GameChangers 2019: Illegal Mining, Latin America’s Go-To Criminal Economy

Latin America

The criminal, economic and political dynamics behind illegal gold rushes this past year in Venezuela and Ecuador were very different. But both countries illustrate the same trend: that illegal mining has become the fastest growing criminal economy wherever there are deposits to exploit.

Over the last decade, illegal mining has come to rival the drug trade for profits in mineral-rich corners of South America. The illegal mining boom took off in Colombia and Peru, and the criminal dynamics that emerged there have provided a blueprint for its expansion into Ecuador, Venezuela, and Brazil.

In Ecuador, the chance discovery of a gold deposit has spurred a massive illegal economy, attracting thousands of workers, including desperate Venezuelan migrants, to rudimentary mines that have also become hotbeds for sex trafficking, drugs and violence.

In Venezuela, proceeds from illegal gold have strengthened the irregular armed groups present in the country, from Colombian paramilitaries and guerrillas to “sindicatos,” or local mafias. They have also fueled the rise of other bad actors, including Venezuela’s “megabandas” — large gangs that took root in the slums of Caracas and now have moved on to control mines in remote parts of the country.

Venezuela’s illegal gold trade has generated enormous illicit wealth for corrupt state officials and helped prop up its government, as other legal economies are stymied and the economy continues in freefall.

Venezuela’s and Ecuador’s move into illegal gold — following similar trends in Colombia and Peru — offers lessons for other countries in the region as to how this illegal economy spreads like cancer and supercharges criminal groups.

Ecuador, Where Illegal Mining Replaced the FARC

Ecuador is experiencing a new illegal gold rush along its northern border with Colombia. While much of the boom was the result of an accidental find, the emergence of mining as a new criminal growth economy in this region is no coincidence: there was an economic vacuum to fill and illegal mining became the go-to industry.

In late 2017, thousands of treasure seekers descended on the district of Buenos Aires in the province of Imbabura after a construction crew unearthed gold while breaking ground on a road project.

By the start of 2019, as many as 10,000 miners had taken over the area. The miners opened an estimated 1,000 rudimentary mines and set up around 200 processing mills. The miners were backed by mafia mining financiers from the south of the country. They offered start-up capital to be repaid in sacks of ore, which they shipped to the south to be processed in their own processing plants.

Soon, the riches attracted criminal gangs, which began extorting the miners and the businesses that sprung up around the mining camps, including bars, restaurants and brothels. The initial wave of criminal groups came from the province of Esmeraldas on Ecuador’s western border with Colombia. However, these homegrown criminals were driven out by Colombian armed groups, who seized control of the region with high-powered weaponry and a willingness to use extreme violence.

In July 2019, thousands of police and military were deployed to the region to clear out the mines. While the future of the area remains in the balance, there can be little doubt that the Buenos Aires boom represents just the most visible face of a problem. Illegal miners from Buenos Aires have already made incursions into other nearby areas, seeking new gold deposits to open up.

Furthermore, mining is on the rise all along the Ecuador-Colombia border as areas that had previously experienced low levels of mining in the provinces of Esmeraldas, Carchi and Sucumbíos have seen a steady increase in the size of existing mining operations and a spread of mining to new areas.

Authorities in Ecuador seize an illegal gold mine in Esmeraldas: Courtesy of Ecuador’s Mining Agency

Driving this new gold rush is a collapse in another illegal economy that had previously sustained the border region: supplying the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia – FARC).

The guerrillas’ war against the Colombian state provided employment opportunities in everything from providing food, clothing and equipment to their fighters to smuggling precursor chemicals for their cocaine laboratories. When the FARC demobilized in 2017, the income and work opportunities they represented for these poverty-ravaged areas left with them.

With no sign of a legal economy to fill the vacuum, locals turned to illegal mining. The gold rush attracted newcomers from all over. When Ecuadoran security forces moved on Buenos Aires, they discovered over 1,000 Venezuelans and nearly as many Colombians.

