Foreign Policy: Downgrade Good As Gold, Literally
Elizabeth Dickinson is a freelance journalist and former assistant managing editor at Foreign Policy.
Over the last three years of economic turmoil, markets have been predictable in one respect: When bad news hits, gold prices skyrocket. So when stock markets around the world plummeted on Monday, Aug. 8, reacting to the sovereign debt crisis in Europe and one rating agency's downgrade of the United States, gold futures hit a record high. By the close of business Monday, they had surged to a record $1,782.50 an ounce, up 4.3 percent — almost as much as the S&P 500 stock index was down.
Some 2,500 miles away from Wall Street, the gold boom has fueled a different kind of crisis: a crisis of opportunity. From 2006 to 2010, Colombia — Latin America's largest gold producer since 1937 — more than tripled its production to 59 tons per year. Next year, it intends to double the amount mined in 2009, attracting investment from top international firms such as AngloGold Ashanti and Cambridge Mineral Resources. But multinationals aren't the only ones getting in on the action: Leftist rebels, drug cartels, and regular old criminals are also edging for a piece of the multibillion-dollar annual trade. As commodity prices have gone up and up, and as drug trafficking has gotten more difficult, gold has become the new cocaine.
Armed groups of every sort are leaping at the chance to control Colombia's latest booming business. The sector has grown so fast that regulations and monitoring efforts are struggling to catch up. There are simply too many applications for new operations and too few trained eyes to scrutinize their legality. Local authorities can often easily be co-opted for a profit. And best of all, the product — gold — is not illegal; it can be exported freely through front companies or middlemen.
"The mines attract all manner of armed actors," says Victor Hugo Vidal, a leader of the local chapter of the Process of Black Communities in Colombia, a region-wide organization that promotes social justice and monitors the mining sector on the Pacific Coast. "The same guy who runs the narcotics trafficking [in the area] probably runs the mine."
Colombia is hardly the first country to see its armed groups diversify into the mining business. In Central Africa, the Democratic Republic of the Congo's low-level civil war has long been funded by the export of copper, gold, and other precious metals. Diamonds funded the Sierra Leonean civil war, and timber fed years of Liberian strife. But for Colombia, a vastly more developed state that in recent years has racked up impressive victories against narcotraffickers, the gold boom represents a new threat to the country's hard-won stability.
The Colombian government is well aware of the danger. Last September, President Juan Manuel Santos announced that leftist guerrillas were infiltrating the mining sector. The Revolutionary Armed Forces of Colombia (FARC) and the smaller National Liberation Army (ELN) were using illegal mining as a "means of funding" their operations, he warned. Emails discovered on the computer of FARC military chief Mono Jojoy, seized this January after his death at the hands of Colombian security forces in September 2010, confirmed the rebels' participation.
The government responded quickly to the news by shutting down its overburdened mining license system in February. In May, the mining minister announced an investigation into corruption in the sector. And in June, the hold on new titles was extended through 2012. Santos has promised to try to pass a new law in coming months to improve mining regulations and redistribute mineral profits to local governments.
But in the meantime, the mining sector's existing contracts — many of which were approved in haste — are still generating plenty of business for the licit and illicit alike. And even without official deeds, "informal" mines are popping up. Perhaps most worrying is the diversity of the armed groups that are getting involved — not only FARC and ELN but also the increasing array of criminal gangs that have begun to populate Colombia's cities and towns. Known here as bacrim, short for bandas criminales, these mafia-like structures evolved to fill the vacuum in drug trafficking and other illicit activity that emerged in recent years as the conflict's traditional actors, the rebels and paramilitaries, were respectively weakened and demobilized. With names such as the Urabeños and the Rastrojos, the bacrim are also fighting for economic control.
On an unpaved gravel road in the coastal city of Buenaventura, an artisanal miner who, until a few months ago, often traveled to an informal mining site some 45 minutes outside the city, recounted the violent chaos he saw. There were so many armed groups trying to control their pieces of the mine, "it was impossible to tell who they all were," he said, afraid to tell me his name. Some 250 digging machines belonging to as many different actors were vying for a piece of the mine, drilling into the open, alluvial riverbed wherever they pleased. Amid the melee, local civil society groups documented approximately 100 homicides between 2009 and 2010.
Signs of the new trade are visible everywhere. Election monitors for the upcoming local elections say that they are seeing the most violence in resource-rich areas, including near gold-mining areas. On July 25, the International Crisis Group upped the warning, issuing a report documenting the extensive "alliances between criminals and some segments of local economic elites." Armed groups, eager to buy off local officials who can facilitate their mining access, appear ready to use intimidation or worse to get their candidates into office.
The U.N. refugee agency UNHCR also points to increasing displacement along the Pacific Coast and in the northern regions where mining is common. Armed groups (or sometimes even legitimate businesses) have been quick to kick communities off their land with minimal compensation, if any at all. A mining executive from the Canadian firm Medoro told Al Jazeera in a documentary that aired in early July that getting communities to vacate their land was simply a "matter of money." (The executive, Juan Carlos Santos, later said he was "misinterpreted.")
Colombians in the country's mineral-rich areas have worked as artisanal miners for years. Like the man I met in Buenaventura, they pan for gold, sell what they can, and earn a living here and there. "There are no other economic options," the miner told me. "It's either that or the criminal gangs — and then you can't sleep at night." Yet when armed groups move in, those mining opportunities dry up. He hasn't found mining work for months.
Still, the Colombian government sees mining as a growth sector. In 2006, the administration of then-President Alvaro Uribe declared a plan to transform Colombia into a "mining country" by 2019. The document lays out plans to make Colombia ever more attractive to international investors by establishing clear regulations in the sector and upping the economic incentives to participate. Santos, meanwhile, has emphasized what good the royalties from the mineral trade will bring to impoverished communities.
But as the country's institutions try to catch up to the mining boom, environmental standards have often gone out the window. Even when mines are licensed, their operations may not be up to code. "It's an environmental disaster, particularly for agricultural production, for the cleanliness of water sources, and for the whole population," explains Gustavo Gallon, director of the Colombian Commission of Jurists. "It's a dreadful business — it's as if it were the colonial era again."
If there is good news, it is that everyone here seems acutely aware of just how daunting and urgent the problems with the mining industry are. In private, military and political officials are quick to admit their concern. The military in particular has worked with local authorities to flush criminals out of mining operations, and the country's chief prosecutor has just appointed a new investigator whose sole role will be to investigate illegal mining.
Yet as the current frenzy reveals, good intentions in the capital are hard to translate in the field. When I spoke to community leaders in Buenaventura, home to many of the displaced who have fled mining competition, they all asserted that the gold rush was as strong as ever and the actors as pernicious.
"This mining is the fiercest war," said Lucmilla Gutierrez Garcia, a locally elected community representative. "That's just the reality."