Folha publishes article on Instituto Escolhas Public Consultation with the proposal to be sent to the Central Bank and the Security Exchange Commission (CVM) #AmazonWithoutIllegalGoldMines

“We want there to be greater control over the buying and selling of gold, because today there is no control of origin and, therefore, illegal schemes are proliferating in the Amazon,” says Larissa Rodrigues, project manager at Instituto Escolhas, in an interview with Folha de São Paulo.

The article addresses the Instituto Escolhas Public Consultation with regulatory proposals that will be presented to the Central Bank (Bacen) and the Securities and Exchange Commission (CVM) so that financial institutions do not sell gold of illegal origin, from indigenous lands or conservation units in the Amazon.

The campaign “Where does gold come from?”, launched by Instituto Escolhas, presents data and arguments for consumers to avoid a business that puts the Amazon at risk. It also shows that the financial market, which is not free from gold of illegal origin, does not bother to inquire about the origin of gold by giving the proper attention to environmental impact in its operations.

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Discover the campaign #AmazonWithoutIllegalGoldMines

 

Folha de São Paulo

Campaign aims at regulation to inhibit the buying of illegal gold by financial institutions

The proposal is under public consultation and will be sent to the Central Bank and the Security Exchange Commission

4 October 2020 at 11h15PM

PRINT EDITION

Thais Carrança

SÃO PAULO – Currently, in order to sell gold to a financial institution, a gold digger only needs to show their identity document, fill out a form by hand and tell where the metal comes from, without the need for any proof.

The lack of certification of origin means there is a gap for tons of gold that is produced illegally, on indigenous lands or conservation units in the Amazon, to enter the financial market, where that gold is legally traded, without any control.

To change this situation and inhibit the purchase of illegal gold by financial institutions, a non-governmental organization intends to present a proposal for regulation–currently under public consultation–to the Central Bank and the Securities and Exchange Commission (CVM), which regulates the capital market, by November 3rd.

Aerial images show illegal mining in the Amazon

During a May 2020 flyover in the state of Roraima, Greenpeace recorded an invasion by prospectors in the Yanomami Indigenous Land. Deforestation in indigenous lands increased by 64% during the first four months of 2020, compared to the same period in 2019. Because the miners, loggers and invaders are in or circulating within these territories, they are potential transmitters of Covid-19 for indigenous people. Chico Batata / Greenpeace

According to Instituto Escolhas, which is responsible for the initiative, standardization is particularly relevant at the moment, when illegal mining in the Amazon region is being driven by the high price of the metal in international markets, by the reduction of the inspection of mining activities and by the government’s indications that it may legalize mining in areas that are currently protected.

According to data from the Ministry of Industry, Foreign Trade and Services (MDIC), from January to August 2020, Brazilian gold exports grew 30.5% in value compared to the same period in 2019, totaling US $3 billion. In terms of volume, the increase was 5.2% compared to the previous year, reaching 64 tons.

From January to August, the average price of gold rose 27% compared to the same period in 2019, driven by the investors’ search for safe financial assets amidst the crisis caused by the coronavirus pandemic.

 

“We want greater control over the commercialization of gold, because today there is no control of origin and, therefore, illegal schemes proliferate in the Amazon”, says Larissa Rodrigues, project manager at Instituto Escolhas.

According to Rodrigues, out of the approximately 100 tonnes of gold produced by Brazil annually, approximately one third comes from mining, where illegal extraction of the metal is concentrated. This gold enters the financial market when it is sold to Securities Distributors (Distribuidoras de Títulos e Valores Mobiliários – DTVMs), financial institutions that maintain positions for buying metal in the Amazon.

“The idea is that there is a validation of proof of origin and that this be carried out through an electronic system that allows cross-checking with other databases, such as tax collection and production from the National Mining Agency,” explains Larissa.

Lawyer Ana Luci Grizzi, of Veirano Law Office and author of the proposal draft, says that the idea is that DTVMs, when buying gold, carry out a kind of mini-audit of the seller.

“The buyer must check whether the gold was in fact extracted from an area that has the mining right granted by the National Mining Agency and whether the person who is selling is the holder of the mining right or has a contract with whoever has that right,” she says. The seller must also present the environmental license for the area.

Sources: Camex, Metals Focus/World Gold Council and World Bank

Illegal mining has strong social impact, exposing indigenous communities such as the Yanomami, in Roraima, and the Munduruku, in Pará, to violence and health risks, including contamination by mercury or by Covid-19, both brought in by gold diggers.

In ‘Mourão’s land”, illegal mining carries on under the blind eye of the Army

Rudimentary gold mining rafts dredge the bottom of the river in search of gold with a hose Lalo de Almeida /

It also has vast environmental impact, contributing to deforestation.

According to a survey released in June by Greenpeace, using data from the National Institute for Space Research (Inpe), deforestation caused by illegal mining in protected areas of the Amazon grew 80.6% during the first four months of 2020, in comparison to the same period last year. In indigenous lands, the increase in deforestation due to mining was 13.4% in the same comparison.

In this scenario, Instituto Escolhas highlights the importance of financial institutions and regulatory bodies participating in the effort to inhibit the trade in gold that is produced illegally.

“All gold from illegal mining sites must necessarily enter the market through a financial institution, so they are the ones that may require a legal origin guarantee and environmental compliance for this gold,” says Larissa.

“Regulatory bodies must demand this, because sadly, if there is no legal obligation, this fails to become practice.”

Sought out to comment on the initiative, the Brazilian Federation of Banks (Federação Brasileira de Bancos – Febraban) replied that the entity and its associated banks do not condone bad practices and are committed to permanently strengthening socio-environmental diligence practices.

“The banking sector has always been attentive to the need for sustainable development, and it is aware that it is necessary to advance in the management and mitigation of socio-environmental risks in business with customers and to channel more and more resources, mainly private, to finance the transition to the green economy, always keeping in mind the need to guarantee the stability and resilience of the financial sector.”

The Central Bank stated through its press office that it would not comment, and the CVM did not respond to the request for a position.

 

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Article originally published in

https://www1.folha.uol.com.br/mercado/2020/10/campanha-quer-regulacao-para-inibir-compra-de-ouro-ilegal-por-instituicoes-financeiras.shtml