Amazon to Alps- Swiss gold imports from Brazil tread a legal minefield
- The Brazilian Amazon is experiencing a new and potentially catastrophic gold rush driven by increased international demand for the precious metal.
- Over the past year, an estimated $1.2 billion worth of gold has been exported from Brazil to Switzerland, making it the second-largest export market for the country’s gold, after Canada. About a fifth of this gold comes from the Amazon, according to official figures.
- The scale of Brazil’s gold exports to Switzerland has raised concerns among environmental and transparency advocates that a significant quantity of illicit gold from the Amazon may be entering global supply chains.
Illegal mining in protected areas in the Brazilian Amazon saw as much as a fivefold increase since 2010, a gold rush driven largely by surging prices in international markets. Over the past year, 25.4 tons of the precious metal worth an estimated $1.2 billion has been exported from Brazil to Switzerland, making it the second-largest export market for the country’s gold, after Canada. About a fifth of this gold comes from the Amazon, according to official figures.
The resulting rush to exploit Amazon gold has had devastating impacts on Indigenous peoples such as the Kayapo, Munduruku and Yanomami, who live in reserves in Pará and Roraima states that have been heavily mined by garimpeiros, or wildcat miners. The gold rush has been linked to increased pollution, deforestation and a rise in violent crimes.
Between 2019 and 2020, some 100 tons of mercury was estimated to have been dumped into the Amazon Basin by illegal miners. The substance, which contaminates the water and the fish consumed by Amazonian people, affects the central nervous system, but can also reach the kidneys and liver. According to the Mercury Observatory, a pollution monitoring group, it can also pass through the placental barrier, contaminating the unborn. The symptoms of mercury poisoning range from impaired vision and muscular atrophy to psychological disorders and, in extreme instances, it can lead to life-threatening conditions such as cancers and heart conditions.
Examples of the impacts of the gold rush are not hard to come by. In the Sawré Muybu Indigenous Reserve in the state of Pará, home to the Munduruku, the entire population of three villages were found to be contaminated by mercury, and 60% were found to have levels of the substance above the safety threshold recognized by the World Health Organization.
In the Munduruku Indigenous Reserve, also in Pará, mercury contamination has been accompanied by an escalation in violence, which reached a peak last March when garimpeiros, equipped with heavy machinery, guns and even a helicopter, set Munduruku houses on fire and attacked a bus carrying community leaders. The territory abuts the Transamazônica road in the Tapajós Basin, the Brazilian region most affected by illegal gold mining.
But the problem has spread to many other parts of the Amazon as well. In the Yanomami Indigenous Territory, the country’s largest Indigenous reserve, in the state of Roraima, there are nearly as many garimpeiros as there are Indigenous residents, according to recent estimates.
‘They are coming by the river, the roads, and the air. There are more than 100 planes and helicopters flying over our territory every day,’ Hekurari Yanomami, who heads the community council responsible for supervising Indigenous health care in the Yanomami reserve, told Times of Nation in a phone interview in October, shortly after two Indigenous children died in an accident involving a dredger operated by illegal miners.
The territory is also home to seven other Indigenous groups, six of whom live in voluntary isolation from the outside world. During the coronavirus pandemic, illegal gold miners also become a vector of transmission for these communities.
Not all artisanal mining is illegal. Small-scale mining in Brazil generally enjoys looser environmental regulations due to its assumed marginal impacts. In practice, however, many garimpeiros organize themselves in corporate-like structures whose environmental impacts are comparable with those of large-scale mining operators.
‘When we think of a garimpeiro, we imagine someone who operates in a very rudimentary way, without equipment, without structure. But today it has been subverted into some real companies, with strong structure and impact, and which require stricter regulation,’ Gustavo Kenner Alcântara, a state prosecutor, told Times of Nation in a phone interview.
The already relaxed rules are set to become even looser with the passing of a new mining bill, which is currently being considered by Brazil’s Congress. If approved, the new law will exempt projects from environmental licensing if they are deemed to not pose a risk of ‘meaningful impacts.’ Applications for mining permits which have been waiting for approval for more than a year will also automatically be approved by the national mining agency.
The Swiss connection
Unlike many agricultural goods that are produced in Brazil and traded through Switzerland only on paper, gold is imported physically into Switzerland in large quantities and processed largely at refineries in Ticino in the country’s south, near the Italian border. There, gold is melted at high temperatures in to remove impurities, producing thousands of bars of bullion a year.
Swiss gold refineries, such as MKS PAMP, Metalor, Valcambi and Argor-Heraeus, which are among the largest in the world, process a large portion of the gold mined worldwide. Due to the prevalence of illegal gold mining and trading, it’s difficult to calculate exactly how much of the world’s gold supply is refined in Switzerland. The Swiss Federal Council estimates that more than two-thirds of the gold traded worldwide passes through the country, though its share of the refined gold market is thought to be smaller.
