Peru is a third world country according to Alan García

Back in April this year, when the illegal mining that's destroying the Peruvian Amazon jungle managed to keep the world's attention for more than 15 minutes, President Twobreakfasts said that (we quote) "....the illegal activity (of Madre De Dios gold mining) makes us look like a backwards, third world country and leaves open the possibility to be condemned internationally for allowing this chaotic activity to take place." He also explained how..."his government would stop the existence of the informal mining that was poisoning rivers, destroying the environment and making slaves of the youths that were dragged into the sector by the large operators."

Since then, Madre de Dios gold production has gone straight back to where it was before the headlines got made.

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Not only that, but Peru's gold mining industry, seeing production drops in its formal mines like Alto Chicama relies even more heavily on this scandalous export to maintain its economy. Madre de Dios gold now accounts for nearly 11.5% of all gold produced in the country.

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Third world is as third world does, Mr. President, and another thing that Peru has in common with the other third world countries is the bullshit demagogue liar and shyster it has as Head of State. But who gives a damn when we can all shout ¡VIVA INVESTMENT GRADE! as one voice?

If you didn't know ECU Silver (ECU.to) was a total insider-feeding scam previously......

....then today's evidence makes it clear to anyone with a working IQ level. This morning, ECU silver (ECU.to) announced its inevitable private placement, with the intention of raising $10.8m by placing 13.9m units made up of a share at 72c and a half warrant at 90c (that adds to the mountainous warrant overhang already at that price).

Ok, fair enough, we knew that it was going to happen. But the brass neck of these people is astounding once you keep reading this morning's PR: Here's an extract:

ECU Silver Mining Inc. (TSX:ECU) ("ECU") announces its intention to issue 13,900,000 special warrants ("Special Warrants") by way of private placement at an issue price of $0.72 per Special Warrant for aggregate proceeds of $10,008,000. A number of large shareholders of ECU plus certain institutional investors have agreed to subscribe for all the Special Warrants.

Stephen Altmann, President of ECU, stated that "This financing is fully subscribed, in large part with existing key shareholders, which is testament to the confidence of our loyal shareholders in ECU's focus to grow the company.

Errr, no, Altmann...it's testament that the company is a scam and rapes retailers for all they're worth. What this scumball is saying to the world is that "a whole heap of shareholders had inside knowledge that we were going to run a placement at 72c, so we gave them ample time to unload their shares on you poor innocent saps and then reload the same positions (with an extra half warrant) at a much lower price." Here's the last 10 days of action in the stock...

...and we can see how the stock has been sold down and down to the PP level by those who knew what price ECU was going to raise cash at. Not only that, but if we look back at the most recent pump move to the upper 80s to 90c range, between November 9th and November 18th (the top of the price range) there were 10.6m shares traded.

I WONDER WHO HAD THE FORESIGHT TO SELL THEIR STOCK AT 18C ABOVE THE LATEST PLACEMENT PRICE, WISTAR?

If the OSC doesn't act on this blatant illegal frontrunning scam it will be condemned forever.

Peru: Gold miners in Madre de Dios

The front page, above fold, of El Comercio today
(click to enlarge)

An excellent piece of journalism in Peru's El Comercio today (a reminder of the newspaper that it used to be) bylined Nelly Luna, showing the ecological disaster area created in the Amazon jungle of Peru by informal gold mining. The Madre de Dios Region is home to an estimated 30,000 miners, nearly all of whom produce gold illegally and with no regard whatsoever to environmental regulations.

Main feature page of the El Comercio page today,
complete with photos of the disaster zone
(click to enlarge)

Here follows my translation of the full report, entitled "Brutal Deforestation of Madre De Dios", and watch out right at the end for a revealing interview with the Mining Ministry Flunkey, who knows what is happening, knows it's illegal and knows that around 50 metric tonnes of mercury legally imported into Peru ends up being illegally sold in the disaster area but doesn't want to do a thing to stop it. His arguments are laughable and clearly just wants to protect the status quo, not giving a damn about the enormous damage that current policies are causing. Viva investment grade.

Who will halt this criminal attack against nature?

Brutal Deforestation of Madre de Dios

Forests are converted into deserts due to the advance of informal mining that illegally extracts gold. Regular buying and selling of mercury is demanded by locals, who use it for the extraction of the precious metal.

An overflight of the jungle between Madre de Dios and Puno offers a panoramic portrait of the devastation; thousands of tonnes of earth removed and forests disappeared or buried beneath the tailings left by years of intense and illegal exploitation of gold in the Amazon. It is possible to make out improvised mining camps, heavy machinery turning over the red soil, flows of rivers cut off and enormous pools of water that hold an un-noticed poison that keeps on accumulating: mercury.

