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Ecuador: Mineral Policy in Zaruma, which produced 100 t of gold and 500 t
of silver between 1898 and 1949 (Sacher 2015).)
María Cristina Vallejo Galárraga and As a result, this sector has been a marginal part
William Sacher Freslon of the economy representing only 0.42% of the
FLACSO Ecuador, Quito, Ecuador GDP in 2015 (BCE 2016a). Nevertheless, after
two decades of minerals exploration and mining
development, the country is on the verge of inau-
Introduction gurating its first large-scale open-pit copper mine.
Meanwhile, a dozen of other metallic projects,
Ecuador is a small South American republic, with currently in portfolio, are about to complete their
a population of 14,483,499 (INEC 2010) and an exploration phase.
area of 283,560 km2. The country is administra- According to the Constitution of Ecuador
tively divided into 24 provinces, the capital Quito (Asamblea Constituyente 2008), nonrenewable
being the main political center. Over the past natural resources, including mines and mineral
8 years, the country’s Gross Domestic Product deposits, are property of the National State
(GDP) increased annually by 4.09% on average, (art. 408), and mining is a “strategic sector” of
up to US$ 70,354 million in 2015 (BCE 2016a). the economy managed and regulated by the State,
Ecuador is poorly industrialized and its economy according to the mining policy defined by the
is highly dependent on raw materials exploitation: President of the Republic (art. 313). Ecuadorian’s
crude oil represented 51% of the total exports in economic objectives are mainly growth-led and
2014 and dropped to 35% in 2015 due to the raw materials exports are fundamental for the
decline in international prices; while a series of stability of the country’s economy, officially
other commodities such as banana, coffee, cocoa, dollarized (to US$) since 2000. The government
shrimp, tuna fish, and flowers together repre- expects mineral exports to be a significant source
sented another 37%. of foreign exchange in a near future.
Ecuador has no modern large-scale metal and
nonmetal mining experiences, to the contrary of
other Andean countries like Peru, Bolivia, or even Need of Minerals and Structure of the
Colombia. (With the notable exception of Sadco Mining Sector

Except for cement and construction materials,


The authors gratefully acknowledge the assistance
rendered by Francisco Venes on the information where a transnational company like Holcim
processing. plays a significant role in the total production,

# Springer-Verlag GmbH Germany 2017 1


G. Tiess et al. (eds.), Encyclopedia of Mineral and Energy Policy,
https://doi.org/10.1007/978-3-642-40871-7_153-1
2 Ecuador: Mineral Policy

