The Peculiarities of Mining Development in Ecuador
“Exploration is the engine that drives innovation. Innovation drives economic growth” — Edith Widder.
In today’s world, focused on the global digitalization of production through the introduction of technological algorithms, mining is still a relevant activity. Mining is one of the most significant examples of human use of natural resources for economic benefits. The modern world is still densely dependent on the earth’s vital resources such as oil, coal, gold, silver, and other non-precious common materials, whether aluminum, copper, or silicon. Nevertheless, resources are unevenly distributed in the Earth’s crust: only some nations can fully support themselves with their own minerals. Countries that have abundant sources of minerals tend to show good economic growth and develop comparably faster than poorer regions. Nevertheless, each country’s historical experience is different, and even the availability of the most precious resources does not mean the socio-economic well-being of the population. In this regard, it is of academic interest to study the specifics of mining development in Ecuador, as a country with contradictory facets.
This paper will examine in detail the path and strategies of public investment in the mining industry of the South American Republic of Ecuador. This state is located in close proximity to the Andean mountain system, which provides Ecuador with rich reserves of gold, silver, copper, and even oil. However, a socio-economic analysis of the country shows that even the presence of all the described resources is not enough to achieve the conditions of well-being. For this contradiction, the answer is obvious: Ecuador has only recently begun to invest in energy and geological exploration strategies actively, and therefore the transformation within the country remains to be seen. Thus, the subject of research interest for this paper is to examine the specifics of investing in the Ecuadorian mining industry, taking into account the historical, geographical, and socio-political aspects of the country. This paper discusses successively the opportunities Ecuador has to offer with regard to the mining industry and examines the experience of managing these opportunities. The final part describes general growth strategies that could be part of Ecuador’s development in the next decade.
Located on the west coast of South America, Ecuador is a small unitary state once under the rule of Spanish colonizers and the Republic of Colombia. For a century and a half now, Ecuador has been an officially independent, sovereign state with its own industry. With an area of some 284,000 square kilometers, the country is located along with the Andes mountain range in such a way that a mountain system falls in the center of the country. This proximity to geographic topography has led to the location of valuable minerals and resources in Ecuador. As far back as the last century, oil was discovered there, and with the advent of the new millennium, Ecuador found vast reserves of gold1. That is clear that such wealth must have an impact on the well-being and social well-being of the country.
However, it is not only — and not even so much — oil that has become a local resource value. Data reports that for the territory of Ecuador, the most exported mining products are gold, copper, and silver2. Given the country’s unique geographic location, the presence of precious minerals, and the lack of an established mining management apparatus, the authorities of the country initiated a law as early as 1971 that central to the management and use of resources, particularly oil, should be the public sector3. In this way, the Ecuadorian authorities protected the country from the invasion of foreign companies and domestic oligarchy, but this measure proved unsuccessful. The Ecuadorian authorities were unable to effectively manage the mining industry, leaving the country’s economy in stagnation. A coup led by General Rodriguez Lara changed the situation, after which U.S. authorities helped Ecuador restructure the local management of the oil industry, directing most of the profits from exports to the social system. Such changes helped the country enter a new era of economic growth, allowing for an almost tenfold increase in the country’s income in three years. However, even under this system, the government showed low efficiency, and as a result, the country increased the amount of foreign debt. Such a problem, reinforced by Ecuador’s withdrawal from OPEC, as well as the global default in 1998, led to the close integration of Ecuadorian authorities with the U.S. government4. As a result of this cooperation, Ecuador’s local currency was replaced by the U.S. dollar, and most of its export revenues went to cover its growing foreign debt.
As a result, as a result of mismanagement and problems related to the oppression of the indigenous population, the Ecuadorian authorities have systematically failed over the past fifty years. It so happened that the country had excellent opportunities to exploit and plenty of raw materials to export but could not use this effectively for a number of reasons. Contemporary Ecuador is changing rapidly, and after a series of additional investments by the authorities, it is expected that the country will enter a new, optimized era of benefits from the mining industry. This is an essential strategic path for Ecuador, and the success in managing this industry will determine how close the country will be to well-being and prosperity.
