Ecuador rolls out the red carpet to large mining companies but the indigenous community and small miners cry foul

Hoping to attract $5 billion in foreign investment, Ecuador is putting out the welcome mat to large international gold and copper mining companies. The government recently announced a number of mining incentives, including relaxation of some environmental requirements, long-term contracts and tax reductions.

The new open door policy is facing local opposition, however, that could scare away potential investors. Communities of mostly indigenous people opposed to all mining operations, as well as small mining companies already in operation, are crying foul.

River gold mining operation in southern Ecuador.

Leaders in several small towns in Azuay Province, west and south of Cuenca, are claiming that legal requirements, including one of including communities in decisions to allow mining, are being bypassed in the rush to attract investment. In Girón, a drive is underway to collect signatures to force a referendum on a proposed mine.

“We want to protect the water for future generations,” says José Selga, a leader of the vote-collecting drive in Girón. “The new constitution says the people affected by mines must be consulted in any decision that would allow mining. The government is ignoring us,” he says, adding mining opponents are ready to fight to protect their heritage.

Owners of small mining operations in the southern Ecuadorian provinces of Loja and Zamora Chinchipi say that all the government support is going to large multi-national companies, and none to their companies. “We are getting no help at all,” said an U.S. resident who is a partner in one mine. “The red tape is almost impossible to cut and we have seen delay after delay in getting the permissions we need to operate. We are asking the government to treat little miners the same as large ones,” he said.

He added that his gold mining operation, which began operating in mid-2014, is seeing high rates of theft and that the government is offering no help in stopping it. “We are in the jungle and are entirely at the mercy of criminals who steal our gold at night. Where is the law enforcement?” He said as much as 50% of the gold recovered in his operation was being stolen. “This is not fair to our investors, who are taking the hit,” he said.

Among incentives that the Ecuadorian government is offering large mining companies are 30-year investment contracts that promise tax stability as well as accelerated depreciation standards.

“We have made the decision that mining is a central part of our development plans,” said Rafael Poveda, Minister of Strategic Sectors, which includes Ecuador’s mining ministry.

“We want mining to constitute the axis which will allow us to improve living conditions for communities and 15 million Ecuadorians,” he said at Toronto’s Prospectors and Developers Association of Canada conference on Monday.

The country sponsored “Ecuadorian Day” at this year’s show, which included a speech by the minister of mining and project presentations.

While a handful of foreign miners have ventured into Ecuador in the past decade, investment has been minimal.

The country’s reputation took a hit in 2013, when large Canadian-based producer Kinross Gold pulled out of the largest gold project, Fruta del Norte, saying the government refused to compromise on a 70 percent tax.

When Kinross sold the high-grade venture two years ago to a company belonging to the well-regarded Lundin family, the deal sparked some optimism even though the $240 million price tag was a fraction of the $1.2 billion Kinross paid in 2008.