Fair Trade gold mining in the highlands of Peru

For many, the idea of fair trade and gold mining in a country like Peru would seem a contradiction in terms. Peru has an unenviable reputation for unsavoury mining practice and resultant social conflict.

Certainly examples of good practice are few and far between - but they do exist, for example at Filomena, a small town perched on a hilltop in the dry coastal highlands, up-valley from the small town of Yauca on the Pacific coast.

Filomena is a dusty town, set in a barren landscape so arid that even cactuses find it hard to prosper there. The houses are of flimsy wood and corrugated iron: like ovens in the burning hot daytime sun and like refrigerators at night when, 2,000 metres up above sea level, temperatures plummet as the sun goes down.

But it has achieved some prosperity in recent years thanks to an undergound gold mine run by Sotrami - a gold mining company established in 1987, taking over an old 1,000 hectare mining concession previously in the hands of a defunct US-based mining company.

And remarkably, Sotrami has received Fair Trade certification from FLO, the international fair trade labelling organisation. It is keen to use this status to market Fair Trade gold, including jewellery, in Europe and North America.

The nearest town is Nazca, famous for its strange world-famous pre-Columbian images of animals etched into the desert. These were recently the target of a publicity stunt staged by Greenpeace as the COP20 meeting on climate change assembled in Lima, Peru's capital.

A flourishing enterprise

The workers at Filomena come from all over Peru, but most are from Ayacucho, one of the country's poorest regions.

According to Julia Cuadros at Cooperacción, an NGO in Lima, the origins of this settlement coincided with a triple whammy that afflicted this part of Peru in the late 1980s and early 1990s: the effects of hyperinflation, the mass migration of people from war-torn Ayacucho, and the privatisation of Peru's main mines and the dismissal of many of their workers.

Cooperacción has been advising Sotrami for the best part of two decades, seeking to prove that socially and environmentally responsible mining is possible.

Like many other mining enterprises that have taken advantage of the boom in gold prices of recent years, Sotrami has been able to expand its operations, investing in new machinery and mining equipment.

Officially, it is classified as a 'small-scale' enterprise (minería pequeña), but it will shortly be redesignated as a 'medium-sized' company (minería mediana) because of the increased volume of its sales.

Though Sotrami is currently concerned about the fall in prices in the gold sector over the last 18 months, today's prices are well in excess of the cost of production. It has ambitious plans to increase mechanisation and to invest in better health and safety within the mine.

High social and environmental perforamnce

Unlike most small-scale firms in the mining sector, it has opted to regularise its affairs, pay taxes and re-invest its profits both in the firm and in the local community. "We're pioneers in this type of organisation", says Benjamín Vásquez, the production director.

The FLO classification involves rigorous and regular checks over such matters as the company's relations with its workforce, the benefits it brings the local community and its impact on the local environment.

The involvement of Cooperacción stemmed from a campaign to stamp out child labour in the mining industry. It is common for artisanal miners to use their children as workers, a practice that the ILO has sought to eliminate.

Sotrami employs around 260 workers, of which just over half work underground. Most of the rest work in the processing of gold and in administration. There is a high degree of worker participation through a workers' committee by which employees can hold the administration to account.

Pay is good by industry standards, though discipline is ever-present. The company has suffered badly from theft in the past, and has taken steps to deal with this.

The local community of Filomena stands cheek by jowl with the mine. It grew up as a mining town and is peopled almost entirely by mineworkers - both employees and others who have settled there from other parts of Ayacucho in search of work - and their families.

Fair Trade principles mean that a fixed proportion of profits go to the community, mainly in helping provide water and electricity to this otherwise water-less location whilst also contributing to healthcare and education. These last two involve close collaboration with the state, both at the regional and national level.

All environmental toxins captured and recycled

Artisanal miners who live in the town but are not employees are allowed to work in the concession so long as they sell their production to Sotrami which takes charge of all processing. Elsewhere such miners do untold damage through the unregulated treatment of ores.

The environmental impacts of mining are usually negative, but Sotrami has made a real attempt to minimise them. The company avoids entirely the use of mercury to purify gold, and its use of cyanide to disslve the gold from ore involves constant recycling.

This highly toxic chemical therefore does not spread outside the processing plant and is tightly controlled within it. Unlike many other mining operations in Peru, Sotrami has no problem a problem with nearby farming interests.

The town of Filomena is situated in an area of zero rainfall where no agriculture is possible. While water is thus very scarce, Sotrami does not divert sources otherwise used by farmers. Indeed, the use of water is also tightly controlled, with dirty water recycled or otherwise used to irrigate small patches of greenery.

The Fair Trade movement also provides effective technologies to reduce emissions of highly toxic metallic mercury, used by many small scale producers to extract gold from sand and silt. When the gold mercury amalgam is 'burnt' to leave pure gold, the mercury is vaporised and contaminates the environment.

To control this problem Fair Trade organisations have developed a simple, low cost retort that re-condenses the mercury after it is vaporised, so that it can be recycled time after time rather than emitted as a pollutant.

Harnessing the Fair Trade premium

The FLO certification means that Sotrami is able to charge a premium on what it sells through Fair Trade channels. Most of its Fair Trade gold production goes to Germany and Switzerland. But Fair Trade accounts for only a relatively small proportion of total output of around 30 kilograms a month.

The rest is sold for non-Fair Trade purposes, though without the premium. Having invested heavily in Fair Trade principles, the company would very much like to sell more on the Fair Trade market. "The premium helps us devote money to the community", says Vásquez.

A British Fair Trade company, Trading for Development, is currently looking into ways in which Sotrami could divert at least some of its production into producing jewellery and wedding rings, linking Sotrami up with Fair Trade jewellers working in some of the poor neighbourhoods of Lima.

Sotrami sees this as potentially a useful sideline which would help it market more Fair Trade gold in Europe. Peru has a strong tradition in the jewellery sector, but most production has tended to consist of silver artefacts involving the use of precious and semi-precious stones.

The company would also like to see others learn from its experience, thus counteracting the otherwise negative view that most of us have of mining practices in Peru, especially among smaller producers.

For example, informal alluvial gold producers have wrought huge environmental damage in the supposedly protected Amazon lowlands of Madre de Dios region, close to the frontier with Bolivia - including forest clearance, poaching of wildlife for food, and wide scale mercury pollution.

By buying Fair Trade gold jewellery, which is increasingly widely available, you can both reward reponsible producers like Sotrami, and expand the market for Fair Trade production - helping gold miners to reform their practices.

And ask yourself - given the immense damage done by 'conventional' gold production, would you really want to wear a wedding ring or other jewellery made from any gold that is not Fair Trade?

More information on Fairtrade Gold.

Campaign: the 'I DO' campaign will go live in January 2014. To pre-register your support please email gold@fairtrade.org.uk.

To locate a jeweller using Fairtrade certified gold jewellery please visit www.fairgold.org.

John Crabtree is a research associate at the Latin American Centre, University of Oxford. He has written, lectures and broadcast widely on the politics of the Andean countries, chiefly Peru and Bolivia. His latest book is ‘Bolivia: Processes of Change' (Zed Press, 2013) which examines responses of people involved in social movements to the reforms brought about by the Morales government since 2006.

Judith Condor-Vidal is the director of Trading for Development, a company dedicated to the marketing of Fair Trade products in the UK and Europe. She is an associate member of the World Fair Trade Organisation and a founder member of the Ethical Fashion Forum.

Also on The Ecologist: 'Fairtrade Gold - helping miners take the mercury out of gold jewellery'.

An earlier version of this story was published in December by the Peru Support Group.