‘Swiss refiners claim that they process only 13% of the gold mined worldwide,’ says Christoph Wiedmer, co-director of the Swiss NGO Society for Threatened Peoples, which monitors the global gold trade. ‘However, it is quite certain that this figure is much higher due to indirect sources. Yet, because of the absurd lack of transparency in the gold business, exact figures are unverifiable.’
There are several reasons why Switzerland is such a significant market for gold refining. The country’s watchmaking industry is an important customer and, until the 1990s, the four major refineries belonged to the country’s top banks, which underwrote purchases and sales. In addition, northern Italy’s jewelry industry has historically driven demand.
In the early 1980s, as Brazil stepped up its gold production to stave off financial crises, the Swiss Federal Council made the details of the gold trade statistics secret. Only total import and export figures had to be disclosed. The lack of trade data in the 1980s meant Swiss refineries were able to subvert the boycott of the apartheid regime in South Africa, then the world’s largest gold exporter. As of 2021, per country import and export statistics are being published again, but any information on regions or mines of origin remain unknown.
Transparency remains poor and the resulting risks high. By importing Brazilian gold, Switzerland is putting itself in dangerous proximity to environmental and social violations that arise, especially from illegal mining in the Amazon, according to experts. The line between legal and illegal gold mining is often fuzzy, and Swiss investors are also exposed to potential losses through stakes held in mining companies operating in the Amazon.
Each year dozens of tons of illegal gold are thought to be inserted into the legal market by illicit mining operators. By some estimates, the illegal market in Brazilian gold is almost a third of total exports, though the nature of the illicit trade makes it difficult to measure and the true figure could be higher.
Where is all this illegal gold going to? ‘We can’t identify precisely where the gold came from, where it went, who is buying it and who is selling it,’ says Alcântara, the prosecutor, adding that there is no electronic invoicing system for gold in Brazil. ‘It doesn’t make sense that such a valuable commodity as gold is until today sold with handwritten invoices. Any international buyer of Brazilian gold is running the risk of buying illegal gold, even if it is from a regularized company.’
Alcântara knows a thing or two about the illegal gold market, having prosecuted cases in the country’s largest crackdown on illicit operators, an operation known as Midas Dilemma, a play on the legend of King Midas, whose foolishness and greed turned all he touched into gold. The Midas Dilemma operations uncovered a scheme to purchase 611 kilograms (1,347 pounds) of gold from illegal sources in Pará that had been laundered and declared legal.
The same gold-laundering methods were used by a criminal organization dismantled in October, which was taking around 1 ton of gold per year out of Indigenous lands in the south of Pará. From the Kayapó Indigenous Reserve alone, the police estimate the miners were taking 18 kg (40 lbs) of gold per month, a gross revenue of 5.4 million reais (about $996,000).
‘It’s so easy. I have illegal gold and I have someone who has a legal mine. I don’t even need authorization from that person, I simply declare that the gold came from there and that it is legal,’ Gustavo Caminoto Geiser, a Federal Police crime expert, told Times of Nation.
‘The current system doesn’t have any kind of check or block. It is self-declaratory. The law expressly provides that the buyer has the duty to believe the seller’s declaration and what is on his papers,’ he added.
Many mining experts in Brazil blame state agencies, including the National Mining Agency (ANM), for the ease with which criminals can exploit the system. ‘There is no funding. ANM has few employees, and they can’t handle it. IBAMA [the federal environmental protection agency] and the Federal Police are also unable to combat all the illegal activity that is going on,’ says Larissa Rodrigues of the Instituto Escolhas, a Brazilian economic sustainability monitor.
Geiser, the federal police officer, said the lack of state control over illegal gold mining operations has become so bad that he believes most of the gold leaving Brazil is tainted with illegality. ‘Since it is so easy to wash it, I am sure most of it is washed,’ he told Times of Nation.
Official data does, however, provide some insight into the scale of gold laundering. In 2020, preliminary data from the ANM showed Brazil produced 62 tons of gold, yet the foreign trade ministry registered 98 tons of gold being exported that year.
The Swiss Federal Office for Customs and Border Security does not provide data on the mines of origin or consignors for imports into Switzerland, nor is there any legal mechanism for requesting information on imports from third countries, such as from the gold trading hub of Dubai. The country’s State Secretariat for Economic Affairs (SECO) told Times of Nation- ‘SECO is in regular contact with Swiss refineries but does not monitor their activities.’
Of the four major Swiss refineries contacted by Times of Nation for comment, only MKS PAMP denied sourcing gold from the Amazon, but it would not disclose the origin of its gold imports. Metalor and Valcambi both declined to disclose the origin of their Brazilian gold imports, while Argor-Heraeus declined to answer questions.
