Gold in Peru – Blessing or Curse?

On Monday afternoon we arrived back in Lima after 4 exciting days in the Peruvian hinterland. Leaving the lodge and our dear guides Jony, Oscar and Rodolfo was hard but we were all glad to finally get a good night’s sleep and we enthusiastically dumped our damp, smelly jungle clothes at the front desk for laundry. The people dealing with these bio-hazardous materials are truly not to be envied.

On Tuesday it was time to get back into an academic environment. We drove to the Universidad de San Martin de Porres where we met with Miguel Santillana. Miguel holds degrees from Manchester University, ESAN Graduate School of Business, and Pontificia Universidad Católica del Perú and is an expert in environmental economics and policy. He describes himself as an American-Peruvian economist and his main research interests are the workings and impacts of destructive industries in Peru.

The most important of these is gold mining. Peru’s territory is very rich in minerals and especially in gold, which is found in 24 of Peru’s 27 provinces. Rising gold prices on the world market have led to an ever-increasing number of people being in involved in the business over the past decades. Alongside big and medium-seized companies this also increasingly includes small and very small (“artisanal”) operations (also called ASM – Artisanal and Small-scale Miners). Most of these are informal or illegal operations. There is an important distinction between these two concepts: “informal” means miners that take active steps towards legalization. This is achieved by following a 6-step process which is required by the government and involves getting concessions for mining from land owners and producing an Environmental Impact Assessment (EIA) for the mining site. Peru uses the Anglo-Saxon type of mining laws, which means that you can have a concession for mining in a certain area without owning the land. In this case you need to get another concession from the actual owner of the land in order to be allowed to mine on it. For most small and artisanal scale miners (also called ASM) this step is close to impossible. Preparing an EIA is also very difficult for them, as most have not even completed secondary education. The term “illegal” is used for those that do not even try to obtain a formal license for mining. These are often the worst operations in terms of environmental impacts and human rights violations.

Currently, the government requires all operations to fully legalize by April 19th of this year in order to not face legal consequences. However, the large majority of ASM miners will be unable to complete this process. This has sparked a lot of protests among the miners and demonstrations against this law in Lima and the main gold mining regions.

On Tuesday, we were able to see firsthand the consequences that mining has brought to the region of Madre de Dios. We drove out from Puerto Maldonado on the Interoceanic Highway through some of the shantytowns that are spawned along it because of the gold rush. Many houses in these areas are just provisional shacks built with plastic walls and the availability of health care services and security are very low. The situation is even worse in the towns that lie further away from the highway in the jungle, where often not even electricity and running water are available.  Huge stretches of the land are deforested in order to extract gold. During the extraction process the miners use a lot of mercury, which creates serious health problems and also leads to the soil becoming uninhabitable for plants. Thus, big parts of what used to be the rainforest now looks like a desert and will not be able to hold any vegetation in the foreseeable future.

Another big problem is that this environment of lawlessness and failure of the state to provide basic services leads to severe human rights violations. Many poor people, mainly from the rural Andean regions, are working for very low wages and under extremely unhealthy conditions. According to one article, the average age for miners in this area is lower than 40. Often even children are forced to work. Furthermore, there are many instances of trafficking of girls for prostitution.

How could it come to this mess? According to Santillana, the main problem is the disorganization of government and failure of its different institutions and levels to work together effectively. For example, a big problem is that of overlapping concessions for land use. Different agencies give out different kinds of concessions for land, e.g. ownership of the land, logging rights and mining concessions. These multiple layers often create confusion and make it extremely hard for miners to obtain legalization. This could be simplified by reorganizing the process of granting concessions and improving communication between the different government agencies.

Important improvements could also be made on the technological side. There are low-cost techniques for gold mining available that avoid mercury and cyanide, which miners currently use. These technologies should be promoted and the inputs for illegal mining, mercury and cyanide, should be much more strongly controlled and regulated by the government.

Another important step is the empowering of local communities. Currently, most decisions concerning the mining regions are made on the federal level but there is very little funding for local communities. Local communities should be enabled to organize themselves and provide basic services by giving them more funding.

The government’s current strategy: blow up equipment of illegal miners and arrest many of them. But this is an ill-suited solution of the problem. It destroys capital, and imprisoning people is expensive. There are already 78,000 convicts for a prison system with a capacity of 30,000. It would be much more useful to cooperate with miners, helping them to legalize and empower local communities to organize themselves and provide basic services, so as not to create an environment of lawlessness where human rights violations and environmental degradation are common.

– Roman Hennig

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