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Gold and diamonds fail to shine as drivers of Amazon development

  • Gold and diamond mining in the Brazilian Amazon don’t contribute to sustained improvements in the economy, health and education, among other development parameters, a new study shows.
  • The study compared these parameters in 73 Amazonian municipalities where mining takes place, against others in the region without mining.
  • It found that any improvements were brief, lasting no more than five years, while the adverse environmental impacts lingered for up to seven years.
  • The researchers, from the Instituto Escolhas, plan to hone their methodology by including other parameters, such as tax incentives for miners, which they predict will show that the industry is also a drain on public coffers.

An analysis of social and economic parameters in gold and diamond mining regions in the Brazilian Amazon shows that these activities have done little to boost development for locals.

The findings, from a new study by the Instituto Escolhas, a sustainability think tank, add a new layer to the discussion of whether mining brings positive impacts to the areas where it takes place.

The “economic development” argument is typically at the top of the list when developers and governments try to justify new mining projects, often ignoring the social and environmental costs that will last for decades.

When such benefits occur, they do so for only a limited period of time, according to the Escolhas analysis, based on propensity score matching of various parameters. After this, the local population is left to deal with chronic problems arising from the mining operations, which fail to provide the promised results.

“Our study confirms that gold and diamond extraction do not manage to break an economic dynamic based on the usurpation of regional natural resources, leaving a trail of poverty and environmental destruction behind it,” says study coordinator Larissa Rodrigues.

The researchers looked at all the municipalities inside Brazil’s Amazonian states where gold or diamonds were mined between 2005 and 2016. They then compared these 73 municipalities against others in the same region where no mining activity had taken place, looking at parameters like health, education and per capita GDP. They found that in the mining municipalities, any improvements to these parameters are brief, lasting only three to five years.

Carlos Alberto Manso, the study’s technical coordinator and a researcher at the Federal University of Ceará, says it’s important to evaluate public administration with concrete data and transparency so that the public has the tools to analyze the factors driving social progress — or the lack thereof.

“Our country is in recession and is facing severe social challenges. There is no margin for error. We have to monitor and evaluate. Studies like this one contribute as an instrument for transparency and pressure that improve the quality of the debate,” Manso says.

Bad jobs and rising deforestation

The poor results show up in parameters for employment and income. Over the last decade, salaries in the mining sector dropped by more than half, to an average of 4,840 reais ($890) per month in 2019. Brazil’s mining industry is also among those that generate the fewest jobs throughout the production chain: for every 100 people directly employed in mining, another 86 are employed in various other sectors across the production chain. Manufacturing, by contrast, generates far more jobs, with every 100 direct jobs corresponding to 480 more in the production chain.

Another parameter where gold and diamond mining come up short is the environment. The Escolhas study shows that they contributed to increased deforestation within the municipalities studied. Deforestation attributed solely and in an isolated manner to mining was statistically confirmed starting two years after the activity began, which is the minimum period for an impact on the municipality to be observed, according to the researchers. After mining began, the deforestation impacts lasted up to seven years.

According to the study, this statistical analysis complements satellite imagery analysis supplied by the DETER program of the Brazilian space research institute, INPE, which has provided a mining profile since 2015.

DETER analysis shows that over the last 5 years, 40,536 hectares (100,167 acres) of forest were lost to mining inside the Brazilian Amazon — an area more than half the size of New York City. The rate of deforestation increased on protected lands from 2019, when Jair Bolsonaro became president.

An illegal mine in part of Jamanxim National Park in the state of Pará. Image by Felipe Werneck/IBAMA.

Possible alternatives for the Amazon

In addition to showing that gold and diamond mining haven’t changed local realities for the better, the Escolhas study broadens the discussion about the need for economic alternatives to mining, cattle farming, soybean cultivation, logging, and other forms of resource exploitation in the Amazon.

The story of the mining towns, Rodrigues says, is a story of boom and bust. “The mining business generates revenue for the companies and then collapses, it leaves. In the end, this dependency leaves no space for lasting alternatives capable of generating development, based on knowledge and technological development,” she says.

More viable drivers of development over the long term would center around what the researchers call the “bioeconomy,” based on local sustainable products and innovative businesses that keep the forest standing. It’s a concept that has been deeply studied and supported by respected researchers like Carlos Nobre. From a purely economic perspective, industries like cattle ranching and soybean cultivation — the biggest drivers of deforestation in Brazil — yield around 600 reais ($110) worth of commodity per hectare. In the case of açaí berries, cocoa and Brazil nuts, all of which can be harvested from standing forest, the value reaches 12,300 reais ($2,260) per hectare.

The full potential of standing forest is still unknown, but studies have been done that try to measure the wealth they could generate. One study, by Robert Constanza at Australian National University, estimated that the Amazon generates some $1.83 trillion per year in gross value.

Rodrigues says the same logic could apply to Brazil’s other biomes, like the Cerrado. “Value must be generated from sustainable products through technology and integrated with the cultural and economic dynamic of the region so they can gain scale, generate more income and bring lasting benefits,” she says.

Corruption, subsidies and improving tools

The Escolhas study omitted to factor in other important parameters that were more difficult to measure. These include corruption and the indiscriminate use and diversion of public funds generated by the CFEM mining tax, which all mining municipalities receive and which, given the finite life of mines, eventually runs out.

A study by the nonprofit Institute of Socioeconomic Studies (INESC) shows that, in the case of Canaã dos Carajás in the state of Pará, which receives hundreds of thousands of reais from the CFEM, the lack of transparency and poor administration prevent the mining tax from being spent on the well-being of its citizens: 42% of the municipality’s population lives in poverty or extreme poverty.

Manso says the methodology developed for the study will allow Escolhas to add new parameters over time and refine its tool. “This accompaniment could be increased in coming years and generate updated data in order to keep evaluating the sector,” he says.

This could prove revelatory when parameters such as local tax subsidies, exemptions and incentives that the mining companies receive, which aren’t considered in the current study, are added to the mix. The researchers say they would likely point to the mining industry not only failing to provide the development it promises, but also draining resources from state and municipal coffers, receiving cumulative benefits that are rarely questioned and that contribute to inequality and environmental destruction.

Banner image of a gold mine inside Jamanxim National Park, by Vinícius Mendonça/IBAMA.

This article was first reported by our Brazil team and published here on our Brazil site on Feb. 1, 2021.

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