Peru is the largest gold producer in Latin America and has various government agencies regulating the industry. At the top is the Ministry of Energy and Mines (Minem), which oversees and regulates mining operations nationwide, and maintains a public database of mining concessions. Mining concessions, as well as license fees, are administered by the Mining and Metallurgical Geological Institute (INGEMMET). To obtain a concession, an environmental impact assessment must be submitted to the National Service of Environmental Certification for Sustainable Investments (SENACE).
The countless reserves of the precious metal, along with record gold prices, have brought a boom in this activity, which has been a magnet for criminal networks that have lined their pockets with proceeds from illegal mining. An estimated 28 percent of gold is illegally mined in Peru, meaning it is extracted in prohibited land or with unauthorized equipment or machinery. The illegal gold rush in Peru has left a deep environmental footprint and has become one of the main drivers of deforestation in the Peruvian Amazon.
Arguably the most important mining region in the Peruvian Amazon is the department of Madre de Dios, in the country’s southeast, with more than 3,000 mining concessions. In addition, thousands of illegal miners are scattered across as much as 500,000 hectares of land in what is known as the "mining corridor." According to an investigation by the Amazonian Center for Scientific Innovation (Centro Amazónico de Innovación Científica - CINCIA), which is dedicated to studies on reforesting the Peruvian Amazon, mining in Madre de Dios was responsible for the deforestation of almost 65,000 hectares of forest betwe'en 2009 and 2017. In 2018 alone, the Monitoring of the Andean Amazon Project (MAAP) estimated that 18,440 hectares of forest in Madre de Dios, Cuzco and Puno were destroyed due to mining.
Illegal Mining Gold Supply Chain in the Amazon
The destruction of the Amazon is tied to the process of mining. That process begins with miners extracting a muddy mixture of silt and stones from rivers using dredges, which contain suction pumps and erode the mountainsides, forests and rivers. In this amalgam, small pieces of gold are found. The practice is especially prevalent along La Pampa, and across the Tambopata, Manu and Malinowski national reserves.
During the extraction phase, mercury is used to separate the tiny particles of gold from the sediments. The unrestrained use of mercury also is both destructive to the environment and the people of the Amazon. According to the Artisanal Gold Council, a Canadian non-governmental organization dedicated to studying artisanal gold mining, more than 180 tons of mercury are disseminated yearly through the air, river and soil in Madre de Dios alone. As mercury is burned off into the air or spilled into nearby rivers, far-reaching threats to the environment and health emerge. In communities where fish is an important part of the diet, people can accumulate mercury in their bodies, which can lead to damage to the nervous system, as well as vision and hearing impairments. In severe cases, it can lead to birth defects or death. In 2016, a state of emergency was declared in the region due to mercury contamination.
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After it is mined, the gold is transported by carriers to local and regional hubs, such as Puerto Maldonado, where buyers are based. These middlemen buy in bulk and then sell it to a processing plant, where the gold is melted, melded with other gold, and then transformed into ingots. Only gold that comes with a receipt that certifies its legal origin should be bought and sold. However, processing plants and acopiadores (bundlers) — who buy and sell the mineral — pay for fake receipts from facturadores (billers), who provide these receipts so gold produced at illegal mines can be sold at these processing plants. As it is with wood processed at sawmills, once the illegal gold has been laundered with the legal, it is virtually impossible to trace.
Peruvian gold is distributed to markets around the world. Since 2011, most of the gold exports have gone to refineries in Switzerland, the United States, India, Canada and the United Arab Emirates (UAE), where a kilo can be sold for nearly $60,000.
Mercury contamination has persisted even though Peru ratified the Minamata Convention in 2015, an initiative that has sought to eradicate the use of this chemical worldwide. While there has been a significant reduction in formal mercury imports into the country, César A. Ipenza, a Peruvian lawyer and professor who specializes in environmental issues, told InSight Crime that large quantities of mercury are still smuggled into the country from Bolivia, much of which is used by illegal miners in Madre de Dios.
To counter illegal mining in La Pampa, Peruvian authorities launched Operation Mercury, which aimed to remove more than 5,000 illegal miners from the area. The operation started in 2019, with the deployment of 1,200 police, 300 soldiers and 70 prosecutors. This operation signaled a step forward in the fight against illegal mining in Peru, as it managed to reduce deforestation and environmental destruction in the area by 92 percent. However, this victory was clouded by the balloon effect: Miners moved into other areas of Madre de Dios. Today, one of the new hubs of illegal mining is located along the g River, close to the border with Brazil and Bolivia. Locally, it is known as the “New Pampa.”
