Illegal Mining Swells in the Shadow of a Commodity Boom
The Policy Shift the IMF Urged on Peru

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With international copper and gold prices holding at elevated levels, Peru's economy grew 3.4% in 2025, outperforming the regional average. Yet an analysis published by the International Monetary Fund (IMF) on July 27, 2026 documents in detail how illegal mining has expanded rapidly behind this boom, warning that without a policy shift, the good times will not last. Since our earlier report covering the situation in March, the problem has grown further in scale.

What Happened

Peru is the world's third-largest copper producer and one of the world's leading gold producers. Minerals account for a large share of its exports, and soaring prices have improved both government revenue and the trade balance. Judging by fiscal indicators alone, Peru's economy looks stable.

Copper output itself, however, has been essentially flat for the past two years. The pipeline of new large-scale projects is thin, and Peru has slipped from second place in the world production rankings after being overtaken by the Democratic Republic of the Congo. Behind investors' reluctance to commit to new projects lie the risk of conflict with local communities and institutional uncertainty.

Illegal mining is filling that void. According to the IMF's estimates, the economic output generated by illegal mining reached roughly $12 billion in 2025, about three times its 2023 level. That single sector accounts for about two-thirds of the country's entire illegal economy.

Organized Crime Moves into the Mining Camps

The initial trigger was the surge in gold prices. Gold has continued to trade near historic highs into 2026, and the shift in break-even economics has made illegal mining in remote areas financially viable. According to reporting by the Associated Press, illegal gold mining has spread from the Madre de Dios region into Loreto, Ucayali, Huánuco, Pasco, and areas near the Ecuadorian border. The government has stepped up enforcement, and in recent operations mining equipment worth 60 million soles (about $16 million) was seized and destroyed.

A key point in the IMF's analysis is that illegal mining is also harming the formal sector. High profit margins have hollowed out the nominal legalization process, and operators who keep mining illegally under the guise of "formalization" show no sign of disappearing. If trust in institutions erodes, legitimate foreign direct investment will retreat even further. Smuggling of mercury used in gold refining has also been uncovered, compounding the environmental risk of river pollution across the Amazon basin.

The Conditions for Sustaining the Boom

The IMF stresses that a coordinated policy response is urgently needed: clearer criteria for legalization reviews, stronger coordination among investigative agencies in fighting organized crime, and effective enforcement of the environmental and social standards attached to mining permits. It adds that mineral revenues should be channeled into investment in growth industries, education, and infrastructure, so as to change the very structure of resource dependence.

The Author's View

What makes this report worth reading is that it frames the expansion of illegal mining and the stagnation of the formal sector as two sides of the same phenomenon. The higher prices climb, the more lucrative illegal mining becomes; deteriorating security and institutions drive away formal investment, and output stops growing — a cycle in which high prices themselves spoil the fruits they were supposed to deliver. Resource-rich countries have lived through this "paradox of plenty" throughout history, but today's Peru — with transnational organized-crime networks added to the mix — is its modern incarnation.

There are three indicators to watch going forward: whether reform of REINFO, the provisional registry for informal miners, moves ahead; whether new investment decisions on large copper mines materialize; and whether enforcement tightens along the distribution channels for illegal gold — the refining and export chokepoints. Unless these three things move, the structure will not change, however good the headline numbers look.

Glossary

Minería ilegal (illegal mining) refers to any mining that fails to meet permitting and environmental standards, and is distinguished from minería informal (informal mining), which is in the process of regularization. REINFO (Registro Integral de Formalización Minera) is a provisional registry for small-scale miners, and its hollowing-out has long been criticized.

The higher prices climb, the more illegal mining grows and the further formal investment retreats — that is Peru's ironic cycle today.

※ This article is the author’s commentary based on public information. Please confirm the latest figures, dates and procedures with governments and primary sources. Quotations are kept minimal and sources are cited.