As seen in Buenos Aires, the opportunities also extend to armed groups, gangs and mafias, which both finance and extort mining operations, following a pattern firmly established in neighboring Colombia. As a result, Ecuador’s border region has entered a new era based on a new illegal economy and new underworld overlords.

The results of this gold boom are likely to be devastating both for the environment and for communities in gold-rich areas dealing with the social problems caused by the incursions of illegal mining. Unless the authorities grasp that the mining explosion is a response by people with few legal alternatives, then illegal gold looks set to underpin the local economy in the same way it has already taken root in Colombia, Peru and elsewhere in the region.

Crime Groups and Venezuelan Government Feed on Illegal Gold

Gold has become a vital crutch for President Maduro’s government in the wake of Venezuela’s economic collapse. With oil production stagnant and exports decimated by international sanctions, the state is in dire need of income and has few legal resources left to exploit.

Despite US sanctions hitting Venezuelan gold in November 2018, Venezuela has continued to cultivate relationships with alternative international buyers such as Turkey and Dubai.

The Maduro administration’s desperation to replenish its dwindling gold reserves has created a dynamic of dependency between the government and criminal gangs. At least 80 percent of Venezuela’s gold is illegally mined. The state gold company Minerven does little mining itself, but rather channels gold to the Venezuelan Central Bank (Banco Central de Venezuela – BCV) from the plethora of armed groups that control mining throughout the south of the country.

In March, the US Treasury placed targeted sanctions on the company and its president, accusing them of “propping up the illegitimate Maduro regime.”

Gold bar from ore mined at Venezuela’s orinoco mining arc: Courtesy of Venezuela government

Maduro’s arrangement with illegal mining interests is convenient to the criminal actors involved. The regime is kept afloat, while criminal gangs reap vast profits unmolested by the state, and the country’s economic crisis provides a steady stream of exploitable labor. The local military also profit by charging protection payments to illegal mine operators.

Further up in the state hierarchy, government loyalists are also profiting. Venezuelan officials allegedly involved in the illegal gold trade include the country’s minister of industries and national production, Tareck el Aissami, and the president’s own son, Nicolás Maduro Guerra. In June, the US Treasury sanctioned Maduro Guerra after former Venezuelan intelligence chief Christopher Figuera accused him of setting up a resource company that sold illegally mined gold to the BCV at inflated prices.

On the ground, relations among criminal groups are tense. The mining states of Amazonas and Bolívar have seen outbreaks of violence as rival groups battle for control of precious mineral deposits. Many such clashes are associated with the rapid expansion of Colombia’s National Liberation Army (Ejército Nacional de Liberación – ELN) in Venezuela. In Bolívar state, the ELN has grown its criminal empire by seizing mines from the local mafias known as “sindicatos,” committing massacres, and subjecting local mine workers to dangerous conditions.

In an International Crisis Group report published in February 2019, a former ELN commander said that the group earned 60 percent of its income from illegal mining in Venezuela and Colombia. Besides gold, the group also reportedly controls coltan mines in Parguaza and diamond mines in San Vicente de Paul. These economies have been a major contributor to the ELN’s rapid evolution from a Colombian rebel group to a Colombo-Venezuelan army, with a presence in at least 13 Venezuelan states.

Venezuelan megabandas, such as the Tren de Aragua gang, have also used illegal mining to expand their power. From its home turf of Aragua, the gang has spread its tentacles to the south of Bolívar, where it now controls several mineral deposits and exports gold and coltan into Brazil. This diversification has provided the gang with new income streams as the country’s impoverishment makes street crime less profitable. Tren de Aragua is now arguably Venezuela’s largest homegrown criminal risk, and a budding regional threat as it expands into Colombia, Peru and Brazil.

What’s more, dissidents from the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarios de Colombia – FARC) have regrouped in the southern Venezuela state of Amazonas and looked to illegal mining to fund their expansion. The Acacio Medina Front is active in the mines of Yapacana, a region described as a “giant money laundry by watchdog group SOS Orinoco, which tracks illegal mining in the Amazonas and Orinoco regions of Venezuela. There, guerrilla groups invest drug earnings into the extraction of gold, which can be easily laundered at a higher profit. This income has allowed the ex-FARC mafia to expand its operations to at least eight Venezuelan states over the last year.