In this paper, the key research focus is on examining the political, economic, and social constructs that create the characteristics of the system of public investment in hard commodities in Ecuador. A historical and current analysis of the driving factors that allow the country to change the current agenda on the welfare of the mining industry is proposed. Thus, the subject of study is the strategies and ways to support this industry by the authorities. This can be realized through the study of the reforms, experiences, and perspectives that are the resources of the government apparatus of Ecuador. In addition, it is proposed to study the significance of the contradiction that has arisen due to the country’s incredible resource wealth and the high level of poverty and social threats to the local population.
Taking all of the above into account, it is necessary to formulate a single research question in relation to this work. This may be: Is there a way forward for Ecuador to develop its mining industry, and if so, which directions and strategies should be pursued? There are no unequivocal views on this topic since it is highly unlikely that it is feasible to guarantee the country’s development. Nevertheless, many researchers and authors read that local mining is one of the most promising industries in Ecuador, on a par with agricultural exports. They also predict that Ecuador will enter a new period of economic prosperity within the next 5-10 years. Such statements are primarily related to the change of president in Ecuador, the discovery of new deposits, and closer interaction between the authorities of Ecuador and the governments of the global community. With this in mind, it can be postulated that Ecuador has sufficient wealth and high potential to replicate the economic miracle of some countries, be it the UAE, Saudi Arabia, or Singapore, but for that, the country needs effective leadership in the form of highly qualified and experienced professionals with the ability to run the country and manage the mining industry more profitably.
This research paper will explore in detail three key arguments that will clearly and unequivocally answer the research question in the conclusion of the entire paper. Before proceeding with the specific arguments, a general introduction should be made to allow the reader to understand better the material discussed next or to use only the section of the paper that is of most interest to them. In addition, such a focus on specific sections will allow for a more detailed understanding of the specific topic of the study through narrowing the theoretical scope of the analysis. The first part of this section examines the geographical and geological features of Ecuador, confirming the unique capabilities of the local mining industry. The second part discusses in detail Ecuador’s political experience with mining management, including through historical analysis. Finally, the third part of the Argument section presents a study of the current mining operational management agenda and future opportunities for the country in the near future.
Mining Opportunities in Ecuador
The number of natural resources available for industrial use is limited on the planet. It is impossible to extract more oil and precious metals from the bowels of the earth than they are quantitatively represented there. Understanding this limitation poses a severe challenge to states since the use of natural resources presents specific strategic advantages. A state can export the oil it extracts from its own territory and make an excellent marginal profit from it. At the same time, if a country produces and exports precious metals in addition to oil, it becomes a severe contribution to its economy. Gold, in general, is not a precious metal, but the long historical experience of its use, combined with the specific chemical properties of the substance — gold does not oxidize and thus does not deteriorate during storage — make this metal incredibly valuable5. Thus, the basis of gold’s value is simply the belief of investors that even decades from now, the metal will continue to be a valuable asset. From these words, it can be concluded that countries with rich geological resources can use them to achieve conditions of economic prosperity, unlike countries with poor mineral resources. In turn, this phenomenon creates a foundation for competition between countries, which can take the form either of military action over resources or economic and political pressure from the more extensive powers.
Ecuador is an example of such a country with the wealthiest conditions for the extraction of solid commodities. This includes both oil production and target minerals, whether precious or base metals. In fact, Ecuador is characterized by reserves of even more potentially valuable materials for the country’s economy, whether lithium, aluminum, iron, coal, or even uranium. However, it is the hard commodities — that is, gold, silver, and copper — and oil that are the most strategically valuable resources to export from Ecuador. Such a wide variety of valuable resources is the result of the country’s good location: as mentioned, Ecuador is literally divided into two regions by the Andean mountain system (as shown in Figure 1), which creates not only specific difficulties in managing the country but also presents excellent opportunities for mining of rock minerals. It cannot be known with certainty how much mineral wealth is lurking in the Andes, but the natural richness of the mountains can be assessed from an economic perspective. Data reports that by 2017 about 39% of all the world’s copper, 23% for silver, 20% for molybdenum, 14% for zinc, and 12% for tin were extracted from the Andes6. This indicates a high richness of this mountainous area for useful metals.
