Peru: Gold Certified As “Fair Trade”

By Hildegard Willer

Whoever wants to enjoy good coffee, chocolate or bananas without a guilty conscience buys products certified as “fair trade” which, despite all of the financial crises, is a growing business. More and more consumers are aware of the social and environmental conditions of production and value how “ethical” the products that they buy are.

But how can you buy “ethically” when it comes to gemstones or gold? The gold industry has one of the worst reputations due to the environmental destruction and social conflicts it causes. But a Peruvian gold mine shows that it is possible to combine ethical consumption and production of gold.

Víctor Pachas’s office looks like a fortress. It is situated in a residential neighborhood in Lima, protected by high walls and equipped with the latest security systems. From there, Pachas searches the world over for clients for his product: gold produced under the “fair trade” label. He works for the Association of Mine Workers (SOTRAMI), the first Peruvian mining company to achieve — in March of this year — the qualifications through international certifying agency FLO-CERT.

Since then, the gold produced by SOTRAMI is sold with the “fair trade” label; criteria include respect for labor rights, no child exploitation, that buyers pay fair prices to local producers, care of the environment, that women be taken into account during decision making, and that the entire community reap benefits. Pachas’s job is to find buyers who are willing to pay up to 10 percent over market value (currently US$1,500 an ounce).

In economically uncertain times, gold is considered by many as a safe haven for savings, but these are also unethical times. It is well known that modern gold production—formal as well as informal—destroys landscapes, contaminates water sources, and displaces small farmers from their lands.

The profits stay in the countries of production and in the pockets of foreign and anonymous investors.

Digging inside the mountain

“For mining with a human face” reads a handmade wooden sign in SOTRAMI’s main office in Santa Filomena, a mining town of 5,000 residents between the departments of Ayacucho and Arequipa, a 12 hour trip from the capital city of Lima.
The operations center for the mine is a small house made of wood, where the door is always open. The first person to greet visitors is Adrián Jiménez. Sun and manual labor have left marks on his face, and he has sparkling eyes beneath a cap that covers what little gray hair he has left.

Jiménez arrived in Santa Filomena 20 years ago to look for gold in an abandoned mine there.

“They had removed the wood from the mine’s galleries, because wood was worth more than gold then,” remembers Jiménez, now 64 years old. With him arrived many farmers whose lands weren’t providing enough, looking for another way to support their families. They quickly formed SOTRAMI to legalize their existence in the eyes of the Peruvian government, which was an advantage for getting the fair trade certification because FLO-CERT only gives it to associations of small-scale and artisanal miners that meet the legal requirements and the state’s regulations regarding taxation, labor, and the environment.

Another sign, hanging at the entrance to the mountains, also says “For mining with a human face.” The mine at Santa Filomena is, in contrast with open pit mines, an old-fashioned one. Instead of moving mountains, as modern mining does, here the excavation is from within.

To get the gold you have to enter the mountain. Jiménez did it for years, equipped with a pickaxe and a shovel. Today he is a member of SOTRAMI’S board of directors and is in charge of the 100 miners using their helmets and respirators before entering the tunnel. Meeting occupational safety requirements is one of the nearly 200 certification criteria required by FLO-CERT in order to grant the label “fair trade.”

FLO-CERT regularly evaluates their compliance. Nevertheless, heading into the mountain every day still involves sacrifice. The miners go down 900 meters on foot, use dynamite and drilling to remove the rocks that contain gold, and come back up the 900 meters on foot after work.

“Every miner is happy when he sees daylight again,” said Jiménez.

The mine workers don’t earn great wealth with SOTRAMI. The day rate is between 33 and 50 soles ($12-$18). It’s not a lot, but it’s double the minimum monthly salary in Peru ($218). Moreover, safety and health measures must be taken into account, which are also requirements to be labeled “fair trade.”

No women allowed

Ana María Munoa would like to go into the tunnel, but they don’t let her.

“The belief is that the mine is a woman who becomes jealous when there are other women in the mine”, recounts Munoa, 25, the daughter and wife of miners who lives with her family in Santa Filomena.

The majority of the SOTRAMI miners’ families live in the town. Since the women can’t go into the mine, all they can do is rummage in search of gold through the remains of the rocks that the miners removed from the mountain. These women are known as pallaqueras.

In Santa Filomena the women have become experts in finding even the smallest vein of gold in these rocks. Munoa is the president of the Association of Pallaqueras of Santa Filomena and as such is part of the SOTRAMI social premium committee, which decides how to use the 10% profit on top of the international market price. Only a limited portion of the fair trade social premium can be reinvested in the company; the majority must go toward the community.

According to fair trade criteria, women must participate in these decisions. Munoa already has a suggestion for how to use the money: to bring water to Santa Filomena. The town is in the middle of the desert; every drop of water arrives in trucks or is brought over from a tiny town 7 kilometers (4.4 miles) from Santa Filomena. Only women know what it’s like to give birth, raise children, and keep a home clean in the middle of this desert.

But Jiménez and his colleagues on SOTRAMI’s board of directors would prefer to reinvest the social premium in modernizing the mine. They have not yet begun discussions on how they would put that surplus to use, but they will have to reach an agreement — one that includes women’s voices.

Fair is not the same as ecological

In the SOTRAMI mine it is possible to produce gold under conditions that favor the community as well as the small-scale and artisanal miners. It is also possible to produce it without damaging the environment. SOTRAMI has the right to use the “fair trade” label, but not yet the “ecological production” label. To receive that, they would have to stop using not only mercury, but also cyanide.

The SOTRAMI processing uses the lixiviation method with cyanide to extract gold from rocks that have been crushed and ground up. It is the same method used by large gold mining companies. Although all safety measures are taken when using these highly toxic metals and the water is recycled and reused, there is a tailings dam where a mix of mud and cyanide are deposited on top of a plastic membrane.

In other mines, the tailings dams cause social conflicts because they contaminate the water. In Santa Filomena’s case, those conflicts do not exist because they are in the middle of the desert. What women consider a sacrifice — not having water — is a kind of blessing for the mine because there are no water sources to contaminate, and thus no farmers with whom to fight over land and water.

At the end of the process —crushing and grinding the rocks removed from the mountain, mixing that sand with water and cyanide, salvaging the gold through carbon filters — the liquid gold is poured into an iron mold. SOTRAMI produces two to three 5-kilogram ingots every month and sends them to Lima so that Pachas can find buyers.

The people who succeed with this gold are not major shareholders in Swiss or US banks, but rather people like Jiménez or Munoa and their families. With the fair trade social premium they can make their mining town more livable and dignified.