In the Yapacana mines, local residents report that ex-FARC guerrillas work alongside the ELN in a loose guerrilla alliance, SOS Orinoco reported. Such pacts provide a worrying model for closer criminal cooperation between these groups in the future, particularly in light of reported meetings between ex-FARC and ELN leaders on the Colombia-Venezuela border.

In Amazonas, violent clashes have been reported between the ELN and the Venezuelan National Guard, reflecting ongoing tensions over extortion payments demanded by the military. By contrast, in neighboring Bolívar, Venezuelan congressman Américo de Grazia and former governor of Bolívar, Andrés Velásquez, have both alleged that the ELN’s rapid expansion is the result of a pact with security forces to displace the anarchic local mafias and impose order on the mining region.

In October, President Maduro announced that he would turn over a gold mine to be administered by each state governor from his party, to finance their local governments. In November, a wave of atrocities swept the mining region of El Callao, shortly after the governor of Vargas visited the province to take control of his promised gold mine. A local mafia boss circulated a statement threatening local authorities for breaking their pact with the sindicatos and allowing the ELN to enter the region. Local residents claimed that Maduro’s plan lay behind this reconfiguration of power.

Another emerging trend has been the commission of atrocities in mining regions. In the municipality of Gran Sabana, in the far south of Bolívar, mineral deposits have historically been controlled by the Pemón indigenous group. The last year has witnessed three deadly attacks against Pemón communities, allegedly on the orders of regional authorities, in Canaima, Santa Elena de Uairén, and Ikabarú. Indigenous leaders express the belief that the massacres are the result of a deliberate state strategy to seize control of indigenous mining operations.

Illegal Mining’s Prospects

The illegal gold rush goes beyond Venezuela and Ecuador. In Brazil, mining has accelerated in the Amazon, devastating massive swaths of rainforest. In the frenzy to reach deposits, the Brazilian miners, known locally as “garimpeiros,” invaded indigenous reserves in 2019, setting tracts of land ablaze and even killing a local leader.

Brazil President Jair Bolsonaro, who promised during his campaign to open up the Amazon to commercial exploitation, has curtailed efforts to fight illegal mining, which is estimated to bring in more than a billion dollars a year, according to a New Yorker report.

Neighboring Guyana and Suriname are also rich in gold — and biodiversity. Illegal mining has already stripped chunks of Suriname’s Amazon forest. Criminal groups in Venezuela have set up along the country’s border with Guyana, extorting local mining operations. Gold is freely smuggled between the two countries.

Smaller and poorer than their neighbors, Guyana and Suriname are ill-prepared to handle incursions from armed actors in search of new mining operations.

Smuggling of illegal gold has proliferated across the region. Bolivia has seen gold exports hit record levels in recent years, likely smuggled from other countries. And the islands of the Dutch Caribbean have become a favored transit point for Venezuela’s clandestine gold exports.

In August, the owner of a tourism complex in southern Bolívar, Venezuela, was identified as coordinator of a trafficking network that laundered gold in the Caribbean nations of Trinidad, Aruba, Curacao, and the Dominican Republic, flying it out from clandestine airstrips. Brazil is also a major exporter of illegal gold. A ring that exported 1.2 tons of illicit gold — worth more than $55 million — was taken down in December. The gold was mined in southern Venezuela and moved over the Brazilian border, or sourced from illegal mining operations in the indigenous Yanomami reservation in Brazil’s Roraima, which abuts the Venezuela border.

Venezuelan gold has also been smuggled directly to the United States. In September, a private jet was detained in Miami carrying $5 million worth of gold in its nose.

Gold, unlike drugs, is easily laundered, making it especially valuable to transnational organized crime groups, including drug trafficking syndicates. With world gold prices high and climbing, illegal mining and the illicit gold trade will continue to expand and fuel the interests of transnational organized crime for the foreseeable future.

Top Image: Associated Press photo of gold bar seized by Brazilian police after a raid on a ring that allegedly smuggled tens of millions of dollars worth of illegal Venezuelan gold

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