It is logical to assume that not only Ecuador but also the neighboring Andean states have equally rich stocks of hard commodities. In a sense, this is indeed the case since Chile or Peru have already been able to show excellent results in exports. For example, by 2019, Chile’s essential export commodities were gold and silver8, whereas for Peru, these commodities were copper and gold 9. Unlike Chile, Ecuador is almost ten times smaller in extent, but this does not mean that Ecuador is characterized by fewer reserves. Studies of the fertility of Ecuadorian magma show that the concentration of minerals in the mountain system, specifically in Ecuador, can be the same as for neighboring states, but it can also be higher10. Moreover, certain areas of Ecuadorian land may be so rich in material that it literally lies on the surface instead of being hidden in the bowels of the earth. However, theoretical estimates are difficult to confirm by geological practice, not because they are false, but because the history of Ecuador is not characterized by such great exploratory discoveries of local deposits — at least, until the beginning of the 21st century — as it is typical of, for example, Peru or Chile. At the same time, some researchers tend to compare Ecuador’s exports with those of Colombia, the South American market leader in international trade. It is true that Ecuador has not been able to achieve the same high results to date (the reasons for this are discussed in the next section), but Ecuador is still not the last participant in the export arena. Thus, it is worth saying that in 2019, total exports to other countries amounted to $22.9 billion, of which only $608 million came from metallurgy, including precious metals, and $9.02 billion from exports of oil products11. Regarding only the solid commodities discussed, Figure 2 clearly shows that lead, iron, copper, and aluminum were the primary exported metal commodities. At the same time, among the precious metals produced, Ecuador exported 96% of gold, which means that this substance should be seen as the dominant product of the precious metals export market. In an overall context, the sale of precious and ordinary metals from total exports does not exceed 2.66%, which represents a critically low number for a country with such rich reserves of these materials. Tellingly, the total contribution from oil sales is 34.3%, enough to conclude that Ecuador actively invests in oil sales, and less attention is paid to the country’s metals and mining industry.
It is noteworthy that Ecuador’s reserves are rightly high not only in oil but also in precious metals. According to statistical forecasts, the country’s total oil reserves reach the level of 87.5 times the annual consumption, which puts the country in 19th place in the world in terms of the volume of buried resource13. At the same time, there is not even an estimate of gold reserves for Ecuador, which further confirms the clear prioritization of government mining management. Figure 3, however, shows that the country’s gold reserves held by the Central Bank of Ecuador have had an inconsistent trend over the past ten years. The erratic growth of reserves, marking a more secure economic situation in the country, has only been noticeable in the last three years due to the political restructuring of the mining industry discussed next. This is becoming a reliable indication that the authorities in developing Ecuador are beginning to understand the value of gold mining and exports. It is correct to note that the number of resources mined in Ecuador depends not only on the domestic political decisions of the leaders but also on the global demand for such materials. For a long time, Ecuador remained a member of the OPEC grouping, which means that the country was forbidden to produce and export more oil than the regulations of the association required. Another obvious example of external influence on aggregate supply was the COVID-19 pandemic, which came as a surprise to the entire world community. As a result of the outbreak of the virus, governments imposed restrictive measures to protect the health of the nation, but the consequence was an economic slowdown. Supply chains, factories, and mines have been halted or slowed, causing exports to plummet. However, despite the external threat and price fluctuations during the first months of the quarantine, by the end of 2020, prices for hard commodities began to show low volatility14. This effect is reliable evidence of the dependence of the world economy on oil, gold, and base metals, as rapid adaptation, and a focus on maintaining the sustainability of these markets was paramount.
Finally, it should not be forgotten that technological progress continues to evolve, and although COVID-19 has become a definite threat, there has been a noticeable trend for technology to adapt. The number of innovations in the world is growing rapidly, and it is expected that electric transport will soon become the typical mode of public transport due to its more significant economic and environmental benefits. Electric cars require large quantities of copper ore to work appropriately, which is expected to be mined in Ecuador, among other places. Ultimately, this denotes that the global community maintains demand not only for petroleum products but also for solid commodities. Consequently, it is a fair strategy for Ecuador to invest in gold and other metals in order to improve the country’s economic agenda.
