Conflict tarnishes Fairtrade gold

Written by Jen Wilton, originally published by Contributoria

Fairtrade’s precious metals programme seeks to improve living and working conditions for artisanal miners in low income countries, but conflict in Peru raises serious questions about the benefits of the brand as a tool for development.

Photo: Alan Frampton (middle), of UK-based Cred Jewellery, with Sotrami miners in Peru. Photo courtesy of Alan Frampton
Photo: Alan Frampton (middle), of UK-based Cred Jewellery, with Sotrami miners in Peru. Photo courtesy of Alan Frampton

In 2011, Fairtrade International launched a new certification standard for working with small-scale mines in countries with low to medium development status. While Fairtrade bananas and coffee beans have become common items on supermarket shelves across the UK, the lesser-known precious metals programme has sought to establish a more ethical supply chain for gold and, more recently, silver.

Fairtrade’s gold programme is aimed at the artisanal and small-scale mining (ASM) sector, which employs approximately 25 million people worldwide, while a further 150-170 million people are indirectly dependent on ASM activities. ASM is characterised by the use of intense physical labour over more advanced technologies.

ASM projects largely focus on gold extraction and account for 20% of all gold mined globally. Major problems associated with artisanal gold mining include environmental contamination from mercury, which is commonly used to separate gold from rock, hazardous working conditions and the potential for social conflict, as many small-scale miners lack legal title to the land they work. Recent conflict in Peru highlights the considerable challenges the Fairtrade programme faces.

Death of a miner

Peru is one of the largest producers of gold in the world, with a sizeable informal ASM sector. A small mine in central Peru, run by the Society of Mine Workers (Sotrami), was one of the first mining projects to be certified Fairtrade. The mine and the village of Santa Filomena, which was built as a mining town in the late 1980s, are located more than 2,000 metres above sea level in the Peruvian Andes, near the Atacama desert.

The Fairtrade certification process requires mining companies to satisfy an extensive list of criteria related to human rights, workplace safety and environmental practices. After initial certification, annual audits are carried out to ensure Fairtrade standards are still being met.

There is a sizeable area of contested land between Sotrami’s concession and that of adjacent mining company Victoria 100, which also leases land to local artisanal miners Unión Santa Rosa. Although the matter was taken to the Peruvian courts over a decade ago, a definitive ruling on the land boundary issue is still pending.

There have been several violent confrontations between these groups over the past year. Last October, the Peruvian ombudsman reported that “on 19 August 2013 Sotrami, represented by its director Eugenio Huahua and with the participation of approximately 25 residents carrying explosives, firearms and knives, blocked the main access to the Victoria 100 concession with rocks and earth, generating anxiety and fear among members and/or employees of the company Unión Santa Rosa”.

Tension between the groups flared again on 4 November 2013, when a violent confrontation left local man Alex Antayhua Chacón dead and another person seriously wounded. Shortly afterwards, the regional mining and energy authority ordered a halt to all mining on the disputed territory until a definitive study could be carried out.

The ombudsman also registered a third confrontation between the miners on 18 May 2014 in the town of San Luis Alta, which resulted in three people being hospitalised with serious injuries: two with gunshot wounds, while the third person had been attacked with a knife. Four people were arrested and then subsequently released, making it unclear who is ultimately responsible for these crimes.

Sotrami for its part says it has a legal title to mine in the disputed territory. A representative of Unión Santa Rosa has said part of the problem stems from the fact Sotrami is recognised by the government as a formalised mining company, whereas the Santa Rosa miners have struggled to gain the same legal standing.

When asked to provide comment on the ongoing conflict, Fairtrade International was unaware of the violent incidents that have taken place over the past year. Amy Ross, project manager for gold and precious metals at Fairtrade International, confirmed that a portion of Sotrami’s land title has been contested, causing some conflict with other mining groups, but had heard no reports of the situation turning violent. Sotrami were assessed by Fairtrade’s independent auditor FLO-CERT in November 2013 and October 2014, but the process did not raise red flags about the conflict.

The Fairtrade Standard for Gold and Associated Precious Metals for Artisanal and Small Scale Mining states: “The Standard will not support organisations involved with armed conflict in any way.” It also specifies that an investigation may be triggered in areas where conflict exists between ASM activities and other sectors. In such cases, the miners need to “demonstrate to an independent party that no conflict exists between their organisation and the specified party”.

The origins of Fairtrade Gold

Fairtrade Gold was initially established to help improve the transparency and traceability of the supply of precious metals. Across the ASM industry, conflict is all too often part and parcel of everyday operations.

“I travelled to India in 1999 and witnessed first-hand the exploitation of women and children in [small-scale, artisanal] gemstone mining,” says British jeweller and Fairtrade Gold founder Greg Valerio. He recounts the “horror” of seeing families who had been in bonded slave labour for generations, which sparked his desire to develop a more ethical supply chain for his products.

“It was the deserts of Rajasthan – there was no water or food,” he continues. “It was a ramshackle village, all of which was owned by the mine owner, which effectively meant that the people that worked for him would never be able to work their way out of the debt that they owed.”