metals and nonmetals in Ecuador have so far been (including exports). Most of the internal con-
produced by small national companies and the sumption includes basic chemical substances,
informal sector, employing directly between cables, and copper alloys. On the other hand,
80,000 and 130,000 workers (MRNNR 2012; domestic consumption of copper as product was
MEM 2007). As no large-scale mine is in opera- 91.3 million dollars in 2015, which is 95% of
tion yet, the production of metals and nonmetals the total consumption. Most of the copper prod-
is very low if compared to its direct neighbors in ucts are used to manufacture basic chemical
the Andean region. substances and cables. Table 1 summarizes con-
Nevertheless, the Ecuadorian mining industry sumption figures of copper, gold, and steel
has experimented quite important changes over (INEC 2015).
the recent years. Exports of metals and non- Most of the raw gold exploited in Ecuador is
metals products multiplied eightfold since 2010, exported (95%), while gold ores and concentrates
reaching US$ 698 million at FOB prices in 2015 are internally consumed as raw materials. Steel, as
(BCE 2016b), becoming the sixth export prod- raw material as well as product, is consumed in
uct with the United States as the main destination the domestic market mainly for basic manufac-
(PROECUADOR 2014). Metal concentrates tures (INEC 2015).
highly contributed to these figures. In tonnage, On the other hand, in 2015, Ecuador imported
copper concentrates and lead concentrates are 14,191 t of metals, mainly aluminum and their
the heaviest part of metal exports, representing concentrates (BCE 2016b). From these figures it
98% of metal exports (a total of 1,243 t (In this is estimated that only 0.4% of the available supply
article, a “ton” refers to a metric ton, i.e., of metals (extraction plus imports) was destined
1,000 kg.) in 2015, BCE 2016b). (These figures for export in 2015.
correspond to item 26 of NANDINA classifica- Nonmetal minerals exploited in relevant quan-
tion, include: metal minerals, slag, and ash.) An tities are limestone, pumice, cements, clays, feld-
interesting aspect is that copper and lead exports spar, silica, kaolin, sand (iron) and obviously
are obtained through recycling and smelting of stone, sand and gravel (a total of 11.7 million
nonferrous metals. However, these figures do not tons in 2015), and construction materials (6.6
account for the enormous amount of other mate- million of m3). Imports account for 446,000 t
rials removed or consumed during the whole (mainly cement and gypsum), and exports
process (extraction, metal concentration, and ben- 141,000 t (primarily cement). Most of the non-
eficiation phases). For instance, the Wuppertal metal minerals are for domestic consumption,
Institute (2014) reports the material intensity or only 1% of the internal supply (without construc-
the “ecological rucksack” of 1 t of copper from tion materials) was exported in 2015 (BCE
primary production as 348 t of abiotic materials, 2016b). (These figures correspond to item 25 of
367 t of water, and 1.6 t of air. Gavin (2008) NANDINA classification, include: salt, sulfur,
determines that a ton of copper pollutes between lands and stones, gypsum, lime, and cement.)
30 and 500,000 l of water, thus not able to human In addition to the trade of mineral raw mate-
consumption afterward. rials, Ecuador imports cast iron and steel manu-
Metals and concentrates production has multi- factures (6% of the total imports in 2014) and
plied twofold since 2010, reaching a total of exports gold manufactures (4% of the national
743,000 t in 2015 (ARCOM 2015). The main exports, BCE 2016b). (Manufactures of minerals
components were: 81,000 t of gold and copper corresponds to items 68, 69, 70–79, and 80–83 of
concentrates and 662,000 t of steel (USGS 2014; the NANDINA classification.) Despite the recent
ARCOM 2015). According to the Annual Survey announcement by the government of future con-
on manufacturing and mining (INEC 2015), on struction of metal processing plants, the country
the one hand, domestic consumption of copper as lacks technological and human resources and the
a raw material was 28.7 million dollars in 2015, sector will remain heavily dedicated to the pro-
which is 34% of the total consumption of copper duction of primary goods in the coming years.
Ecuador: Mineral Policy 3

Ecuador: Mineral Policy, Table 1 Metals for domestic consumption in Ecuador, 2015
Raw materials Products
Metals US$ % of total consumption US$ % of total sales
Copper 28.727.951 34% 91.271.487 95%
Basic chemical substances (12%), cables and copper Manufacturing of basic chemical substances
alloys for manufacturing engines (11%) (31%) and cables manufacturing (52%)
Gold 2.414.843 100% 11.418.343 5%
Extraction of gold ores and concentrates (65%), raw Extraction of raw gold (5%)
gold to jewelry making (19%)
Steel 418.376.251 46% 1.160.743.861 96%
Materials for basic manufactures (20%) Steel plates, profiles and bars for basic
manufactures (45%)
Source: INEC (2015)

Finally, state revenues through tax and royal- international metal prices, mainly induced by
ties associated with metal and nonmetal mining China’s two-digit growth), which lasted the
are almost negligible (0.13% of the total State whole decade 2000s. In this context, many junior
budget in 2015, US$ 34,925 million, BCE mining companies invested back in the explora-
2016a). Before 2010, annual mining revenues tion projects left at the end of the 1990s. During
had never been more than US$ 6 million. How- the first 5 years of the 2000s decade, thousands of
ever, due to the payment of anticipated royalties mining concessions (a mining title will be
(explained in a later section) associated with the described in more detail in the next section) for
Mirador project, there has been a substantial, exploration were issued. At the end of the year
although unstable, increment of these revenues 2007, 20% of the national territory was covered
over the past years: US$ 66 million in 2012, by mining concessions for exploration (Acosta
US$ 31.3 in 2013, US$ 60.3 in 2014, and US$ 2009, 98) in rural areas, but also páramos, indig-
34.9 in 2015 (ARCOM 2015). enous territories and even protected areas. The
presence of mining companies in these zones
and the multiple dispossessions processes it
implied (in the sense of Harvey’s accumulation
Mineral Policy Conception of Ecuador
by dispossession, Harvey 2003) triggered social
conflicts in many parts of the country. The gov-
The first neoliberal mining code of Ecuador was
ernment and mining companies responded to the
promulgated in 1991 through the “Law 126,”
social resistance with violent repression, as
attracting numerous majors mining companies to
documented by Álvarez (2009).
invest in exploration campaigns (Sacher and
The rise of the left-wing political leader Rafael
Acosta 2012). Nevertheless, a drop in interna-
Correa to the country’s presidency in 2007 im-
tional mineral prices as well as domestic political
plied a series of transformations in the mining
instability at the end of the 1990s led them to
sector. The first 2 years of his administration
abandon the country.
were times of uncertainty for the transnational
In 2001, a second-generation neoliberal set of
mining sector. In 2008, a “Mining Mandate” was
mining reforms, cancelled mining royalties and
promulgated, that promoted a 6-month-long mor-
implemented new legal instruments to marginal-
atorium on any mining activity, environmental
ize the artisanal mining sector (arguing that most
protection of water and forest resources, extinc-
of the small-scale mining is illegal and harmful to
tion or suspension of numerous mining conces-
the environment). These new reforms almost
sions, as well as the creation of a national mining
coincided with the beginning of the so-called
company (Asamblea Constituyente 2008). Under
global mining supercycle (a marked increase of
4 Ecuador: Mineral Policy

