ZARUMA, Ecuador — Gold has been mined in the city of Zaruma in southern Ecuador for over 500 years. The area has suffered a complicated history of extraction and exploitation, and now stands as a prime example of the challenges currently facing the Ecuadoran mining industry.

Approximately 10,000 people in the area surrounding Zaruma make their livings from “artisanal,” or small-scale subsistence mining. The work is backbreaking and the profit margins generally narrow. It is hardly the most efficient way to access the country’s estimated 280.4 tons of unmined gold.

Recognizing what the underground stores of gold, copper, and silver worth an estimated $200 billion could mean for a country with more than a quarter of its population living below the poverty line, President Rafael Correa introduced a bill aimed at encouraging new investment in the mining industry. The measure seeks to diversify the Ecuadoran economy, which is heavy in oil and exports, and to attract companies to make big investments in large-scale mining projects.

Unfortunately for President Correa, the pending legislation was not enough to entice one of its major targets, Canada’s Kinross Gold Corporation, into following through with a planned $1.3 billion mining project in southeastern Ecuador. The development of the Fruta del Norte mine was scrapped after more than two years of negotiation, and is now expected to be taken over by Chinese investors.

China has been an increased presence in Ecuador over the past several years, and Chinese investor groups seem eager to continue the expansion. Having already established a strong presence in the oil sector through China National Petroleum’s and Sinopec’s local subsidiaries, investors are keen to deepen their involvement with the mining industry. Last year Chinese-backed Ecuacorriente signed a $1.4 billion deal with the government to open a large-scale mining project in the Mirador copper deposit. The company is currently negotiating another deal to expand their operations to the Panantza-San Carlos copper deposit.

These concessions to major foreign investors with superior capital and technology have not gone unnoticed by concerned indigenous groups. Many groups across the country have protested. Some — like the Shuar — have even marched to Quito. The fear is artisanal miners cannot survive in an industry dominated by huge corporations.

Communities like Zaruma are at the heart of the debate. On one hand, the seemingly inevitable expansion of foreign companies into the area now home to subsistence miners would bolster an important Ecuadoran industry, despite the risk that such an expansion could cause social unrest.

On the other hand, there is the idea that investments should be focused on local mining businesses, like many already operating in Zaruma. The investments would allow these businesses to increase their capital and technology so as to be able to compete for government concessions. Their operations would be smaller projects but would keep the profits in the local community.

The mining of precious metals in Ecuador has a difficult, haunted history, and in many ways the uncertain future of communities like Zaruma demonstrates how complex the issues surrounding the industry remain even today.

– Lauren Brown

Source: BBC, The Financial Times
Photo: Ecuador Times