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Artisanal and Small-Scale Mining in Ecuador— Building and Implementing an Effective Legal Framework

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Artisanal and Small-Scale Mining in Ecuador— Building and Implementing an Effective Legal Framework Artisanal and Small-Scale Mining in Ecuador— Building and Implementing an Effective Legal Framework Author: ANDREW A. IRVINE, Fulbright U.S. Scholar to Ecuador, Andrew A. Irvine, P.C., 123 Abstract Jackson, Wyoming. Mining industries in Latin America and across the world are often dominated by artisanal and small-scale mining (“ASM”) operations, which are marred by myriad health, social, economic, and environmental problems. Even with significant economic and social contributions, these operations are often considered illegal because they operate informally, outside legal frameworks. While approaches to addressing problems resulting from ASM have varied, scholars recognize that legalization of ASM is a fundamental condition for a legitimate, stable and responsible ASM sector. New mining legislation in Ecuador provides for the regularization of ASM in an attempt to combat illegal mining in the country and solve many of the resultant problems. The impact of the new law on illegal mining, however, has been limited. With respect to gold laundering, the law may actually be contributing to this illegal activity rather than reducing it. This paper provides an overview of the prevalence of illegal mining in Latin America and discusses the attendant problems, with a focus on Ecuador. Ecuador’s law formalizing ASM is then presented and analyzed in the contexts of its contribution to gold laundering in the country and degradation of a popular river in Ecuador’s “whitewater capital.” The law’s effects on mercury reduction and the coexistence between ASM and large-scale mining in Ecuador are also discussed. Based on these analyses, recommendations are made to improve the effectiveness of Ecuador’s new mining law, both to reduce illegal mining activity in the country and to better protect Ecuador’s natural environment. Overall, enhancement of Ecuador’s legal framework for ASM is intended to contribute to the advancement of ASM as a formalized, socially and environmentally responsible means of livelihood in the country. 1 The author would like to offer special thanks to Sr. Álvaro Ordóñez, of counsel, at the Ferrere law firm in Quito, Ecuador. Sr. Ordóñez and the Ferrere law firm generously provided office space, and Sr. Ordóñez was integral in arranging interviews and meetings 2with agencies and institutions in Quito, and providing research materials for this paper. This paper was written as part of a 2016-2017 Fulbright U.S. Scholar program award to Ecuador, but the views expressed herein are solely those of the author, and not those of the 3Fulbright program. The author can be contacted by email at [email protected] or as indicated at the website for Andrew A. Irvine, P.C. (www.andrewirvinelaw.com). i Table of Contents I. Introduction ........................................................................................................................................................ 1 A. The Prevalence and Problems of Illegal Mining in Latin America ......................................... 1 B. Environmental and Social Impacts of Illegal Mining in Latin America ............................... 4 C. Distinguishing Between “Illegal” and “Informal” Mining .......................................................... 7 D. The Importance of Artisanal and Small-Scale Mining ................................................................ 8 II. Formalizing Informal Artisanal and Small-Scale Mining ............................................................... 9 III. Investigating the Impact of Ecuador’s New Mining Law ........................................................... 11 IV. Status of Illegal and Informal Mining in Ecuador .......................................................................... 12 A. Levels of Employment and Production .......................................................................................... 12 B. Environmental and Social Conditions ............................................................................................ 14 C. Current Outlook and Statistics from the Ministry of Mining ................................................. 17 V. Overview of Ecuador’s Mining Law ...................................................................................................... 20 A. Promotion of Artisanal and Small-Scale Mining ........................................................................ 20 B. Reforms to the Mining Law ................................................................................................................. 21 C. Differentiating Between Types of Mining Under the Mining Law ...................................... 23 VI. Ecuador’s Legal Framework Formalizing the ASM Sector ........................................................ 26 A. Structure of the Artisanal and Small Mining Regimes ............................................................. 26 1. The Artisanal Mining Regime ......................................................................................................... 26 2. The Small Mining Regime ................................................................................................................ 30 3. Mining Control and Enforcement ................................................................................................. 33 B. Environmental Legal Framework for Artisanal and Small Mining .................................... 33 1. Environmental Registration for Artisanal Mining ................................................................ 33 2. Environmental License for Small Mining .................................................................................. 36 3. Environmental Control and Enforcement ................................................................................ 37 VII. Significant Regulatory Gaps in Ecuador’s Legal Framework for the ASM Sector .......... 40 A. The Legal Framework Contributes to Illegal Mining and Gold Laundering ................... 40 1. Statistics Indicate that Ecuador is a Haven for “Dirty” Gold ............................................. 40 2. Gold Laundering .................................................................................................................................. 41 a) Gold Laundering in General ...................................................................................................... 41 b) Gold Laundering in Ecuador ..................................................................................................... 42 3. The ASM Sector in Ecuador Facilitates Gold Laundering .................................................. 44 4. Opportunities to Fix the Legal Framework for ASM to Reduce Illegal Mining and Gold Laundering ........................................................................................................................................... 47 a) Implementation of Ecuador’s Existing Controls on the Commercialization of Gold ............................................................................................................................................................... 47 b) Implementation of International Standards for the Commercialization of Gold 49 B. The Legal Framework Lacks Environmental Planning and Review .................................. 50 1. The GALO Mine Case Study ............................................................................................................. 50 a) Permitting of the GALO Mine .................................................................................................... 51 b) Inspections of the GALO Mine .................................................................................................. 52 (1) Noncompliance from the First Inspections ................................................................. 52 (2) Noncompliance from the Second Inspections ............................................................ 54 c) Continued Noncompliance at the GALO Mine ................................................................... 55 ii (1) GALO Mine Increases Production .................................................................................... 56 (2) GALO Mine Submits Insufficient Action Plan ............................................................. 57 (3) GALO Mine Determined to be in State Patrimonial Forest ................................... 58 d) Operations at GALO Mine Suspended for Noncompliance .......................................... 59 2. Opportunities for Increased Planning, Review and Enforcement ................................. 59 a) Need for Controls and Planning at the Front-End of the Mine Permitting Process 59 b) There are Limited Consequences for Violations of Applicable Environmental and Mining Regulations ....................................................................................................................... 61 c) The Responsibility for Enforcement and Monitoring Improperly Lies with the Parties Affected by Mining Activities ............................................................................................. 62 d) Control, Monitoring and Enforcement are Improperly Influenced by Corruption 63 VIII. Additional Opportunities to Enhance the ASM Sector in Ecuador ..................................... 66 A. Reducing Mercury Contamination from ASM ............................................................................. 66 1. Ecuador’s Prohibition on the Use of Mercury in Mining Activities ............................... 66 2. Efforts to Reduce Mercury Use in Ecuador .............................................................................
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