All that glitters
The gold bull-market has a dirty secret
Gold is now better business than drugs for many gangs
THE MINERS’ chants filled the main square of Trujillo, a city on Peru’s northern coast.
Many of them had travelled from Pataz, a province deep in the Andean hinterlands where a gang recently murdered 13 guards working in a gold mine.
“There’s a lot of crime in the mountains,” said a man with a white hard hat.
In response to the killings, Peru’s government imposed a month-long ban on mining in Pataz.
But the protesters wanted to return to work.
“The miners of Pataz are not criminals.
We demand the right to work,” read a woman’s T-shirt.
As the largest producer of gold in Latin America, Peru has been particularly hard hit by a wave of violence linked to illegal mining in the region.
Poderosa, a mining company, says 39 workers have been killed in Pataz in the past three years.
Two mass graves have been discovered there since October.
In January the prosecutor’s office in Trujillo was bombed.
The mayhem has been stirred up by the relentless rise in the price of gold and by a glut in the production of coca, cocaine’s main ingredient.
Since 2008, financial turmoil, geopolitical tensions and growing demand from Asia’s middle classes have pushed up the gold price, which is near record highs of $3,500 an ounce (see chart).
Meanwhile, coca-bush cultivation in Bolivia, Colombia and Peru has doubled since 2010.
Many gangsters are worried that cocaine may become less profitable, so they are piling into the illegal gold market.
The two criminal activities complement each other.
In the Amazon, coca farms and illegal gold mines often share the same infrastructure, such as landing strips for aircraft.
Gangs invest their earnings from drug-trafficking in mining projects, whose output can be laundered and sold as though it had been dug up legally.
In Colombia and Peru gangs are now thought to make more money from gold than from the sale of narcotics.
The Peruvian Institute of Economics, a research outfit in Lima, the capital, reckons the country exported $4.8bn of illegal gold last year (see chart).
That would represent 44% of Peru’s total gold exports, up from 20% a decade ago.
In Brazil the government estimates that gangs earned more than 18bn reais (around $3bn) from the sale of gold in 2022, compared with 15bn reais from cocaine.
Bullion bullies
The gangs’ involvement is spurring violence and helping to prop up autocrats.
Nicolás Maduro, Venezuela’s dictator, gives the army a free hand to work with gold-mining mafias in return for political loyalty.
Colombia’s biggest gold mine, Buriticá, is the site of a stand-off between its Chinese operator and 2,000 miners linked to the Gulf Clan, a gang that stole $200m worth of the glittering ore from Buriticá’s tunnels last year.
Since 2019 some 18 miners have died there.
After a recent government crackdown in Bolívar, an illegal-mining hotspot in northern Colombia, the clan retaliated, killing more than 20 soldiers and policemen.
Last month gunmen in Ecuador killed 11 soldiers during an operation to shut down an illegal mine.
The strife in Peru is part of this scourge.
During the covid-19 pandemic, parqueros, or gold robbers, occupied tunnels in Pataz, hiring gangsters to work as guards, explains Pablo de la Flor of Poderosa.
Soon the mafias took over the mines.
Several of them are vying for control of the province’s resources.
A state of emergency, which has seen the army deployed to Pataz since February 2024, has achieved little.
Even when illegal mining does not erupt in open conflict, it is destructive.
Criminals are razing the Amazon for gold.
By 2018 roughly 1m hectares of forest had been cleared for mining.
By the end of 2024 that figure had doubled, according to Amazon Conservation Association, a monitor based in Washington (see map).
Much of it was in supposedly protected areas.
Mercury, used to separate gold from ore, poisons many Amazonian rivers.
President Luiz Inácio Lula da Silva of Brazil has been clamping down on garimpeiros, the illegal gold miners who flourished under his predecessor, Jair Bolsonaro.
Many have simply moved to Venezuela, where it is easier to cut deals with the army.
With friends like these
The Maduro regime’s collusion with Venezuela’s illegal gold miners is egregious.
But politicians elsewhere also turn a blind eye to such dirty work.
In Bolivia the government’s support for supposedly non-profit co-operatives has fostered a huge black market.
These ragtag groups, which mine most of the country’s gold, are technically legal.
But they often dig beyond their concession areas and flout environmental laws.
Luis Arce, Bolivia’s president, has taken a less strident approach to enforcement.
Lately a foreign-exchange crisis has pushed him closer to the co-operatives.
Last year the central bank bought $1.3bn-worth of gold from Bolivian miners to shore up its reserves.
Opposition lawmakers have accused Epcoro, a new state-owned broker, of laundering illegal gold from the Amazon and selling it to the bank, an allegation it denies.
Peru shows how difficult it is to regulate the sector.
In 2012 its government set up REINFO, a registry that exempts unlicensed miners from criminal sanctions until they can comply with regulations and prove their rights to the land they mine.
But the scheme is a mess.
Just 2.3% of registrants end up getting permits.
While many miners in REINFO want to raise their standards, the scheme offers little support.
In practice it provides cover for gangs who have no plans to register.
Parqueros outside the scheme use it to launder illegal gold by buying or stealing papers from registered miners.
“It’s a total failure,” sighs Gonzalo Delgado of the Pacific University in Lima.
REINFO was originally intended to be temporary.
Its remit is due to expire on June 30th but will probably be extended.
The government delayed a previous deadline after miners blocked Lima’s streets.
One protest leader is being investigated for alleged links to illegal mining.
Gangs also have allies in Congress, making it hard for the government to pass reforms and forcing it to rely on emergency measures.
Sending the army to Pataz was a sign of weakness, says Mr Delgado.
“It shows the desperation of a government that has no idea how to deal with the problem.”
Luis Miguel Castilla, a Peruvian former finance minister, worries about his country’s future: “I see a lot of similarities with the 1980s, when armed groups controlled large parts of the country.”
Across the region, dealing with illegal mining will require a rethink.
Redirecting national budgets would help.
Peru’s government allocated $73m to combat drug-traffickers in this year’s budget, compared with a puny $17.5m to stop illegal mining.
But crackdowns alone will not be enough.
Without proper regulation of the sector, it will remain easy for gangs to move from one mineral-rich province to another.
As the world gobbles up gold, Latin America bleeds.
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