Brazil’s gold trade is toxic, but it doesn’t have to be that way

It is no secret that Brazil’s gold trade is rife with illegal mining. Gold was the state of Roraima’s second-largest export in 2019, despite not being home to any legal gold mines. This year, an investigative report by Repórter Brasil linked the supply chains of several Big Tech companies back to Brazilian gold refiners that have been investigated for purchasing illegally mined gold.

A 2021 study by researchers from the Federal University of Minas Gerais was able to confirm the legal origin of just 34 percent of gold mined in Brazil. 

Meanwhile, sustainability think tank Instituto Escolhas found that 229 tons of Brazilian gold sold between 2015 and 2020 — almost half of total production over that period — showed signs of being illegal.

The problem lies, in large part, with Brazil’s legislation.

A system based on good faith

Gold in Brazil can be extracted either on an industrial scale by mining companies — which are also permitted to refine, sell, and export the precious metal — or by wildcat miners, supposedly working individually on a small scale.

Wildcat miners, known as garimpeiros, must sell their gold to a DTVM, a securities company certified by the Central Bank to trade gold.

At point of sale, the garimpeiro fills out a paper form declaring the provenance of the gold. The paper trail is not digitalized and the information provided is not crosschecked, with its veracity being dependent on good faith — a system which leaves the door wide open for abuse.  

Garimpeiros...