Swiss gold imports from Brazil tread a legal minefield

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 Mongabay 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 Mongabay 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.

Gold laundering

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 Mongabay.

“The current system doesn’t have any kind of check or block. It is self-declaratory. The law expressly provides that the buyer has…