such drastic and threatening measures for their political, and moral level. Using the “Responsible
assets and future investments, many foreign Mining” rhetoric, the government promotes
junior companies simply left the country, leaving national-wide legitimation campaigns. Neverthe-
as only legacy for the Ecuadorian State, part of less, land and water dispossessions, as well as
the geological information raised during their repression to social protest, have strongly in-
exploration campaign. Thus, some basic results creased social resistance against large-scale min-
can be found in the National Development Plan ing in peasants and indigenous communities. In
for the Mining Sector (MM et al. 2016). some cases, local groups have attacked mining
Correa promoted a “New Mining Deal” camps, like in the recent case of Panantza-San
looking for a stronger presence of the State in Carlos in the so-called Cordillera del Condor.
mining operations, regulation of the sector as
well as a higher state share of the income
(according to the Constitution, at least 50% of Regulatory Framework
the profits made on mining resources exploita-
tion). Correa’s administration quickly promul- As owner of mines and deposits (Asamblea
gated a new mining law in January 2009 Constituyente, art. 408), the National State may
(Mining Law 2009). Nevertheless, a series of delegate prospecting, exploration, exploitation,
fundamental features of neoliberal codes were beneficiation, smelting, refining, or even commer-
maintained, despite the appearance of radical cialization of mineral substances to private inves-
change. Transnational mining companies were tors. There are no specific restrictions to foreign in
soon authorized to resume their activities. The comparison to national private investors, except
institutional framework was reorganized with the for the obligation of creating a subsidiary under
aim of converting mining into a key productive the Ecuadorian regime (Mining Law, art. 19). The
activity of the economy. New institutions were Mining Ministry defines the granting, administra-
created such as the ARCOM, in charge of auditing tion, or cessation of mining concession titles.
and regulating the proper functioning of mining The current mining law uses the legal figure of
activities; the National Institute of Geological, the concession, through which mining companies
Mining and Metallurgical Research (INIGEMM); may have access to most of the national territory.
and the state-owned National Mining Company Mining concessions are measured in “mining
(ENAMI), up to now mainly focused on explora- hectares,” which cannot exceed a limit of 5,000
tion activities as it does not possess human, tech- has. (The mining hectare is a measure of volume
nical and financial means to develop large-scale of pyramidal form, whose apex is the center of the
exploitation. earth, its outer limit is the surface of the ground
After a new set of legal reforms introduced in and corresponds to a square of 100 m/side
2013 the government created a Ministry of Mines (Mining Law, art.32). A mining concession is an
in 2015. This Ministry is in charge of imple- official administrative mining title granted to a
menting a government mining policy and defining legal or natural person, which can be transferred
a National Development Plan for the Mining with the approbation of the competent authorities
Sector. In April 2016, after 8 years without (only after 2 years of the concession acquisition,
granting new mining concessions, the Ministry though). It is an exclusive right to explore, exploit,
reopened the national territory to mining explora- benefit, refine, trade, and extract of all mineral
tion. As a result, roughly 2,000,000 ha of new substances in the concession area (Mining Law,
concessions (as represented in the map of Fig. 1) art. 31). Such titles are valid for a period of up to
have been claimed, mostly by foreign mining 25 years, with option of renewal (Mining Law,
companies and the ENAMI. arts. 30, 36). In the case of metal mining, new
From 2009 onward, Correa’s administration concessions are granted by public auction. How-
has strongly and consistently supported mining ever, the Mining Ministry can also directly autho-
activities and foreign companies at the legal, rize new mining concessions, if the State has a
Ecuador: Mineral Policy 5

