Lula government wants to overturn ‘presumption of good faith’ for gold buyers, says agency – 02/16/2023 – Market

The federal government is preparing new legislation to overturn a legal provision that established, in 2013, the “presumption of good faith” of gold buyers and institute an electronic invoice to try to control illegal gold mining and laundering in the country, they said. told Reuters sources accompanying the negotiations.

An initial draft of the text being prepared by the government, which Reuters had access to, institutes the electronic document with various data on the buyer and seller and, mainly, data that give precision to the metal mining site.

The requirements must include the mining area, place of origin of the gold, the number of the administrative process in the mineral resources management agency, the number of the authorization for extraction, the number of the environmental license and the respective issuing agency, as well as the mass of gold object of the transaction.

The text also provides that the gold can only be transported with the electronic invoice and a transport document. The metal will also have to be sold to an institution legally authorized to make the purchase within the extraction region, to make it difficult for distant companies to use it in attempts to launder the origin.

According to one of the sources, the text to be proposed is not yet defined and there is more than one version being analyzed. “The direction under analysis is the one in the text, but there are several possibilities”, he said. “There’s nothing set yet.”

The intention is to make it difficult to launder illegally obtained gold. The current legislation, with the inclusion of the “presumption of good faith” of gold buyers, was approved in a 2013 legislation, in an excerpt grafted to a provisional measure that did not deal with the subject, but with agriculture, a legislative maneuver known how to insert a “jabuti”. The measure was sanctioned by then-president Dilma Rousseff.

The current text provides that gold buyers can take the seller’s word about the legal origin of the metal and cannot be held responsible in the event that the gold is discovered after the sale came from illegal mining.

As it stands, the law facilitated smuggling and opened up space for the laundering of illegal gold in the country, which collaborates with the increase in clandestine mining, such as the one that harasses the Yanomami indigenous land, in the north of the country.

“There is this technical study, in addition to a lawsuit in the STF (Federal Supreme Court) on the same topic”, said the source.

However, the government does not intend to wait for the result of the action in the STF to act. According to a second source, the Civil House is still studying the best legal means of overturning the legislation and putting another mechanism in place. So far, the most likely is that the change will be made through an MP, which has to be approved by Congress.

“The intention is to put an end to this, this bona fide statement will fall through soon,” he said.

Even if the Supreme Court overturns the “presumption of good faith”, a new law is needed to regularize the status of accountability for provenance. The legislation was questioned by political parties in the STF and the process is in its final phase.

During the process, triggered by the case’s rapporteur, Minister Gilmar Mendes, the Central Bank revealed that it is studying, with other government bodies, a model to increase the inspection of commercial transactions with gold in the country.

In the legal opinion, the BC said that a series of “collaborations between public bodies and entities is under way to find technological solutions that make transactions with newly mined gold more transparent and auditable.”

Among the measures informed by BC is the forecast of the electronic invoice.

At the Supreme Court, the intention is for the instruction of the two processes involving the issue to be ready by the end of February, according to a source directly involved in the case. If that happens, the actions can be judged as early as March if they are appreciated in the virtual plenary, in which the rapporteur can take them directly for consideration, or when the President of the STF, Rosa Weber, decides in the face-to-face plenary, if that is the case. way to be adopted.

If voted soon, the decision —which should overturn the law— would make the government’s path easier. But, according to one of the sources interviewed by Reuters, the government is already preparing to overturn the legislation regardless of the Supreme Court’s decision.

So far, according to the source linked to the Supreme Court, no indication has reached the court that the government could enact a provisional measure or other legal instrument to end the practice that facilitates the sale of gold of illegal origin. If the government takes a decision before the Supreme Court judgment, the processes will lose effect.

A study carried out between 2019 and 2020 by researchers from UFMG (Federal University of Minas Gerais) and the Federal Public Ministry showed that at least 30% of the gold exported by Brazil in those years would have an illegal origin.

The survey shows that the declarations of origin of the metal pointed to extraction either in places where there was no mining, or in areas close to indigenous lands or conservation units where the exploration area would not have the potential to remove that amount of metal.

According to an estimate by Ibram, an association that represents multinational and local mining companies, half of the gold production in Brazil comes from an illegal source. The group also calls for the extinction of the “presumption of good faith” rule.

Only data on annual production and export of gold from Brazil already show that the country has been selling several tons of illegal ore. In 2020, for example, according to federal foreign trade data, Brazil exported 111 tons of gold. However, the country officially registered the production of only 92 tons of gold, according to ANM figures.