faster pace than that of land clearing for legal mines. 

Over 11,400 hectares were cleared in 2021. In land occupied by Brazil’s Yanomami people in Roraima along the border with Venezuela, the area destroyed by garimpos increased by 54% in 2022 for a total of more than 5,000 hectares, according to Brazil’s Socio-Environmental Institute, up from just over 2,000 hectares at the end of 2018.

Organized crime is taking over, bringing heavy weaponry into the business. O Primeiro Comando da Capital, one of Brazil’s largest criminal groups, which originated in the prisons of São Paulo, has moved into gold mining in Roraima, running protection rackets and extortion, controlling pits and making partnerships with gangs in Venezuela. In fact, illegal gold mining has become an integral part of growing ecosystems of criminal enterprises, which include the harvesting and sale of precious wood, drug trafficking, and deforestation to seize land.

Swayed by its promise of riches (and by the mining lobby) governments have been slow to respond to illegal mining’s threat to the rainforest. In Brazil, former president Jair Bolsonaro passed a decree to encourage garimpos and tried to open indigenous territories to mining, arguing that the war between Russia and Ukraine would deprive the agribusiness industry of needed potassium. 

And yet evidence of the environmental damage is starting to change the conversation. 

After taking power in January, Brazil’s president Luiz Inácio Lula da Silva stopped both of Bolsonaro’s initiatives. And he sent the army to clear garimpeiros out of Yanomami territory.

The government is now putting pressure on DTVMs – the financial institutions allowed to buy gold from artisanal mines, de facto entry points to the legal market – to ensure the legal origin of the precious metal. In March, tax authorities started requiring that all paperwork for gold transactions from artisanal miners be recorded online, to make the metal easier to trace and make it difficult to launder it by simply fibbing about its origin on a paper-based sales receipt.

Following a Supreme Court decision, the Brazilian Central Bank announced last month it would no longer presume that gold traded by financial institutions had legal origins, nor that the purchaser acted in good faith. And DTVMs are no longer allowed to own garimpos. 

Much more needs to be done. Leitão of the Escolhas Institute, which lobbied for the new Central Bank stance, argues that a good next step would be to establish a monitoring system for Amazon gold similar to that deployed to stem the trade of blood diamonds used to finance war in Africa. After all, he says, Amazonian mining is getting bloody too. 

Among a long list of aspirations, the eight Amazonian leaders gathered  in Belém highlighted how destination countries should lend a hand to squelch illegal trafficking of Amazonian products, including gold.  

This might not satisfy the European farm lobby, so concerned about the environmental damage wrought by South America’s beef and soy. But it might sway the Canadians and the British, not to say the Swiss, to stop buying the gold that finances much of the Amazon’s destruction.

Eduardo Porter is a Bloomberg Opinion columnist covering Latin America, US economic policy and immigration. 

Source: Bloomberg