(Kitco News) – All the Brazilian gold imported by Germany in 2003, and 71% of Italy’s imports from the South American giant, came from the Amazon region where illegal mining is rampant, according to a new study.
Europe's Risky Gold, published by Sao Paulo-based think tank Instituto Escolhas based on government data, showed nearly all European imports of Brazilian gold are likely from sources that violate the EU’s own rules.
“In 2023, European Union (EU) countries – Germany, Italy, Czech Republic, and Portugal – imported 1.7 tons of gold from Brazil, worth USD 99 million,” the report stated.
“However, 1.5 tons of this gold, worth USD 93 million (94%), is exposed to a high risk of illegality,” the authors added.
According to the report, all of the 1.3 tonnes of gold imported by Germany from Brazil in 2023 came from the state of Amazonas, while 254 kg of the 356 kg of Brazilian gold Italy imported last year came from the states of Pará and Sao Paulo.
Amazonas and Para have seen a massive increase in wildcat gold mining in recent years after hard-right former President Jair Bolsonaro relaxed environmental controls in the Amazon rainforest, resulting in increased deforestation. The state of Sao Paulo produces no gold but is the country’s major hub for sale and export of the precious metal.
Larissa Rodrigues, Director of Research at Instituto Escolhas, said in an interview with Reuters that the European Union has strict rules against the trade of legally dubious or illicit metal, but the due diligence process has many blind spots.
“[The EU] cannot say it has a responsible purchasing policy,” she said. “The European companies buying the gold have no idea where it was mined and who sold it to traders for export.”
94% of the total amount of Brazilian gold imported by the EU comes from dubious sources, Rodrigues said, and the metal travels from hundreds of gold prospects in the Amazon through a chain of intermediaries before making it to continental Europe.
Instituto Escolhas said that 54% of Brazil’s total 2023 gold exports of 68 tonnes has suspect origins and cannot be properly traced, despite the current government's crackdown on illegal gold sales.
Canada is the main buyer of Brazilian gold, which is exported by companies from legally licensed mines, and the same is true for the United Kingdom, which is the third largest importer, the think tank said.
However, number two importer Switzerland buys bullion from wildcat mining sites, and Rodrigues said that much of this supply ultimately ends up in the EU, which sources 70% of its gold from the Swiss.
The European Union has relatively new regulation designed to prevent this kind of trade, Instituto Escolhas noted, but the criteria and enforcement mechanisms are lacking.
“[T]he EU has enacted the Conflict Minerals Regulation, which has been in force since January 1, 2021,” the report noted. “This regulation establishes supply chain due diligence obligations for EU importers of tin, tantalum, tungsten, and gold originating from conflict-affected and high-risk areas. While it sets a foundation for due diligence, it appears to fall short of ensuring these minerals and metals are imported only from responsible sources.
The think tank said there’s increasing criticism over the regulation's ineffectiveness.
“In October 2023, 20 NGOs, including Instituto Escolhas, signed a joint statement calling on the EU to step up its enforcement and adopt new measures,” they wrote. “The current reality is that despite Brazil's systematic and widespread illegal gold mining within Indigenous territories, EU members continue sourcing gold from regions where wildcat mines predominate, proof of origin is fragile if existent, and human rights abuses persist.”