Swiss gold refineries have been at the center of several scandals over the past few years regarding their gold trading. Swissaid, a development charity, in 2020 found that UAE firm Kaloti Jewellery Group was used by several refiners, including Valcambi, to source gold from countries where the trade fuels conflict and corruption. Kaloti had previously been linked to illicit gold exports from Brazil and was the subject of a U.S. Treasury Department probe that was mothballed over fears of angering the UAE’s rulers. Despite cases such as Kaloti, Swiss refineries continued to buy gold from the UAE, sourcing some $8 billion of the precious metal via this route in 2020.
There are no data available on whether Amazon gold is entering Swiss refineries through UAE companies, though the nature of gold laundering in Brazil and internationally means such a scenario cannot be ruled out.
Both MKS PAMP and Metalor deny they have any business relationships with UAE suppliers. Metalor said this was because it ‘cannot guarantee the origin of the gold.’ Valcambi and Argor-Heraeus declined to answer questions about whether they source gold via UAE suppliers.
Beside gold laundering, there’s another way of turning illegally mined gold into legal gold, and thereby make it acceptable for Swiss refineries- to legalize illegal gold mining sites. That’s something that Brazilian President Jair Bolsonaro — whose father worked as a garimpeiro and who had prospected for gold himself — is currently trying to do by sending to Congress a bill to legalize mining inside Indigenous reserves.
Alongside the dismantling of environmental inspection bodies and the sharp rise in the price of gold, Bolsonaro’s proposal is seen by experts as a key driver of the current Amazon gold rush.
In 2019, the first full year of Bolsonaro’s presidency, the area of mining-linked deforestation increased by more than 150% compared to the year before — reaching more than 22,000 hectares (54,600 acres), a similar area to that lost in 2020. ‘With the government’s incentive to legalize garimpos [wildcat mines] and even to regulate this activity on Indigenous reserves, there has been a clear stimulus to these initiatives. Since 2019, illegal mining has increased dramatically,’ Alcântara, the state prosecutor, told Times of Nation.
The expectation around Bolsonaro’s bill also generated a rise in requests for legal mining inside Indigenous reserves. While this may seem counterintuitive, as the ANM blocks most of these requests, these dormant applications can act as reservations for future mining licenses that could be activated if the new mining laws are passed, according to experts.
‘These areas inside Indigenous lands are being requested almost like a future market reserve, betting on the approval of Bolsonaro’s bill,’ says Rodrigues of the Instituto Escolhas. In some cases, miners are even given permission to conduct preliminary research on mineral extraction in the areas where they apply for these licenses. Some 2.4 million hectares (5.9 million acres) are thought to have been greenlighted for research in this manner since Bolsonaro was elected in late 2018. ‘The Brazilian mining sector is like the Old West. Whoever arrives first and makes an application for an area, takes it, and then nobody else has access to it,’ Rodrigues adds.
Mega mine has Swiss backers
Despite the mounting evidence of serious negative impacts of Brazil’s new gold rush, new opportunities like the Volta Grande mega mine show Swiss investors are undeterred.
On the Xingu River in the state of Pará, the largest Brazilian open-pit gold mine is to be built, planned by the Canadian company Belo Sun Mining, whose major shareholders include investment manager Konwave AG, based in Herisau, Switzerland.
The construction of the Volta Grande mine in the Xingu River Basin, already facing the impacts of the Belo Monte hydroelectric dam, could expose the river to ‘catastrophic consequences similar to those of the Doce River disaster,’ according to researchers. In that incident, in 2015, a dam holding tailings from an iron ore mine collapsed, killing 19 people and contaminating an area up to 650 kilometers (400 miles) downriver with toxic sludge.
The Volta Grande mine will operate only a few kilometers from two Indigenous communities, who fear the contamination of the rivers by heavy metals and cyanides, prompting criticism from Indigenous organizations and the Federal Public Ministry.
‘There are so many red flags going up here, I can’t even count them anymore,’ James Bosworth, political risk manager for Hxagon, a consultancy, told CBC last year.
On Dec. 18, 2021, the Federal Public Ministry recommended the Pará government suspend all environmental licensing processes for works or activities of ‘great impact’ in the Volta Grande do Xingu area, including Belo Sun’s mining project.
‘There are no studies that assess what proportions the impacts of the hydroelectric dam might take associated with the impacts of a mining project in the Volta Grande,’ it said in a statement.
Times of Nation asked Konwave if it plans to use its voting rights or sell its shares to oppose the Belo Sun Mining project. Konwave said it would sell the position completely if the mining project was not supported by the ‘local community/stakeholders.’ However, the investor would not specify how this support would be assessed.
State prosecutor Alcântara says countries like Switzerland should be mindful of their role in stoking demand for Brazilian gold- ‘The most serious thing in the gold chain is who buys. From the moment you buy it, you encourage this market.’
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Banner image- Yanomami community in northern Brazil saying ‘Go away, mining companies’. Image by Victor Moriyama/ISA.
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