Political Management of the Mining Industry
Ecuador is often overlooked when discussing investment benefits for regional South American exporters. This is not surprising, given the country’s poor historical record of managing its mining industry. The state first voiced its claim to independence in 1830, followed by an era of political accommodation within16. Thus, Ecuador’s internal conflicts have included struggles between conservative and liberal parties, as well as the active intervention of European countries and the United States over the last century. It is probably for this reason that industrial oil production officially began in Ecuador, which took place simultaneously with revolutionary uprisings, coups d’état, and the war with Peru17. The era of state transformation was to begin with the arrival of Lucio Gutiérrez as president: Gutiérrez promised to abandon the foreign intervention of companies in the management of oil wells, establishing state authority over this sector. In practice, Gutiérrez’s promises were not fulfilled, and Ecuador plunged into a crisis situation, leaving the authorities with no other recourse than to the United States and the IMF18. It is noteworthy that even the intervention of an international company and the authorities of a significant neighboring power (in fact, to direct most of the oil revenues to the social sphere and to cover the foreign debt) could not lead to a favorable result for Ecuador: the country began to become poor rapidly. Rafael Correa’s victory in the 2006 presidential elections promised new economic policies for Ecuador: a young man with a European economic background could have governed the country competently and steered Ecuador toward greater prosperity. Nevertheless, Correa, with his staunchly anti-American views, was found to have engaged in corrupt schemes and fraud through the use of his power, resulting in judicial charges.19. In addition, in 2008, Correa imposed a moratorium on mining, which resulted in the complete inhibition of the mining industry. As a result, the last period of the presidency to date was marked by Lenín Moreno’s assumption of power, who ruled the country for four years, and the return of Guillermo Lasso.
Apparently, Lasso decided to change course politically amid the failures of his colleagues, and as a banker in the past, to use his great economic experience to lead the country in exports of mined natural resources. Unlike leftist politicians who have been president for the past decades, Lasso immediately indicated that he did not intend to make many promises he could not keep20. At the same time, it can be said that the secret of Lasso’s victory lies in the fatigue of the population from inept management: Ecuador was utterly unprepared for the COVID-19 pandemic, and most of the vaccines were delivered from China were never handed over to the people. Thus, in the hands of the current president was a weakened, crisis-ridden country with substantial foreign debt and a half-destroyed industry. Lasso’s presidency had many expectations, ranging from a desire to work more closely with the US and to obtain new loans on favorable terms from Ecuador to a complete restructuring of the country’s social and economic agenda.
For Guillermo Lasso, as for most politicians around the world, it is clear that Ecuador in its current state cannot compare to neighboring states Chile, Peru, much less Colombia in terms of economic complexity and development. One predictable step to improve the agenda is to invite foreign mining companies to the local market: by delegating responsibilities, companies with already built-up technical capacity will be able to extract resources, pay taxes and attract additional foreign investment. However, it is not surprising that companies from other countries are slow to develop Ecuadorian affiliates, given the high degree of economic uncertainty that characterizes the region.21. Business executives fear that Ecuador will fall back into crisis and ruin and cannot afford the risks of expansion. An additional factor is an experience of attracting foreign companies: when more radical presidents almost entirely reprivatized the country’s mining industry, the company tax rate could be as high as 70%, discouraging businesspeople22. Lasso clearly understands such problems, and in an effort to initiate Ecuador’s economic growth, he seeks to raise the country’s attractiveness. For this reason, the current president intends to stimulate economic growth not by expanding the capacity of the oil industry (although it continues to function and bring annual profits to Ecuador), but by investing in the mining sector: this is called a policy of income diversification. Thus, one of the main vectors of Lasso’s presidential activity can be described as a desire to attract foreign companies to populate Ecuador’s virtually empty mining market. For this reason, in August 2021, Lasso initiated a meeting with foreign investors and mining executives to discuss strategies for developing the industry in Ecuador23. This will at least partially cover the recession exacerbated by the inefficiencies of Lasso’s predecessors and the pandemic. At the moment, there are several major players in this industry in Ecuador: the Chinese Ecuacorriente and the Canadian Lundin Gold Inc. The exploration activities of the companies are implemented through the signing of concessions issued by the government. According to the Ecuadorian Constitution, all mining rights belong only to the state since any local natural materials are a strategic value of Ecuador. Nevertheless, the government can — and Lasso seeks to — delegate some of these rights in the form of 25-year concessions to legal entities and companies, giving the holder of the concession the exclusive right to develop the deposit. For this reason, it is much more frequent with respect to Ecuador to discuss individual exploration projects rather than individual companies.
