The Mining of Ecuador

The Mining of Ecuador
By: Christopher Sacco
The Meaning of the Word "Relajo"

Huddled among a throng of onlookers, I watched and listened intently. "Relajo, chuta, joder," and a number of other such words flowed liberally from my fellow passengers as we backed away from the mud-slinging semi. Despite the tugging and pushing of many hearty men, the truck stuck hard to the muck, its wheels spinning hopelessly, spitting smoke and chewed earth into the chilly night air. As the fiasco dragged on, the swarm of bystanders continued to swell and I was sure that someone would be inadvertently nudged into the ravine to our right. Finally, when I had resigned myself to a night of uncomfortable sleep in a seat designed for mass transit and not for rest, the truck broke free. One by one the buses lining the single lane road from Quito to the jungle town of Tena roared to life and began crawling through the mire. As we passed the bulldozers, cranes, and dumptrucks clearing the landslide, I could not help but think of them at work in the fragile ecosystem of the Napo River Basin. "Relajo," someone behind me muttered. That word again. Messy, the only word to adequately describe the situation I would find.

Mining the Third World


The rainforest of the Napo Province is one of the most biologically diverse in the world.
Mining in the Developing World is hardly a new phenomenon, but in the last decade the affair between multinational mining companies, Third World governments, and the International Community has gotten steamy. More developing countries have turned to large-scale mining than ever before, at a cost to their resources and people that will not be fully realized until long after the sudden influx of cash has been spent and the resources have been exhausted.

South America's untapped reserves and newly adopted neoliberal economic stance are attracting mining companies from all over the globe. Two of the central tenets of economic neoliberalism are the reduction of government expenditures and the adoption of a laissez-faire approach to business. Struggling to survive the New World order, many developing nations have weakened mining and environmental regulations to entice foreign investment. In some cases these cuts have opened up large areas of virgin land and denied recourse to those who oppose mining activities.

New mines seem to pop up daily in the Third World, and as countries such as China and India join the ranks of the First World consumer economies, demand for raw materials will only increase. The average U.S. citizen uses 47,000 pounds of newly mined materials each year.(1) Europeans and citizens of other industrialized countries consume similar amounts, the majority of which is supplied by the mineral rich continents of South America and Africa. Moreover, with twice as much money being spent on mineral exploration in South America than in any other region, countries such as Ecuador can expect a rapid expansion of mining in their territories.(2)

Mining and Its Consequences


Locals still use large wooden bowls to pan for gold in the rivers of the Napo Province.
Humans have mined for as long as they have employed metals and rocks in their daily lives. However, although the goal of mining remains the same, the methods used for finding and extracting minerals have changed dramatically.

Until the last hundred years, prospectors discovered exposed mineral veins by accident or sheer luck, and workers chipped away at deposits that pierced the earth's surface or occasionally they panned precious metals from shallow rivers. Modern mining, from its prospecting to exploitation phase, is a technologically laden industry that permits the extraction of minerals buried hundreds of feet beneath the earth's surface, hidden amidst thousand year-old forests, and submersed in the unfathomable depths of the planet's great oceans.

Technology has not only opened the door to mining almost anywhere, it has also increased the industry's potential for destruction. The mining method companies choose is almost always the one that allows maximum yield under existing conditions at minimum cost. Consequently, most modern mines employ surface excavation techniques that damage the environment much more than the more costly yet cleaner subsurface techniques. Moreover, because a profitable return is the primary consideration in deciding how and where to mine, the Developing World, with its lax environmental policies and thirst for investment, has become an attractive option.

Mining has historically proven to be one of the most damaging and dangerous industries. Industrial mining produces numerous negative environmental impacts. These range from relatively benign erosion to mercury pollution and other chemical contamination that may persist for centuries after mining operations have ceased.

Mining's most significant impacts occur during its exploitation phase, though certain exploratory practices also harm the environment. For example, transporting track-mounted drill rigs across mineral concessions and building secondary roads fragments habitat and opens previously unreachable areas to human habitation.

Activities associated with the exploitation phase, especially open-pit mining, usually generate enormous quantities of solid waste. During the height of its exploitation, one gold mine in the United States generated over 540 million metric tons of waste rock and tailings in one year in order to produce 329 metric tons of gold; that is, gold accounted for only 0.00006 percent of waste material.(3)

Furthermore, chemicals used for processing minerals and ore during the exploitation stage often find their way into the groundwater or nearby rivers. Intentional dumping, leaky containment ponds, and accidents have poisoned countless bodies of waters. Even when chemicals are properly disposed of, water may interact with the tailings left over from the various extraction and separation processes to generate contaminated fluids that can pollute soils, rivers, and groundwater. These fluids are often highly acidic. The Iron Mountain mine in California is home to the most acidic water on earth. Water resources in the vicinity of this mine have registered pHs as low as -3.6, a level more than 10,000 times as acidic as hydrochloric acid.(4) While the severity of the chemical contamination that frequently results from mining is shocking, its persistence is even more distressing. Contamination resulting from exploitation activities must be measured on a geologic timescale. A Roman era copper mine, silent for more than two millennia, continues to pose dangers to a community in England today.

