Ecuador exported 76 million dollars in gold to China, but 339 million dollars arrived: the data set off OAS alerts

In the year 2019 “Ecuador recorded exports of gold ore to China worth $76.7 million. However, Ecuadorian gold ore imports reported by China that year amounted to $339.2 million. indicates a report from Department against Criminal Crime of the Organization of American States (OAS), made public by the President of the Republic himself, Guillermo Lasso, through a tweet. The difference in figures raised one of the alerts about the modus operandi of the illicit gold trade in Ecuador and the role of illegal mining.

At the same time as the publication of the data, The agency has just congratulated the Ecuadorian government for its statement against illegal mining, describing it as a threat to state security. This department has also announced its support for Ecuador in this challenge, which it says is part of the comprehensive project to combat it.

In the report entitled Chasing illicit gold money: strengthening the fight against illegal mining, a series of findings are disclosed that reveal the development of “a robust illicit infrastructure in Ecuador”.

It is indicated that between 2015 and 2019 the Ecuador’s gold ore exports increased 27,604% on the basis of weight. This growth, according to the research department, is abnormal when compared to that of regional exporters with a mining sector much larger than Ecuador’s.

Thus, “in 2019, Ecuador exported almost four times as much gold as Colombia and Peru combined. The vast majority of these exports went to China, which received more than 99% of gold ore exports. of Ecuador in 2019″, says the report. There is also a notable and growing discrepancy in the reported value of exports ($76.7 million) vs. imports ($339.2 million) of gold ore between China and Ecuador.

These disparities in reported trade values ​​and the sharp increase in gold ore exports seem to indicate the use of a new way to trade Ecuador’s illicit gold, the document says.

The discrepancies between imports and exports and their relationship with the export of illicit gold is not a new phenomenon. An example of this is the report of the gold exports to the United States that in 2014 were equivalent to only two thirds of the Ecuadorian gold that appears in the import records of the United States. However, these discrepancies (says the report) have diminished as a result of intensified enforcement and controls of the gold trade by the Ecuadorian authorities, particularly as it relates to gold smuggling from Peru.

Among other stark claims, the report indicates that “There are legal companies, such as local gold processors and dealers, who are expanding their operations and linking up with the illicit gold trade.”

In addition, it is argued that “limited informal mining, which artisanal and small-scale miners practiced in Ecuador for years, is changing.” And he explains that in recent years larger and more organized groups of illegal miners have emerged in the country with close ties to organized crime, and there is a growing presence of foreign miners from Brazil, Venezuela and Peru.

The report indicates what would be the possible structure of illicit trade in Ecuador, based on stories and interviews:

At the top of the chain are the financiers: criminal groups or shell companies. The extracted material goes to processing in local plants in various small municipalities. The processed material is sold to national collectors. In addition, there is material that enters contraband that is also processed in local plants. It is then delivered to international refineries.

In the report it is stated as country vulnerabilities:

• Corruption of officials in charge of control.
• Irregularities in the granting of mining concessions.
• Poverty, migration and socioeconomic situation in general.
• Insufficient human, economic and technical resources to address the phenomenon of informal and illegal mining.

The report also says that the lesser development of the illicit gold trade in Ecuador compared to other countries in the region offers the government great advantages in combating this illicit economy. It also highlights the success of the measures against the smuggling of gold from Peru as of 2015 and the disruption of illegal mining in Buenos Aires in 2019. These two events “highlight a remarkable capacity and commitment to face this challenge”.

However, they have been detected some important deficiencies in the fight against money laundering. These are:

• Inadequate coordination between national law enforcement authorities.
• Few powers of the UAFE to impose administrative sanctions.
• Insufficient resources of the Prosecutor’s Office.

These are, among others, the recommendations made by the report for Ecuador:

• Allocate more public resources, as well as powers to impose sanctions, to customs supervision and control entities, in order to control non-financial companies linked to the gold sector.
• These remedies and measures should apply in particular to mineral processors, gold ore exporters and freight forwarding companies, given their history of non-compliance.
• It is also essential to properly monitor the small-scale and artisanal mining sector, taking into account its exposure to criminal organizations and the central role it plays in illegal mining.
• In addition, the government should expand its presence in remote mining areas and municipalities where illegal gold is processed and traded, as well as at border crossings close to illegal mining hotspots to combat international smuggling of minerals and inputs.
• Finally, in investigations of the illicit gold trade, the Ecuadorian authorities should adopt a more comprehensive approach that includes actors higher up the supply chain, such as financiers, money launderers, exporters, and illicit gold dealers.

These measures will be crucial to complement the country’s efforts to develop the legal mining sector as an engine of economic growth and investment, the OAS Department said.

In Ecuador there have been very conflictive cases such as the illegal mining activity in Buenos Aires, in the Imbabura sector and that of Yutzupino in Napo. In both cases, the consequences of illegal mining have been seen. In this sense, a few days ago, when the Government declared illegal mining a threat to State security, the Chamber of Mining congratulated said pronouncement.

The president of the Chamber of Mining, Eulalia Silva, had mentioned that for the formal and industrial mining that the Chamber represents, illegal mining is a problem. Among other reasons, for a matter reputational. He explained that, for example, the environmental liabilities left by illegal mining are often attributed to responsible mining. When asked about the opposition of the indigenous sector to the State defending legal mining, Silva said that it is important to reflect on how we want resources to be exploited in the country: legally, reportable, traceable, or illegally. She also invited these sectors to reflect on what illegal mining is the real enemy.