This element is as necessary in the exploitation of gold as kerosene is in the production of cocaine. Because of this, mining engineers and environmentalists argue that if the sale of mercury is regulated, in the same way as chemical supplies are to combat narcotrafficking, a large part of the problem of illegal mining and the destruction of the forests. But this doesn't happen; mercury is sold without any sort of control among the population that is found around the mining zones of Puno and Madre de Dios.

Supply and Demand
According to Customs information, in just the last four years the importation of mercury has nearly doubled, from 75,000kg imported in 2006 to 132,000kg last year. And so far this year, only up to September, there have been legal imports of 131,876kg of mercury. The Ministry of Energy and Mines (MEM) says that all these imports are basically used in artisanal mining, where levels of informality (no mining or land titles held or environmental impact studies approved) reach 90%.

For every gram of gold produced, two or three times as much mercury is needed. A recent study by Cáritas estimated that more than 50 tonnes of mercury is used in the Madre de Dios region per year- Despite the large scale of the mining exploitation, tax evasion due to the informality of the industry is enormous; this region receives only S/15,000 (U$5,200) in mining royalties from the state.

Up to March 2009, the Institute of Geology, Mining and Metallurgy (Ingemmet) and the MEM had authorized 1,592 mining concessions in Madre de Dios and only 19 have approved environmental impact studies, with another 1,089 in process. There are also 87 mining concessions that overlap the Peru State Nature Reserve of Tambopata. According the the MEM, the control of current illegal mining is the responsibility of the regional governments.

"The mining concessions have been authorized without taking into account other existing rights such as agricultural properties, forestry concessions, conservation concessions and protected areas" according to the diagnosis of the Ministry of the Environment. With this disorder of concessions and a lack of controls, mercury is feeding into waters, lands and even in fishes. In improvised stores located around the mining zones such as Huepetuhe or Inambari, where the taxman never appears, one kilo of mercury sells for between S/150 and S/180 (U$52 to U$63) in jars with the ticket names American Mercury or El Español.

No Clear Rules
National rules establish that all companies that use mercury must have mechanisms that allow for the recapture and re-use of mercury, but nothing more. There is no rule that regulates the adequate final disposal or the metal. Experts say that the ideal situation would be to take it to safe depositories overseas (Peru does not have any). Without clear rules, each year more and more tonnages of this dangerous element arrives to stay (or evaporate) in some part of the country.

It is worth mentioning that 83% of mercury imported by Peruvian companies comes from the United States or Spain. Mercantil SA, Triveño Mercury Corporation, JH Minerals, Aldo Orlando Torres Rojas and M&M Trading S.R.L. are the main importers. The quantities that arrive are mainly destined for the mining industry, with lesser percentages for the production of chlorine and dental curation work.

But mercury is not the only element used in illegal mining in the Puno and Madre de Dios regions. Every day, front load diggers arrive that cost half a million dollars apiece along with lorries, trucks, excavators and drags. The economic investment is very large, nothing to do with small mining. The Ministry of the Environment estimates that 50 truckloads of fuel arrives to the zone every day, 175,000 gallons of diesel and gas is used and approximately 1,500 litres of oil is spilled by the machinery and boats. Who will put a stop to this situation?

Interview with Víctor Vargas Vargas, Director General of Mining, MEM
"Prohibiting sales could generate contraband"

"If the commercialization of mercury is regulated, wouldn't it reduce illegal mining?

Mercury is freely traded. There are formal companies that import and sell it in a legal manner. If it were prohibited, it may generate contraband in this material.

Imports have nearly doubled in the last four years.

This is connected with the rise in price of gold, which causes a greater demand for mercury in the marketplace. What's more, 98% of informal mining activity in the country is dedicated to gold mining and the basic ingredient is mercury. What we would like is that the technical requirements of the recovery of this element are complied with.

Therefore, mercury that arrives legally to the country finishes as being sold to illegal mining.

Indeed. Anybody can buy mercury, just like they can buy gold. There are no restrictions. What is needed is to formalize these people and teach them to correctly handle this resource. Large mining companies do not use mercury, but cyanide. Mercury is only used in artisanal mining. However, there are mines that during the exploitation process obtain mercury as a byproduct, for example in Yanacocha, that is then exported.

Is there a regulation, as there is for cyanide, that locates the final destination that the mercury must have?

There is no rule about its control, but there is perhaps thought of creating one, without aggravating the already existing problems. Blocking its comemrcialization would stimulate a black market and a rise in the price of this material.