Ecuador: Mineral Policy, Fig. 1 Exploration mining concessions in Ecuador (Sources: ARCOM (2017), MM et al.
2016)

majority stake in the claimer. Nonme- deposit, include an environmental license from
tallic concessions do not require public auction. the Ministry of Environment and water use per-
Figure 1 shows the territorial distribution of the mission from the National Water Secretary
mining concessions claimed or granted until (SENAGUA). Tax obligations of the concession-
March 2017. ary comprise an annual patent (currently less than
Legal requirements for exploration and exploi- US$ 40 per hectare) and royalties to the State
tation of small, medium, or large-scale mining for exploitation concessions. According to the
projects, defined according to the size of the Mining Law (art. 93) and the Constitution (art.
6 Ecuador: Mineral Policy

408), a minimum of 50% State participation in and rehabilitation costs, as well as compensation
total revenues from mining exploitation is re- payments for damages and/or environmental
quired. For this purpose, the law imposes a pay- guarantees. These payments are anticipated and
ment of a minimum of 5% in royalties on mineral planned in the closure plan approved by the Envi-
sales, in addition to a 25% corporate income tax, a ronment Ministry, when delivering the environ-
12% value added tax, and another 12% profit tax. mental license.
The 2009s mining law prompted a new and con- The sovereignty of the State on subsoil re-
troversial tax of 70% on windfall profits, which is sources is exercised independently of the right of
applied to the positive difference between the sale ownership on the surface lands. The mining law
price established in the contract and the market regulates the relationships between the owners of
price. It was also established that 60% of the minerals rights and the owners of land by means
royalties must end in the hands of local govern- of the easements (servidumbres in Spanish). An
ments for local development projects. easement is defined as a right, created by an
Another specificity of the law is the obligation express or implied agreement, to use and/or enter
for private operators to sign a mining contract onto the real property of another without pos-
with the State before the beginning of the exploi- sessing it, in exchange for a monetary or material
tation stage. There are two mechanisms: a service- compensation. The easement is mandatory for
rendered contract and a mining contract. In the the landowner, who can only negotiate the com-
former case, royalties and the windfall profit tax pensation received. It is a sort of compulsory
are not applied but a 3% tax on the mining sales “leasing,” authorized by the National Mining
have to go to sectional governments. For the con- Regulation Agency (ARCOM in Spanish),
tracts that have been signed up to date (Mirador which allows mining operators to legally dispos-
and Fruta del Norte) the government negotiated sess (in the sense of Harvey, explained before)
that foreign mining companies pay anticipated people from their land. We call this a process of
royalties, that is to say payments in advance a dispossession because the exploitation of the min-
share of the future royalties (a few dozens of eral concession could be incompatible with other
millions). The funds are managed by a new state uses already given to the land, such as the living
entity called Ecuador Estratégico. place of the landowner. Measures applied for the
Regarding consultation processes with local preservation of the environment during the con-
communities affected by mining projects, the cur- cession period has to be foreseen in the environ-
rent mining law (art. 87) recognizes the right to mental management plans, and monitored based
“information, participation and social consulta- on the environmental audits that are carried out
tion.” Nevertheless, even in the case of a majority periodically. The closure activities of the mining
opposition to the project, the decision to develop operations have to include the rehabilitation of
can be adopted by resolution of the government. affected areas, water treatment, revegetation,
(In the mining projects areas, indigenous popula- reforestation, waste management, and a compen-
tion (which along with afro-Ecuadorians represent sation plan for social impacts.
more than 10% of the national population, INEC In protected areas, although the exploitation
2010) and antimining social movements are gen- of nonrenewable resources is forbidden (Mining
erally strongly represented.) In other words, the Law, art. 25), mining exploration and exploitation
law does not give local communities the right to concessions may be granted if considered “rea-
express their positions. Nor does it refer to the sonable” by the Presidency of the Republic, and a
figure of Free Prior and Informed Consent, prior declaration of national interest is issued by
although this is mandatory for Ecuador in the the National Assembly.
case of indigenous people, as the country ratified With these elements, the 2009s mining law
the convention 169 of the ILO. However, some generated resistance from civil society as well as
compensation to the mining effects on communi- from the private sector. The discontent of major
ties can in theory be included in the closing companies like Kinross and Iamgold against the
Ecuador: Mineral Policy 7

