Mining and development: how to get the balance right?

By Anthony Persaud, whydev.org, May 2, 2012

One of the common themes in recent development discourse has been the dichotomy between natural resource extraction and human and environmental rights. Mining is ubiquitous in the developing world, boosting foreign direct investment and creating jobs, but bringing with it a series of social and environmental problems that have often torn communities apart and fermented social unrest. The connection between mining and international development is an important one, but the antagonism between the two sides of the debate has allowed for certain sectors to be neglected. One such sector is that of artisanal and small-scale mining (ASM).

Artisanal and small-scale mining, particularly gold mining (ASGM), has always represented an important development opportunity. Today, with the price of gold hovering around US$1600 per ounce, ASGM has seen a huge resurgence. Current estimates place the amount of direct artisanal gold miners at up to 15 million people globally. The secondary economy that stems from this sector represents employment for up to 50 million people. ASGM is unique in that miners on the ground receive near “spot” or market price for the gold that they produce, creating thriving local economies and making the trade one of the most economically fair and equitable for the rural poor. However, the sector is plagued with problems, and the typical policy response has only served to worsen things.

The Peruvian government’s recent incorporation of informal mining into the criminal code, which created sentencing guidelines of up to 10 years’ imprisonment for those involved in the activity, caused massive protests in the Madre de Dios region of the country. These uprisings consisted of some 10,000 artisanal gold miners, caused three deaths and 30 injuries, and brought the importance of ASGM into the public spotlight, both in Peru and abroad. The protests represent another example of why the formalisation of ASGM is a complicated process that is unlikely to succeed without innovative measures that do more than simply criminalise activities.

Peru is one of the largest gold producing countries in the world, with the informal sector representing at least 50,000 ASGM miners, thousands more indirect jobs, and an estimated production of 30 metric tonnes of gold annually. The problem, the government rightly claims, is that a large number of these miners are using methods that wreak havoc on the environment and the health of local populations – mercury use being a major issue. The miners also illegally occupy land, evade taxes, and in some cases employ children. Although such problems pose great challenges, criminalising informal gold mining without taking the needs of such a substantial sector into consideration is not the solution. Not only does this create social unrest, criminalisation and marginalisation, but also provokes an employment crisis while deepening poverty.

Artisanal and small-scale gold mining is largely unheard of outside of the developing world, despite the fact that such mining represents unique histories in the expansion and modernisation of many countries. More than a century ago artisanal gold miners were involved in their own struggles with the authorities in Canada, the United States and Australia during the gold rush era. The ability of governments at the time to carefully navigate the complex situation resulted in a give and take process where the informal social contracts and extralegal arrangements already established by the miners themselves were eventually incorporated into law.* Legal impositions would only have served to stifle the sector and to create burgeoning black markets. Instead, governments were able to incorporate artisanal gold mining into the formal economy, enabling it to become a vital part of the growth of modern societies and a foundation for many of our existing land rights and laws today.

What happened a century ago is happening now in many countries like Peru. A new gold rush is underway and it is largely driven by poverty, with millions of people relying on it for a living. It is now the task of Peru and other countries to take the measured steps necessary to engage artisanal gold miners and to work with them to develop regulations that are achievable and context-driven. Prohibitive laws need to be accompanied by reasonable time-frames and support to avoid pushing artisanal gold miners further towards the informal market. Educational activities and technical interventions addressing better and safer mining practices must be utilised alongside market-based incentives. Sustainable artisanal gold mining could become a reality with the political will and resources to make it happen.

The first step towards achieving formalisation of the sector, however, is for governments to recognise the importance that ASGM plays in people’s economic and social well-being. A representative of the protesters in Peru said that the government was prioritising and favouring large-scale mining companies over artisanal gold miners. This favouritism is commonplace and it presents a unique challenge to which there is no precedent – large-scale mining was non-existent during the gold rushes of a century ago. Although large-scale mining today remains an important source of foreign direct investment, it is essential that governments recognise that, particularly in regards to gold, artisanal mining represents a much larger employment sector with real economic opportunities.

The social unrest in Peru illustrates the dangers of sweeping regulations that criminalise large sectors of the informal economy without taking specific needs and complexities into consideration. The problems that ASGM present are not insurmountable and solutions can be achieved with focused activities and a willingness to engage miners. With high prices of gold and millions of artisanal gold miners, an incredible economic and social opportunity has presented itself. Governments can choose to either reject it and likely worsen the problem, or they can embrace it and allow for artisanal and small-scale gold mining to fulfill its development potential.

Source