Actors Behind Illegal Mining
There are many similarities between illegal mining and timber trafficking. Both industries are fomented by big business. Moreover, both depend on entrepreneurial criminal networks and cheap labor.
Gold refineries, as well as import/export companies, fuel the illegal gold supply chain. Most of these companies operate far from source areas. They create plausible deniability with false receipts generated by acopiadores and facturadores. And they use these intermediaries known popularly as barones del oro (gold bosses) to obtain their supplies.
Some of these companies have been exposed in judicial cases. In 2019, for example, prosecutors in Peru accused Swiss refiner Metalor Technologies of being involved in an alleged money laundering and organized crime scheme. The refinery had been singled out for the alleged purchase of tons of gold of illegal origin in Peru and in other countries. However, the company denied the allegations, and there are currently no charges against it.
In 2017, the United States-based company Elemetal LLC pleaded guilty to charges of breaching anti-money laundering protocols to prevent illegal gold from being imported into the United States. The guilty plea by Elemetal came after Samer Barrage, Juan Granda and Renato Rodríguez – three employees of the company Northern Texas Refinery (NTR), a subsidiary of Elemetal – were convicted of running an international money laundering scheme in which they bought billions in illegally-mined gold in the Amazon.
SEE ALSO: Peru Targets Multinationals Linked to Sale of Illegal Gold
According to US court documents, Elemental acquired $350 million in gold from four companies in Peru — which were front companies — that bought illegally mined gold and paid foreign bribes. To operate, these companies worked with a well-known money launderer linked to the drug trade, Pedro Pérez Miranda, aka “Peter Ferrari.” Pérez died of COVID-19 in September 2020.
Some of the most important players in illicit gold mining in Peru are intermediaries, the aforementioned gold bosses, who also act as financiers and brokers for the trade. Gold bosses decide when and where illegal mining takes place and have all the right connections. They hire informal miners, and buy machinery, precursor chemicals, food, water and transportation. They also have connections with acopiadores and facturadores, as well as legitimate buyers and sellers who enable the gold to be laundered locally and sold on international markets.
One alleged gold boss in Madre de Dios is Gregoria Casas Huamanhuillca. Known as “Tía Goya,” or “the Queen of Gold,” Casas is currently being investigated for money laundering and tax fraud. Her network is reportedly made up of her husband and their six children. The Casas family allegedly oversees all stages of the gold supply chain, from extraction to connection with refineries abroad. According to investigations by Ojo Público, for instance, the aforementioned Swiss refiner Metalor made million-dollar deals with the Casas Family.
In an interview with El Comercio, Casas denied the allegations of money laundering and tax fraud, stating that she has been consistently audited and has since fired her accountant who she claimed was responsible for any tax fraud. Casas maintains all her gold is of legal origin and that she welcomes investigations into mining.
“Investigate everyone, not just me,” she said. “Let them bombard me if they find me working in natural reserve areas.”
At the bottom rung of the mining distribution chain sits the cheap labor pool. It is made up of low-income miners who travel independently from poorer regions in search of metal, or locals and members of Indigenous communities hired by gold bosses. Some of them, by Peruvian law, have the right to mine the areas where they operate. Others mine in prohibited areas or with equipment that is prohibited. Regardless, they are consistently the lowest paid and the most at risk of health and legal problems. Miners work in the sediments of the river where the gold is found, using heavy machinery such as pumps, excavators and backhoes.
A comparatively easy target, this cheap labor, rather than the higher echelons of the illegal mining chain, is most frequently targeted by state interventions like Operation Mercury. When the Peruvian army cleared mining hotspots like La Pampa in Madre de Dios, it was the estimated 5,000 individual miners and their families who were forced to abandon the sites and relocate.
Fabiola Muñoz, the Minister of Agriculture at the time of the operation, recognized the paradox. “The people who we find here are not the ones who run the mining activity, who launder money,” she told The Guardian. “The people here are the workers. What we have to do is follow the clues to catch those who are really moving this illegal economy.”
*InSight Crime has partnered with the Igarapé Institute – an independent think tank headquartered in Brazil, that focuses on emerging development, security and climate issues – to trace the environmental crimes and criminal actors driving deforestation in Peru's Amazon. See the entire six-part series here.