Informal gold mining in Peru is not only being targeted as a threat to the environment and a source of fiscal evasion but also as a major illegal industry that generates more revenues than cocaine. At a recent symposium in Lima a proposal was floated to create a special body, similar to the anti-drugs commission Devida, to coordinate the efforts to ‘formalise’ that activity, currently dispersed among several government agencies.
At the X Simposium del Oro held in mid-May in Lima, Elmer Cuba, director of Macroconsult (an affiliate of Global M&A), laid out a set of figures showing the extent to which illegal gold mining has expanded. He noted that since 2005, the country’s formal gold production has been declining steadily, but exports of gold have not. Of the 5m ounces of gold that Peru exports, he said, more than 1m oz are of unknown provenance — in other words, 22% of the exported gold comes from illegal mining.
Moreover, if domestic consumption of gold is taken into account, countrywide one out of every five ounces is illegal, and in the south eastern region of Madre de Dios, one out of every three. Exports of illegally mined gold, Cuba calculates, reach US$1.8bn, more than the estimated US$1.2bn generated by cocaine exports. He reckons that the profits from illegal gold mining amount to US$1bn, which means that the public purse is deprived of some US$305m.
Cuba says that there are many telltale indicators of the expansion of illegal gold mining. One is population growth in the areas where that activity is concentrated. He cites San Antonio de Putina, in Puno, where the population grew by 80% between 1993 and 2007, as against a national average of 24%. Another is family incomes, which in Madre de Dios rose from US$370 a month in 2004 to US$882 in 2010. A third is relative energy consumption, which in Madre de Dios is more than three times higher than the national average. Cuba reckons that about 100,000 people are engaged directly in illegal gold mining, and four times that many are indirectly connected with it.
When Cuba proposed the creation of a Devida-type agency to address the issue of illegal gold mining, it was immediately endorsed by former environment minister Antonio Brack, and both put the notion to Energy & Mines Minister Jorge Merino. Cuba believes that such an agency could be more successful than Devida, because the exporters of illegally mined gold are known, whereas those involved in exporting cocaine are not.
The environment ministry has focused on another consequence of illegal gold mining: the destruction of about 18,000 hectares of Amazonian forest; the previous Alan García administration (2006-2011) had previously focused on the impact of mercury contamination on areas of such renowned biodiversity as Madre de Dios. Illegal miners are highly suspicious of the government’s drive to ‘formalise’ their activity: they believe that the arguments deployed to justify this are just a cover for a move designed to favour big mining companies [WR-12-12].
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