Peru's ALBA houses are illegal

The Alba house in Puno during one of its well-supported adult literacy classes

In a decision that will shock absolutely nobody, the Peruvian governmental commission set up to investigate the so called Casas de Alba funded by Venezuela (mainly) on its soil has concluded and decided that the organization is interfering in Peru's political affairs. The commission has therefore recommended that all 31 Alba houses found in Peru (mainly in the very poor high plains and jungle regions) should be closed down. This decision was for Peruvian politikwatchers along the lines of predicting whether bears relieve themselves in areas of dense forestry.

President Twobreakfasts plans to replace the community buildings and drop-in social centres with flocks of communal sheep along with a fraternal message to "get back to what you were doing before, peasants". The subsidized and free lunches given to the poor will be substituted by a cheese sandwich. Adult literacy classes will be replaced by a Nintendo Wii.

UPDATE PM: El Universo in English has a short report on the story.

Colombia: Another day, another gov't human rights abuse: But this one is big.

The Colombian weekly magazine 'Semana' has today broken another big story. Those Spanish speakers amongst you should stop reading this, go here immediately and read the report, but as a quick resumé of Semana's scoop:

• Colombia's official snoops, the "Departamento Administrativo de Seguridad" (Administrative Department of Security) normally known as DAS has been eavesdropping on anyone and everyone regarded as a 'threat'.

• The list includes opposition leaders, journalists critical of the government, members of the judiciary that have been heading cases against government officials, government functionaries and civil servants.

• Just before a new head of DAS took up his post on January 22nd, mountains of documents were secretly destroyed by DAS. An anonymous whistleblower who works as a detective at DAS (obviously anonymous, as if his identity were revealed he could probably count his life expectancy in minutes) told Semana (via Ottotrans™):

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"We received the order to collect everything we had in several offices in the building and in external centres and take it to the Counterintelligence. For two days we collected portable hard drives, we changed computer hard drives, collected CD-ROMs, voice archives and confidential documents. I alone, not counting my colleagues, took two boxes full of these things.

"Of all the boxes that were taken to Counterintelligence, with documents, recordings and such, only one survived, which was taken out of the 11th floor on Wednesday afternoon. I don't know what was left in it or where it was taken. I just know that everything else was destroyed."

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• But possibly the most damning and chilling aspect of the Semana report is the allegation, backed up by its anonymous sources, that DAS ran a network of information sales and would sell official intelligence to narcotraffickers, paramilitaries and guerrilla groups such as the FARC. In a country with an appalling record of extrajudicial killings, union leader asassinations and attacks on judicial bodies, this is an astonishing revelation (though it has to be said, hardly a surprise for those who have followed the rise and rise of Alvaro Uribe and his pseudo-democratic government).
  

Let's see how much of a fuss is made of this story amongst English language media sources. Colour me cynical, but don't hold your breath up there.......



UPDATE: Good English language site Colombia Reports has its take on the story here.

Corrupt Peruvian police caught red-handed

Illegal logging in South America is a trade that catches plenty of attention in ecology and environmental protection circles. Much of the deserved flak is aimed at Brazil but on a per hectare basis, people such as the WWF recognize that Peru is an even bigger problem.

The Peruvian government, via its well-meaning Environment Minister Antonio Brack Egg (just the greatest name ever) has at least recognized that it has a problem on its hands. For example last year they voted a new law that raised the penalty for illegal logging from almost nothing to a mediocre deterrent. However, there's not much point in getting all legal on the gangs of illegals when the police force themselves are party to this lucrative, corrupt and extremely enviro-damaging business.

Yesterday, a plane was stopped at Pucallpa airport (East Peru jungle city) on its way to Lima. The local customs officials had previously got an anonymous tip-off that the plane was carrying contraband from the jungle, and thus it proved: the plane was carrying 9,000 m3 of virgin mahogany, lumber that is totally banned from logging, no doubts, no flim-flam, no second-guessing. But the cutest thing about it all was the plane is a Peru National Police Force (PNP) Aircraft, with PNP pilots, livery and the whole caboodle. Here's a photo of the plane itself on the tarmac at Pucallpa yesterday afternoon.

Hey boss! It's da plane!

A guy in Lima named 'Erick Arroyo' is the client for said lumber, owner of a company called Mi Sueño' (My Dream). We know the names of the aircraft crew, too (Rafael Fernando Ríos Zavala, José Bardales Rengifo, Oscar Bazalar Román, all police officers). The Commander and the General that command these officers are also now under investigation. It remains to be seen whether Peru will actually bother to prosecute its own corrupt functionaries for once, colour me sceptical and all that. As for the jungle and trees, with the law-enforcers up to their necks in this crime is it any wonder that nobody is ever punished in Peru for this environmental rape?

