One of the many negative consequences of widespread political, social, and economic turmoil in Latin America has been the rise in illegal gold mining operations. Similar problems with illegal gold mining have been widely publicized in South Africa and other parts of the African continent. However, South America's illicit mining industry hasn't gotten as much attention due to being overshadowed by economic crises (e.g. Venezuela) and corruption scandals (e.g. Brazil) grabbing the headlines.
Mining a Major Economic Factor
If there's one thing that a black market absolutely needs to thrive, it's a ready supply of whatever the illegal commodity is. This is certainly true of South America's growing industry of illegal mining operations. The vast natural resources that have long been at the heart of the economies of Latin America are, in this case, both a blessing and a curse.
As the graphic above shows, major mining sites for various industrial and precious metals are fairly evenly widespread across the entire continent, as well as Central America. Perhaps the two most prevalent mineral resources found on that chart are, naturally, gold (the orange "Au") and silver (the yellow "Ag").
These rich resource deposits combined with political and economic uncertainty leave the situation ripe for illicit mining activity—illegal gold mining, especially. The situation has gotten so bad that gold has replaced cocaine as the top black-market commodity in Colombia. Estimates place this black market at $2.5 billion annually, accounting for four-fifths of all the gold that the country exports each year.
It's not only happening in Colombia, either. Similar issues have arisen across the continent and are especially rampant in Brazil. Along with other signs of instability, the violence and lawlessness associated with illegal gold mining could place a damper on the country hosting the 2016 Summer Olympic games in Rio de Janeiro.
In nearly all cases, the illegal miners use open-air burning of mercury to refine the gold from the ore. This crude method is not only dangerous but is incredibly toxic to the surrounding ecosystem. Mercury pollution in the water is becoming an increasing problem.
Beyond environmental destruction, the incentive to illegally mine for gold leads more and more criminal groups into the racket. If they aren't operating makeshift mercury-burning projects, sometimes paramilitary and guerilla groups will forcefully take over legitimate mines. They kill the overseers and hold the mineworkers hostage to keep the operation going. This method obviously takes advantage of the fact that these workers are trained to use the equipment and carry out the mining process. It amounts to slave labor.
The image above shows one of the ferries used to transport the illicit gold being destroyed by Brazil's environmental protection agency, IBAMA. You can view a captivating photo essay in The Atlantic detailing some of the efforts to stamp out illegal gold mining in Brazil.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.