Peruvian Government Seeks to Regulate Illegal Mining

Sources:
BBCNews: Peru Mining Protest Turns Deadly in Puerto Maldonado
Bloomberg Businessweek: Peruvian Jungle Gold Miners Protest Leaves Three Dead
FOXBusiness: Peru Hopes Tax Legislation Will Lift Government Revenue to 18% of GDP
MarketWatch: Large Gold Mines Dominate Peru Economy: Report
Reuters: Wildcat Miners in Peru Suspend Protest After Deaths
WSJ: Peru’s Informal Mining Protests Turn Deadly

Minerals have largely contributed to the economic development of Peru. In addition to being the world’s sixth-largest producer of gold, Peru is a leading global producer of copper, zinc, and silver. The mining industry accounts for 60% of exports and 30% of government tax revenue. A recent gold-mining industry report noted that in 2009 alone, the government collected $800 million in tax revenue from mining.

Much of Peru’s gold, however, is mined illegally. Illegal miners are responsible for extracting up to thirty metric tons of gold per year, yielding over $2 billion in profit. Illegal mining has increased in Peru in recent years because of soaring gold prices globally. The Peruvian government has sought to curb illegal mining activities, claiming that they pollute rivers with mercury that is used to separate and collect gold from rocks and soil, causing a public health concern and devastating the Peruvian environment. The government also believes that illegal mining fails to economically benefit the poor gold-mining region. Illegal miners do not pay taxes and take gold out of the country as contraband. The government has, therefore, confiscated and destroyed dozens of dredges (devices used to extract gold and other metals) and imposed ten-year prison sentences for illegal miners. The government insists that it is not targeting subsistence mining but rather large-scale organizations that finance illegal mining, causing irreparable harm to the environment and exploiting workers.

Illegal gold miners in the Madre de Dios region of Peru’s Amazon River basin (along the border with Bolivia and Brazil) protested last week over the government’s measures. They fear that the government’s actions will put them out of work. They also accuse government officials of favoritism towards large multinational companies for whom officials are willing to give mining concessions. Peru’s President Ollanta Humala, for example, encouraged the U.S.-based company Newmont Mining to build a $4.8 billion gold mine.

Throughout the protests, the government has insisted that sanctions are necessary to encourage illegal miners to obtain the necessary permits and obey environmental rules. Approximately 50,000 miners do not have licenses to operate. The government, however, has changed its official stance following the death of three people and wounding of thirty-two more during the protests. The government announced that it will work to incorporate illegal miners into the formal economy by easing some of the barriers to incorporation. As a result, the miners suspended the protests, pending the outcome of talks with government officials in Lima.