Atahualpa Strikes Again

Harper's government toppled by a guinea pig?

Never underestimate the power of a dead Inca. Atahualpa's Revenge is Peru's world-reknowned stomach upsetter named after the last Inca king (for want of a better phrase) who was betrayed and killed by Pizarro and the first conquistadores. And it looks like it might have claimed another victim.

Canada's PM Stephen Harper came back from the Peru APEC summit last week "feeling unwell", and the lack of presence due to the iffy food served in Lima may well have been the catalyst to set off the current leadership turmoil and coalition attacks on his government. Here's Canada's National Post with the goods:

While the opposition leaders and the Liberal leadership candidates were plotting, Mr. Harper was in shock. Still sick from a trip to the APEC conference in Peru, the previous weekend, his recovery was hardly aided by the realization that his fate no longer lay in his own hands. The opposition parties had a combined vote of 163 MPs, 20 more than his own party.

At the time of the APEC summit, this humble blog mentioned there were over 100 cases of bad stomachs due to the crap food served to guests and dignitaries (they blamed it on the weather...seriously). Once the conference was done 225 cases in total had been registered, but none as important than Harper's, I'd venture. Coup d'etat in Canada? Blame it on the cuy, ceviche, seco de cordero, bife de alpaca and chuños, people.

Bina; you owe Peru bigtime.

Ecuador debt: "honestly...we're not kidding you know..."

Now is it just me.............?

Today Ecuador's FinMin Viteri held a presser to tell the world (translation Otto):

"If we have to reach default, we will do it responsibly. The national government does not recognize the illegal and illegitimate debt at all. Ladies and gentlemen, we are not playing; we are very serious and conclusive when saying "The national government rejects the illegal and therefore illegitimate debt."

Spooky huh? WHoooooOOOOoooooOOOOOoooooOOOOOO. Just the kind of thing Andres Oppenheimer can report on tomorrow while trying to forget what an idiot he's made of himself recently. Here's the Reuters version in English too...spookier and spookier... whooOOOoooOOOooo

So interesting that Brazil's main international advisor to President Lula, Marco Aurelio Garcia also said today, "Ecuador is going to pay its bill...we (Brazil) have the means with which to convince (them)."

Also interesting the way the Veep of the debt commission last week admitted that Ecuador will have to pay for the time being. There's no other way to take the complaint forward and maintain the "responsible" position. Right now Ecuador has two firms of US lawyers working on the same thing...betcha a dollar they advise Studmuffin&Co to keep paying the coupons while making an international case of it all. Nah...betcha ten dollars, in fact. Any takers?

Also interesting is the little snippet that Stephan Kueffner of bloomie picked up on. It's buried under the dramatic headline, but Bloomie does manage to mention that Ecuador quietly and without much fuss paid a U$1.2m coupon on one of its Brady bonds this week. The reason why it paid? To stay legal and responsible.

But most interesting is the action where it really counts, namely the bonds market. The key 2012 Globals sank to 21c on the dollar when the whole shebang first started. This time last week they were trading at 25.5c and 26c on the dollar. Today the same bonds closed the day at 31.5c on the dollar having touched 32c after (not before) Viteri spoke. That's a 50% climb since the drama began, and 20+% in the last couple of days. Money talks and BS walks, dudes and dudettes.

Speaking of BS, the whole thing comes to its inevitable climax on Saturday December 13th. That's the day Studmuffin has chosen to reveal to the world whether Ecuador is going to pay the delayed coupon, the announcement coming as part of the Studtastic* Roadshow to be transmitted on Radio MUFN. The guy must be after the ratings...hey, I wonder how much a 10 second slot to advertise this blog would set me back?
Finally, a word for those of you who've taken this blog's advice on Ecuador debt throughout this soap opera: So far you're making good coin but think about the retreat position that the idiots who called end-of-the-world over Ecuador's bonds will take. When Ecuador pays the coupon on Monday 15th, you can bet your sweet bippy you'll hear resounding cries of, "Well, they paid this time, but the issue isn't going away and the next round of coupons is steeper and you'll see you'll see I'm right y'know even though i'm wrong...." blah blah yada yadaaaaa ad infinitum.

The point here is that selling the news is a likely scenario as the pea-brained shills will still be preaching a sermon to people who want them to be right, thus maybe profit-taking on half your position on Friday 12th December is the prudent course. Biz iz biz.

*copyright DJ, used with kind permission