new tax regime was so important that they decided Organization (OLAMI). The country is only indi-
to partially or totally sell their assets and leave rectly an adherent of the Initiative of Responsible
the country. As result, in the recent years there Mining Assurance (IRMA), as part of the Latin
has been an increasing presence of Chinese min- American Mining Monitoring Programme
ing capitals, such as the two Chinese state-owned (LAMMP), which follows the principles of
companies Tongling NonFerrous Minerals and IRMA. Ecuador also participates in the network
China Railways Construction Corporation Action for Prevention and conflict management
(CRCC), in charge of the Mirador, Mirador- for the Sustainable Industrial Development of
Norte, and Panantza-San Carlos copper projects. Mining in Ibero-America (GECOMIN). Ecuador
On the other hand, various movements like is neither a member nor a candidate country to
indigenous and urban ecologists have repeat- the EITI.
edly denounced the unconstitutionality of the
law, because the Constitution states that a law
that may affect indigenous people must be sub- Concluding Statement
mitted to a prelegislative consultation to those
potentially affected. Over the past two decades, the Ecuadorian gov-
In June 2013, the government enacted a set of ernments, whatever their political orientation,
modifications to the 2009s mining law in order to have promoted large-scale metallic mining as
introduce some flexibility in the tax regime. In this being essential for the future of the country’s
new regime, the windfall profit tax cannot be economy. From being marginal, three decades
applied until the company has recovered its initial ago, mining is today on the verge of becoming
investment. Also, a new upper threshold of 8% one of the most important economic sectors of
was fixed for royalties in the specific case of gold the country.
and copper. The process of obtaining the environ- In the 1990s and 2000s, as most of Latin
mental license was simplified and a new regime of American countries, Ecuador adopted neoliberal
penalization was established for the “illegal reforms promulgating a new mining code and
mining.” institutional arrangements designed to attract for-
eign investment. As a result, the role of the State in
the regulation of the sector was minimized. The
International Memberships rise of the leftist leader Rafael Correa in 2007
initially generated concerns among transnational
Ecuador is a founding member of the United miners with its promotion of a “return of the
Nations (UN); therefore, the country is affiliated State.” This led to an increase in the State capacity
with many of its specialized agencies, such as to appropriate the mining rent, some institutional
ECLAC, UNCTAD, UNESCO, UNEP, and re-arrangements and the creation of a National
FAO. Regarding strategic sectors of the economy, Mining Company. Nevertheless, Correa has been
the country is a member of OPEC, OLADE. For a strong promoter of large-scale mining activ-
social issues important memberships are WHO ities during its 9 years long administration
and ILO. As mentioned, Ecuador ratified the (2007–2016), and the new mining law conserves
ILO Convention 169 on Indigenous Peoples. For many structural features of the preceding neolib-
the regional interests of the country, other signif- eral codes. As a result, a dozen of large-scale
icant memberships are OEA, CELAC, ALADI, mining projects have reached advanced explora-
UNASUR, ALBA, and CAN. For economic pur- tion stage and one large-scale project, Mirador, is
poses, the country is a member of the IDB, IMF, currently at the development stage. Despite
WB, and WTO. Correa’s “New Mining Deal,” social resistance –
Regarding the mining sector, Ecuador is a sometimes armed – remains ubiquitous in the
member of the Inter-American Mining Society country and has shown capacity to delay or even
(SIM) and the Latin American Mining stop projects.
8 Ecuador: Mineral Policy

At a macroeconomic level, the mining policies INEC, Instituto Nacional de Estadística y Censos
implemented over the past decades increased the (2010) Censo de Población y Vivienda 2010. Available
via DIALOG. http://www.ecuadorencifras.gob.ec/
weight of extractive commodities such as oil and censo-de-poblacion-y-vivienda. Accessed 15 May
minerals in the Ecuadorian economy as a whole. 2017
Although the government expects mineral exports INEC, Instituto Nacional de Estadísticas y Censos
to be a significant source of foreign exchange for (2015) Encuesta de Manufactura y Minería 2015.
Available via DIALOG. http://www.ecuadorencifras.
the country’s economy in the future, this will gob.ec/manufactura-y-mineria/. Accessed 15 May
probably deepen the high dependence on interna- 2017
tional prices, with direct negative consequences Law 126 (Ley 126). Registro Oficial N 695 de 31 de
on the economy in case of a drop, as currently MAYO de 1991
MEM, Ministerio de Energía y Minas (2007) El ABC de la
observed with oil prices. minería en el Ecuador. Ministerio de Energía y Minas,
Quito
Mining Law (Ley de Minería). Registro oficial N 517 de
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