Fruta del Norte, from Lundin Gold Inc., is one of the most important gold deposits in Ecuador. Although the mine was discovered back in 2006, and the Canadian company bought the contract in 2014 for $240 million, the direct extraction of the material did not begin until 2019 due to a long phase of preparatory work and the socio-economic crisis within Ecuador24. In fact, Lundin Gold Inc. has 29 government concessions, of which seven are devoted to Fruta del Norte, covering more than 5.5 thousand hectares, as shown in Figure 425. This is a relatively young production, which is at the stage of a constant increase in economic and technical potential. Thus, by the end of 2021, the volume of produced processing is expected to increase by 20%: from 3,500 tons per day to 4,200. The Canadian company has carefully considered the infrastructural peculiarities of the mining region, so there is a 150 km paved road to Fruta del Norte from the city of Los Encuentros26. The total projected life of the project will be about 14 years, during which the company expects to produce 340,000 ounces of gold. It is obviously that if Fruta del Norte shows excellent results in the first years of operation, it will signal the possibility of prospective expansion of the Canadian company’s presence in Ecuador.
There, in southern Ecuador, the Mirador copper mine from China’s Ecuacorriente division of the CRCC-Tongguan consortium was launched a little earlier. Mirador expects the Andean area to hold about 3.2 million tons of copper, 3.4 million ounces of gold, and 27.1 million ounces of silver, which automatically makes the mine strategically crucial to the company and the country as a whole.28. Mirador is expected to be more active than Fruta del Norte for about 5-6 years. This project was launched under the former presidents of Ecuador, and only in 2019 began commercial metal mining: as in the case of Fruta del Norte, the development of the deposit required significant investments from foreign companies in the weakened Ecuadorian economy, including in order to ensure functioning coordination and unimpeded transportation of ore.
In a sense, it is safe to say that the policy of attracting foreign companies has been successful for Ecuador. In the first quarter of 2021, the country has already exported 2.23 times more mining products than in the same period last year29. Under Lasso’s presidency, however, the country continues to invest confidently in prospecting for new mineral deposits. By 2021, exploration work from Australia’s SolGold Plc. and a joint project between Ecuador’s state-owned ENAMI and Chile’s Codelco had yet to be completed30. The very first effects of investing in the mining industry are already becoming visible. It is too early to judge Ecuador’s exponential economic growth and complete social well-being, but the fastest reactions can already be detected. For example, a reference to Figure 5 shows that after a sharp fall in the labor market in 2020 for obvious reasons, the market has entered a rapid upswing, which may be partly due to the discovery of new fields described earlier. At the same time, the IMF reports that the country’s projected GDP growth in 2021 is 2.8%, the largest gain in five years, as shown in Figure 6. Along with this, the unemployment rate is falling rapidly, and the government’s gross debt is on a smooth downward trend. This becomes evidence of the beginning of the right path for Ecuador in terms of changing the agenda of the mining sector.
Given the changes in the Ecuadorian market that are already taking place, it becomes possible to discuss Ecuador’s critical prospects for the near future. It is paramount to emphasize that the expected changes are only likely to occur because of the effective management of the executive branch in Ecuador. By learning from the mistakes of his predecessors, President Guillermo Lasso can probably help the country achieve strong economic growth and become a severe export competitor to other South American countries. Nevertheless, if Lasso proves to be just another lousy manager who fails to show the necessary initiative, the state will not achieve the desired results. The recognition that it is impossible to build an efficient economy on one export product alone plays no small part in the change. For a long time, Ecuador, in terms of the topic of interest, was an exporter of oil only, but this trend has changed over the last three to five years. In this sense, the example of the UAE comes to mind, which abandoned its oil-dependent economy in time and is now a confident leader in international trade and technological progress. On the other hand, the unfortunate example of Venezuela, whose authorities invested considerable sums in gold, should also be a cautionary tale for Ecuador, which seeks economic and social well-being. Thus, Ecuador’s strategic path is ambiguous, complicated, and not unhindered, but good governance can be salvation.
