Large-Scale Mining, A New Industry for Ecuador

Abstract

This article provides a brief historical overview of mining in Ecuador and explores the importance of mining in the context of the Ecuadorian economy in terms of production, exports and economic linkages, and other countries in the region. The mining potential is also explored based on confirmed reserves, and the legal framework that regulates the industry is discussed. We conclude that the mining sector in Ecuador has been dynamically growing at a real rate of growth that outpaces that of the industries of oil and natural gas extraction and its supporting activities, as well as that of the economy. The dynamic growth of the mining sector is also observed when comparing the exports of Ecuadorian products. In effect, gold has become the number four product of Ecuadorian exports in 2012, following bananas, shrimp, cocoa and its elaborates, and outperforming the exports of tuna and fish and coffee and its elaborates. We also calculated that the confirmed mining reserves in the explored soil, of about 10% of the country, amount to 114.2% of the GDP of year 2015 (calculated at the average price of minerals observed in 2015). We conclude that, although Ecuador has a regulatory framework consistent with environmental and wealth sustainability, the management of mining resources must be prudent, transparent and the government must account for the destination of those resources to prevent its wealth erosion.