Gold Beats Cocaine as Colombia Rebel Money Maker: Police

Colombian armed groups are reaping profits from illegal gold mining that are five times greater than returns from cocaine, according to Colonel Hector Paez, acting director of the country’s rural police division.

Cocaine typically takes six months to produce and requires considerable knowledge, while an illegal mining operation in the Colombian jungle can extract two kilograms of gold a week, Paez said in a June 19 interview in Bogota.

“Illegal mining has risen in this country - for gold, coltan, limestone and construction materials,” he said. “They are earning more money from gold than cocaine or kidnappings.”

Gold, which slumped below $1,300 an ounce for the first time since September 2010 in New York yesterday, has become Colombia’s biggest export after oil and coal. A kilogram of cocaine can sell for about 5 million pesos ($2,570) in the Colombian jungle while a kilogram of gold can fetch 19 times that, or similar to global market prices, Paez said.

The precious metal is also relatively easy to legalize while cocaine remains banned. “As soon as it’s excavated and away from the mine it’s legal,” said Paez.

Colombian armed groups include the Revolutionary Armed Forces of Colombia, or FARC, the National Liberation Army, or ELN, and organized crime gangs with links to Colombia’s decommissioned paramilitaries. The FARC have been engaged in a five-decade armed struggle against the Colombian government and are currently participating in peace talks in Havana.

Coca Crop

The FARC and other armed groups profit by taxing gold production and machinery use, as well as operating their own illegal mines, said Paez. Rural police have shut 336 illegal mines this year, topping last year’s total of 330, he said.

Besides the mines run by rebel groups or criminal gangs, Colombia’s mining industry also includes thousands of artisan miners operating without permits. Cesar Diaz, president of the Colombian Mining Chamber, said a “very important” percentage of the country’s gold production comes from the informal sector.

“The two big gold producers in Colombia, Mineros SA (MINEROS) and Gran Colombia Gold Corp. (GCM), make up about 10 to 15 percent of total production. So what is there in the other 85 percent? You can draw your conclusion,” Diaz said in an interview last month.

Colombia exported about 70 metric tons of gold in 2012, according to data from the mining chamber.

As illegal mining surges, Colombia’s coca crop dropped a record 25 percent in 2012, newspaper El Tiempo reported June 16, citing United Nations data. Natalia Arango, head of communications in the UN Office on Drugs and Crime for Colombia, said a report including 2012 coca crop figures will be published July 2. She declined to comment on El Tiempo’s story.

To contact the reporter on this story: Andrew Willis in Bogota at awillis21@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

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