By now, as has been seen, the most prominent players in the mining industry in Ecuador are Canadian and Chinese companies. However, by the end of Lasso’s first presidential term, that is, by 2025, the country is expected to have at least four new mines, which by then will be in the exploration or development phase. Specifically, exploration from Canada’s Atico Mining Corp., Adventus Mining Corp., and Dundee Precious Metals should begin non-commercial production as early as 2023. In 2017, Adventus Mining Corp. signed a contract to do exploration work on the El Domo deposit, initiating the Curipamba project. Curipamba has seven state concessions (Figure 7) for copper and gold, and beginning in 2020, the company began actively developing infrastructure33. This includes building a gravel road, providing coordination and comfortable working conditions for the local workforce.
In August 2021, Atico Mining Corporation acquired the final stake to develop the La Plata deposit. Unlike El Domo, La Plata already has developed infrastructure and large water reserves necessary to carry out technical mining operations. This deposit is expected to produce more gold and copper, as well as silver, lead, and zinc. The company’s metal production forecasts reflect excellent prospects: for gold, it is about 3 g/t, for silver about 33 g/t, and for copper about 3%35. In addition, there are already convincing results showing the presence of additional reservoirs that were not originally predicted.
At almost the same time, Dundee Precious Metals purchased full ownership of the Loma Larga deposit. Loma Larga is a giant silver, gold, and copper deposit37. The deposit is projected to be active for twelve years, with Loma Larga expecting an annual yield of 200,000 ounces of gold for the first five years of operation. Notably, Dundee Precious Metals has excellent experience in mine development, as it did with the Chelopech mine in Bulgaria. In addition, one of the most promising projects of the next decade is the Cascabel concession, located in the region of the same name in Ecuador. The Cascabel project is 85% owned by the Australian company SolGold Plc. It is widely believed that Cascabel could become not only one of the most successful projects for Ecuador but also the most significant copper, silver, and gold mine in the world38. Cascabel’s reserves are projected to exceed 10.9 million tons of copper and 23 million ounces of gold, with an expected mine life of over fifty years. It is evident that the success of this project will make Ecuador a major strategic exporter of precious and valuable metals, which will undoubtedly have an impact on the country’s weakened economy.
Thus, favorable trends are evident for Ecuador if the policy of managing the mining industry maintains its growth rate. The country’s authorities are actively inviting foreign investors to cooperate, which benefits not only the companies but also the government of the country. A large number of promising new industry projects are opening up, which promises not only to bring in a large number of taxes from mining companies but also an increase in exports. In addition, Ecuador has the potential to become a strategically important participant in the international gold and copper export market, which will give the country the necessary impetus for domestic development. This is about changing the social and civic agenda in the country so as to ensure the well-being of the local population, affordable medicine, and quality education. It can be predicted that if companies continue to come to the region’s domestic market and the authorities maintain a constructive attitude toward them, Ecuador will change radically for the better in the next decade.
In general, it is worth saying that despite the significant opportunities that Ecuador has, investments are not moving as fast as they could. One of the reasons for this is the imperfection of mining law, which has been constantly rewritten and restructured due to the polarly different views of the country’s political leaders. As mentioned, the Constitution of Ecuador postulates the sole authority of the government in mining matters: no private person, without permission, may engage in legal mining on Ecuadorian territory, much less the subsequent sale of the mined goods. On the one hand, this decision by the Ecuadorian government unequivocally shows the priority of managing such a strategically important area for the country. On the other hand, together with the power, the government receives more responsibility for the preservation of natural diversity and ensuring adequate environmental safety in the areas of extraction. In practice, however, it is clear that by now, the state-owned mining company ENAMI does not have as well-developed means of maintenance and production as its commercial competitors. In this sense, using Articles 1 and 408 of the Constitution, the Ecuadorian authorities are delegating management responsibility (in fact, admitting their own inability to manage) to foreign companies, which will not only be able to use the mines effectively but also to improve the economic status of the country39. At the same time, according to Article 407, only the President of the country can declare strategically important areas of Ecuador, which in no way can be conceded to private companies.