Following his harrowing experience in India, Valerio wanted to be able to look his customers in the eye and say where the materials for his jewellery came from. Fifteen years ago, he says, that was impossible: “No jeweller in the country was ethical. Everybody was involved in an exploitative supply chain.”

Valerio campaigned for four years within the jewellery industry to get answers to basic supply chain questions, such as where gold comes from. “We hit a total brick wall,” he recounts. Across the board, from importers to wholesalers to retail, people said sourcing ethical metal could not be done.

After a 2004 visit to the environmental gold programme Oro Verde in Colombia, Valerio finally secured the world’s first fully traceable shipment of gold. The yellow metal was sent to Cred Jewellery, set up by Valerio as a fairtrade business, which was then turned into wedding rings. “The industry could no longer say it was impossible, because we were doing it,” Valerio argues.

Today, a Fairtrade premium of $2,000 per kilo of gold is paid to Fairtrade-accredited mines, in addition to the agreed price of the metal. The Fairtrade Foundation says the premium is “a tool for development”, so that mining groups can invest in “the social, economic and environmentally sustainable development of the [organisation] and its miners and through them, their families, workers and surrounding community”.

The challenge of oversight

Prior to joining the Fairtrade programme, Sotrami had already received international assistance to improve working conditions at the mine, including a four-year programme to eradicate child labour run by the International Labour Organisation. In 2004, it was declared the first mine in Peru to be free of child labour.

However, research carried out in 2007 by the International Research on Working Children Foundation (IRWCF) found that while Sotrami has a rule not to employ children, it is often ignored. “The owners state that they agree with the rule against the employment of children,” the researchers wrote in the book Hazardous Child Labour in Latin America. “Adolescents, however, are usually not considered to be children and participate freely, especially during holidays.”

The study found that working in mine-related activities and living in a mining village can have a negative impact on young people’s education and health. Twenty-eight-year-old Nicolás recalls starting to work during the school holidays at Santa Filomena at age 13, carrying away mining debris. He later developed silicosis and Sotrami gave him a job working above ground when he could no longer work in the mine shaft.

Fairtrade Gold project manager Ross explains the situation today: “Fairtrade’s position on child labour has developed over time and what we currently say is we understand there are various conditions in which children might be at the mine.” She says they have had recent examples of children taking lunch to their parents at the mine and then helping with some work while they are there.

Ross points to the difficulties of adequately monitoring conditions at the mine, but says the community has a large role to play. “What Fairtrade tries to do is take a pragmatic approach and say that actually this needs to be in the hands of the community,” she explains. “We train them very carefully on the distinction between children helping their parents out in the school holidays compared to worse forms of child labour or activities that infringe upon their education and wellbeing.”

Ross says that while Sotrami is fortunate to have received so much development support, it has also added to the local conflict. “I think it is fair to say that there is a certain amount of resentment from other illegal, less successful groups who see Sotrami as having had preferential treatment over the years and that causes local tensions and has led to some intimidation of Sotrami staff.”

“It is a very volatile situation in Peru at the moment,” Ross says. She explains that legislative changes requiring artisanal mining groups to formalise and operate with legal permits caused widespread protest across the country in 2014. “They have got lots of people really struggling to make a living and the government is making it very difficult for people. Then you have a few mines that are seen as having made it. The fact that they are exporting to international refineries and receiving Fairtrade premiums doesn’t make life particularly easy for them.”

A silver lining?

Gold and silver from the Sotrami mine are brought to the UK by Cred Jewellery, which current owner Alan Frampton bought from Valerio in 2010. Cred is the largest importer of Fairtrade gold to the UK and it also provides wholesale services to other UK jewellers.

Frampton, who has visited the Sotrami mine several times, says the Fairtrade programme has had a big impact on the Santa Filomena community. “We have paid them over $150,000 in Fairtrade premiums,” he says. The additional money is spent on improvements to the community, which last year was used to connect local schools and medical centres to the electricity mains.

Frampton shows pictures of workers down the mine shaft at Sotrami and points to the protective gear they are wearing, including helmets, gloves and dust masks. He also says they have a system where every worker who goes underground is counted in and out, so their whereabouts is always known. Frampton also points out that artisanal mining has less of an environmental impact at the site than industrial-scale projects, as the miners just remove the gold vein for processing, rather than taking tonnes of surrounding rock as well.

London-based human rights NGO Peru Support Group says: “The environmental impacts of mining are usually negative, but Sotrami has made a real attempt to minimise these. It avoids the use of mercury to purify gold entirely, and its use of cyanide involves constant recycling so that this highly toxic chemical does not spread beyond the processing plant.”

However, the benefits must also be weighed against the costs. “[Peru] is a dangerous part of the world,” Frampton says. “It is bandit country and they are operating in a hostile environment.” He thinks the Peruvian government should take a greater lead in finding a solution to this complicated situation.

“[Sotrami] are trying and they are the beacon of small-scale mining,” asserts Frampton. “That is not to say what they are doing is perfect by any stretch of the imagination, but I am unaware of anybody else in the world that is up to their standard.”

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