In addition to environmental degradation, mining operations often cause a number of social ills. To the extent that mining creates new infrastructure and provides additional employment, it also introduces foreign customs and practices. Increases in social maladies like prostitution and drugs are often reported after miners enter communities. Also, the affluence that draws drugs and prostitution often causes extreme inflation that makes it difficult for locals, who are seldom paid First World wages, to survive. As the number of mines and miners in South America increase, the impacts of their presence will become clearer, though it is already evident that mining operations change every community they touch.(5)

Looking for Bad Guys in the Napo Basin

Between the foreign company seeking the mountain of gold sitting beneath the rainforest, the corrupt officials turning a blind eye, and the locals who would fight to keep the miners out, the story I set out to write had all the elements of a David and Goliath Hollywood thriller. However, as much as I wanted to, I did not find anything so mysterious or simple as men in black suits lurking about, plotting the exploitation of the Napo and Ecuador. No, most of the bad guys I found were all together unaware of the conflict brewing in the Napo Region or of the mining dilemma that Ecuador and the rest of South America faces.

Since 1999, the "villains" that spurred me to write this article, a company called Ascendex, began acquiring mining concessions in Ecuador's Napo Province. In June 2000, Ascendex had nine concessions in Napo and had applied for six more. These 15 concessions total approximately 55,000 hectares of land, much of which borders the Napo River. The company intends to extract gold from the alluvial terraces on either side of the portion of the river that runs through their concessions.

The gold placer - a deposit of sand or gravel found usually in the bed of a stream containing particles of valuable minerals - that Ascendex plans to mine is the accumulation of thousands of years of mineral rich silt eroded from high in the Andes. Mineral erosion and deposition such as this is well documented and has been exploited since before the Spanish landed in South America. What earlier miners did not know was that the Napo, like most rivers, has changed course many times throughout its history and has left behind substantial gold deposits in its old channels. According to a company representative and based on the results of prospecting and exploration reports, the placer that Ascendex is sitting on is one of the richest remaining gold deposits in the world.(6)

There is no doubt that extracting gold from the jungle surrounding the Napo River will harm the environment. It is impossible to dig meters into a delicate ecosystem and not damage it. Noone I have spoke to claims that Ascendex will benefit the environment, not even the miners. There is, however, considerable disagreement with respect to the extent of the impact, the degree to which the damage that is done is recoverable, and the cost-benefit balance between the jobs and cash that the miner's will bring and the environmental degradation caused by their operations.

Ascendex anticipates that its operations will create more than 1,000 jobs over the next 12 months and possibly several thousand more over the next two to three years. This is a significant number in a country in which more than an eighth of the population is unemployed. The company also claims that 50% of its operations' gross will stay in Ecuador and that it will employ the cleanest technology available. Balancing economics and the environment is never easy. The decision is even more difficult when it deals with one of the world's richest gold deposits and one of the planet's most biologically diverse forests.

It is difficult to blame a mining company for wanting to take advantage of such a robust gold deposit; it is after all what they do. Moreover, Ascendex and the rest of the world's mining companies only mine because there is a market for the materials they extract - the almighty principle of supply and demand. On the other hand, the way in which mining is being forced upon Ecuador in its weakened state is reprehensible. In the words of Ascendex, "the current economic recession in Ecuador has actually helped to generate greater governmental support for the mining sector."(7)

Big Brothers

In 1999, Ecuador's economic woes reached new heights. Political uncertainty and plunging public confidence in the economy brought on by a broad freeze on banking deposits, coupled with President Mahuad's plans to privatize many state industries and "dollarize" the economy, caused Ecuador's Gross Domestic Product (GDP) to fall more than 30% in just a year. Other economic indicators told an equally dismal fiscal tale; Ecuador's GDP growth rate fell from a relatively healthy 3.3% in 1998 to a gloomy -7% in 1999, and, during the same time span, the per capita income of the nation's 12.4 million inhabitants plummeted more than 30% from USD 1,619 to USD 1,101.(8) In January 2000, the wretched state of Ecuador's economy prompted widespread street protests, which culminated in President Mahuad being forced from office.