However, it is fair to admit that significant players in the mining sector may still face some threats despite the loyalty and welcome of the Ecuadorian authorities. Looking ahead, failure to adequately manage the problems will cause financial losses for not only the company and the government but also the likelihood of new revolutionary uprisings and economic recessions. More specifically, it is talking about illegal resource extraction as well as environmental damage to ecosystems from mining. Illegal mining can be carried out both by private individuals — so-called “artisanal mining” — and by large firms implementing corrupt schemes and political lobbying. For a long time, artisanal mining was the only form of small-scale mining: it naturally developed the region’s economy by employing local people and selling the product. However, when it comes to artisanal industries, it is well known that their employees often work in poor conditions, their wages are not paid, and taxes are not sent to the treasury. In addition, it is clear that criminal forms of mining are not inherently environmentally conscious because they focus only on increasing profits. As a result, while artisanal mining may have benefits in the short term, it becomes a problem for the long-term development of the country.
The second challenge for the strategic development of Ecuador’s mining industry is a concern for the environment. For large companies already experienced in mining, complying with ecosystem protection requirements is probably not a significant problem. On the contrary, failure to do so may result in government sanctions and a drop in the investment reputation of the company. This creates a robust kernel of reciprocity and mutual benefits between the government, society, and companies that change Ecuador’s topography. Companies not interested in such outcomes obviously will not ignore the demands of ecosystem protection, unlike artisanal industries. For example, in a tiny Ecuadorian village called Nambija, near the town of Zamora, there is a small gold deposit40. Local residents are engaged in artisanal mining of this precious metal, for which they use mercury amalgams. As a result of the inept use of dangerous mercury, its particles enter the domestic life of the villagers, causing severe damage to human, soil, and animal health. The Ecuadorian government is aware of this problem, and their plan is to develop the Nambija mine in a way that ensures the complete safety and controllability of the resources used. Among other things, control by the authorities means that they intend to eliminate artisanal production and establish commercial mining.
In addition, as it is known, a great infrastructural problem from mining activities is the presence of dust on the roadways. Due to the systematic drilling of rock, large amounts of dust formations rise into the air and can be transported to urban settlements, where, once deposited in the lungs of residents, they cause breathing problems. With regard to this threat, Ecuador has regulations imposing obligations on companies to eliminate such problems. The solution to this environmental threat may lie either in changing the technical practices of companies or in entering into strategic partnerships with firms that provide cleaning and hazardous dust removal services.
Finally, it should be understood that Ecuador was initially been inhabited by indigenous Indians, who were subsequently oppressed by European colonizers. Because of this, the issue of ethnic justice is particularly sensitive for Latin American countries. It is known that the entry of the Chinese mining conglomerate into the Ecuadorian market allowed the country to boost its economy significantly but found an adverse reaction from the indigenous population41. The claims of the descendants of the Indians are obvious: foreign companies are destroying local ecosystems, interfering with the natural life of communities, and lobbying the government. Recognizing the importance of a sustainable and favorable Chinese company presence in Ecuador’s rich soil, Mirador management decided to change organizational practices in order to adapt to the needs of local people. This includes increasing dialogue, encouraging local community participation in production, taking complete care of threats to the environment, and recognizing responsibility.
In summarizing this paper, several key conclusions should be drawn regarding the analysis undertaken. First of all, it is worth saying that the mining industry is an essential component of the world economy that supports the export and import cycle of precious metals, precious metals, and oil. Second, Ecuador is a South American country with a weak economy that is still on the road to development. As a result of a series of mismanagement, corruption, state crimes, and negligence by Ecuador’s presidents, the country’s mining industry has been in decline. In fact, Ecuador continues to export oil and agricultural products, but not enough to ensure the country’s full social and economic well-being. In addition, increasing dependence on oil exports could be a problem for the country. Third, Ecuador has been steadily accumulating foreign debt and losing its attractiveness to foreign business over the past decades. The situation began to change only in the last five years when the government revised its attitude toward foreign companies and relaxed the terms of mutual cooperation. Since then, large Canadian, Chinese, and Australian firms have turned their efforts to mining strategically essential hard commodities, whether gold, silver, or copper, of which Ecuador is so rich.
Ecuador’s economy is expected to show intensive growth by attracting large amounts of foreign capital and development in the near future. Already now, with the arrival of a new proactive president, Ecuador has entered a new era of economic transformation. The country continues to actively invest in the discovery of new deposits, which increases its attractiveness in the international trade arena. Ecuador has genuinely begun to take advantage of the opportunities it has had all along, and therefore it should be predicted favorable changes in the social, political, and civic agenda within Ecuador. In addition, companies populating the country’s mining market must clearly comply with regulations and local legal requirements in order not to lose their financial and reputational attractiveness. To summarize and answer the research question of the entire paper, there are clearly promising ways for Ecuador to develop its mining industry, provided that the government maintains and continues to support this sector.
