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Ecuador gold supply chain : analysis of government intervention in the artisanal mining sector Thomas, Maxim Jordan

Abstract

The government of Ecuador has been attempting to modernize the artisanal and small-scale gold mining (ASGM) sector to increase tax benefits, reduce pollution, reduce money laundering and formalize informal miners. One of the strategies to help legitimize the supply chain is a program implemented by the Central Bank of Ecuador (CBE) through its Gold Purchase Program in Sangolqui that focuses on the ASGM sector. The attraction for miners to sell gold in Sangolqui is due to the international price paid by CBE for their gold, as well as 0% deductions for service and 0% IVA. The main hurdles to expand the CBE include:1) distant location of the CBE GPP office in Sangolqui, near Quito (miners take 3 days to go by car or plane from southern Ecuador); 2) Neither local gold buyers nor CBE pay for the silver content in the doré; 3) Lack of security for the miners when travelling to Sangolqui with their gold; 4) Legal inadequacy, as the CBE GPP buys gold only from legal and registered sellers; 5 )The CBE requests full registration of the gold sellers with ARCOM, which is a complex process; and 6) In some cases, the time lag to receive the money from the CBE GPP is too long (up to 14 days). Some suggestions to improve the CBE GPP were generated from the findings of this study, including: 1) The CBE could reinforce its presence and influence in the mining regions by establishing permanent or temporary offices near the production areas; 2) Supply a mobile purchasing unit in an armored car; 3) All of the artisanal miners in the country, formal or not, should be able to sell gold to CBE GPP after doing a simple registration; 4) Reduction of the 2% tax charged by the CBE as an additional incentive; 5) CBE and ARCOM could organize the ASGM in cooperatives, thereby creating a mechanism to buy large amounts of gold, which would reduce travel costs; 6) CBE could establish a partnership with large–scale conventional mining companies to purchase gold from ASGM.

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Attribution-NonCommercial-NoDerivatives 4.0 International

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