Ecuador's current economic slump, the worst in a century by some accounts, combined with an ever-weak central government and an indifferent upper class, have reopened a reoccurring historical theme: exploitation. In the face of the current crisis, the International Community has convinced Ecuador that progress and prosperity will come only with development of a functional free-market economy. Those who control Ecuador have responded by throwing open the doors to foreign investment of all kinds, a move that may result in the unchecked pillaging of the country's resources.

Mining companies have responded in droves to Ecuador's recent call for investment. As of June 2, 2000, 1,309,070 hectares of exploration concessions had been granted, a number that represents more than 5 percent of Ecuador's total land. Though interest in Ecuador's minerals is now higher than ever, mining in Ecuador has been a no-brainer for years. Since 1991, mining companies have submitted applications to explore almost 18 million of Ecuador's 25,637,000 hectares, more than 69 percent of the country.(9) The freewheeling Ecuadorian mining law, that attracted the bulk of exploration in the 1990's, remains more or less unchanged today. This mining law combined with the government's willingness to bend over backwards to pull in investment from abroad and the incredibly low price of labor make Ecuador the ideal place to set up a mineral extraction operation.

The secret of Ecuador's mineral wealth has been out for years, though it was not until the late 1990's that the International Community took sufficient interest to finance its development. In 1998, the World Bank, Switzerland, and Great Britain gave Ecuador nearly 24 million dollars and technical support to develop El Proyecto de Desarrollo Minero y Control Ambiental (PRODEMINCA); a program with the stated objectives of identifying Ecuador's most potent mineral zones, presenting the information to interested investors, and developing an attractive mining investment climate in the country.(10)

In the wake of Mahuad's hasty departure, the International Community took an even greater interest in Ecuador. Fearing that the historically tumultuous country was about to once again fall off the road of democracy and development, and take with it all the money it owed, the world financial community assembled an aid package. On March 1, 2000, little more than a month after Mahuad's stormy exit and, unfortuitously, on the same day that the International Monetary Fund (IMF), the World Bank Group, the Inter-American Development Bank (IDB), and the Corporación Andina de Fomento (CAF) announced tentative support of a two billion dollar loan, Ecuador's Congress approved the highly unpopular Economic Transformation Law (ETL). Approval of the ETL was prerequisite to international assistance; the Technical Memorandum of Understanding attached to the Letter of Intent addressed to the IMF demands the ETL in no uncertain terms.(11) In addition to the ETL, many of the stipulations contained in recent agreements between Ecuador and the International Community address the opening of Ecuador's economy to outside investment.

Ecuador is now all but betroth to the International Community. This is abundantly clear in the following excerpt from Ecuador's Memorandum of Economic Policies, which was solicited by the IMF:

"This legislation [the ETL] paves the way for the official dollarization of the economy announced on January 9, 2000, a more flexible labor market, a strengthened framework for addressing the problems of the financial sector, and should facilitate increased private foreign and domestic investment in key sectors of the economy. The government also expects that it will send a strong positive signal to the official International Community, and to private investors, and thereby will help mobilize financial support for the economic and structural reform process." (12)

In the face of epidemic, institutionalized corruption and multinational corporations driven by profit, it is up to the International Community to insure that mining in Ecuador does not result in the destruction of the country's unique ecology and the further impoverishment of its people. Unfortunately, however, it appears that the only institutions capable of guiding the intelligent development of Ecuador are as shortsighted as those that the nation needs protection against.

Who's to Blame?

One person's, or in this case one country's, loss is often another's gain. This describes Ecuador's relationship with the First World with chilling precision. Industrialized countries and the international institutions they have created condone the illicit union between mining companies and desperate Third World governments. With their own resources depleted and unable to stomach the destruction and risks inextricably linked to mining in their own backyards, the United States, Japan, and the other First World states have turned to the Developing World to feed their insatiable hunger for raw materials.

Exploiting the Third World's economic troubles is not a noble pursuit but the blame does not rest wholly with First World governments, international institutions, and mining companies. Though governments and mining companies should support developing nations and encourage clean technology, they are not the cause of the mining problem but are merely its face. The responsibility for mining, and all that it entails, lies with every consumer who cherishes computers, cell phones, and the myriad 'indispensable' gadgets he cannot live without.

Happily pounding away on a new computer, I am as much at fault for Ecuador's mining dilemma as the mining companies. Telephones, televisions, computers and the thousands of other products ubiquitous in the First World all start as minerals. Telephones are made from as many as 42 different minerals, televisions consist of 35, and more than 30 minerals were used to make my computer. Que relajo! Ecuador's mess is of our making.