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Llangari, Jose. “Ecuador Begins Large-Scale Mining at Mirador Copper Project.” Reuters.
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- Lauderbaugh, 14.
- USGS, 2017–2018 Minerals Yearbook (New York: U.S. Geological Survey Minerals Yearbook). 2021, PDF e-book, 14.1.
- Lauderbaugh, xxiv.
- Ibid, 132.
- EBSCO, “Bitcoin vs. Gold & USD As A Store Of Wealth,” ITNOW 60, no. 4, (2018): 13.
- Lluís Fontboté, “Ore Deposits of the Central Andes,” Elements: An International Magazine of Mineralogy, Geochemistry, and Petrology 14, no. 4 (2018): 259.
- Villacís, Anita G. et al., “Chagas Vectors Panstrongylus chinai (Del Ponte, 1929) and Panstrongylus howardi (Neiva, 1911): Chromatic Forms or True Species,” Parasites & Vectors 13, no. 1 (2020): 4.
- Kojima, Shoji et al., “Distribution of Gold and Silver and its Relation with Hypogene Ore Minerals in the Esperanza Porphyry Deposit, Antofagasta Region, Chile,” Resource Geology 71, no. 1 (2021): 80.
- José Carlos Orihuela and Victor Gamarra Echenique, “Volatile and Spatially Varied: The Geographically Differentiated Economic Outcomes of Resource-Based Development in Peru, 2001–2015,” The Extractive Industries and Society 6, no. 4 (2019): 1145.
- Jose Llangari, “Ecuador Begins Large-Scale Mining at Mirador Copper Project,” Reuters.
- “Ecuador,” OEC.
- BP, Statistical Review of World Energy (London: Whitehouse Associates, 2021), PDF e-book, 18.
- Maruf Y. Ahmed, and Samuel A. Sarkodie, “COVID-19 Pandemic and Economic Policy Uncertainty Regimes Affect Commodity Market Volatility,” Resources Policy, 74 (2021): 11.
- “Ecuador Gold Reserves,” World Gold Council.
- Lauderbaugh, 51.
- Ibid, 14.
- Ibid, 158.
- José María León Cabrera, “Ecuador’s Former President Convicted on Corruption Charges,” NYT.
- José María León Cabrera and Anatoly Kurmanaev, “Conservative Ex-Banker Headed to Victory in Presidential Election in Ecuador.” NYT.
- Heidi Vella, “Can Ecuador Achieve its Bold Vision for Mining,” Mining Technology.
- ZVS, “Executive Decree Nº 151 (New Mining Policy),” Tobar ZVS.
- Juan José Herrera et al., “Ecuador’s Fruta Del Norte: Early Engagement as a Tool to Build Trust,” Sustainable Industrial Water Use: Perspectives, Incentives, and Tools 5 (2021): 57.
- Cecilia Jamasmie, “Lundin Gold’s Fruta del Norte mine production exceeds expectations,” Mining.
- “The First Large-Scale Modern Gold Mine in Ecuador,” Lundin Gold.
- Alexandra Valencia, “Ecuador Sees Mining Exports Rising 74% in 2021, Ministry Says,” Reuters.
- “Ecuador Employment Rate,” INEC.
- IMF, “Ecuador,” International Monetary Fund.
- ADZNV, “Curipamba Project,” Adventus.
- SGC, Amended and Restated NI 43-101 Preliminary Economic Assessment of the La Mina VMS Project Cotopaxi Province Ecuador (Québec: Minerals Services, 2018), PDF e-book, 96
- Ibid, 28.
- DPM, “Dundee Precious Metals Completes Acquisition of INV Metals,” Dundee Precious Metals.
- Roque Bernardo Bustamante, “Ecuador,” Chambers and Partners.
- “Case Study: Nambija Gold Mine — Ecuador,” YouTube video, 3:39, posted by CAESER University of Memphis. Web.
- CEI, Chinese Mining and Indigenous Resistance in Ecuador (Washington: Carnegie Endowment for International Peace, 2021), PDF e-book.