Colombia's emerald-street traders work a $1 million-a-day gold mine

March 20, 1995|By Bloomberg Business News

BOGOTA, Colombia -- They gather every day on Bogota's main street in the shadows of the Central Bank: 2,000 men in leather jackets swapping some of the most precious stones in the world.

They're emerald dealers, hawking up to $1 million a day in stones that, gram for gram, fetch more than twice as much as diamonds and up to 50 times as much as cocaine. Most of what's traded here will be smuggled out of the country.

"Sure it's contraband," said Carlos Calderon, a 10-year veteran of the emerald-street trade, as he gingerly pulls three brilliant green stones from a tiny white envelope.

"This is a free market. We don't charge taxes and we don't pay taxes. It's the way we do business."

The open-street trade in emeralds is merely the most obvious manifestation of an industry that shares with Colombia's cocaine trade a reputation for nefarious characters, outlandish wealth, and violence.

Belatedly, the Colombian government is trying to clean up the $1 billion industry, which some analysts reckon is the nation's fourth biggest after cocaine, coffee and oil. The centerpiece of that effort is an old idea -- the creation of the world's first emeralds exchange in Bogota to organize and legitimize the business. In so doing, it hopes to attract what the industry has never had: foreign investors.

"We have to make the industry more transparent," said Silvio Mejia Duque, Colombia's vice-minister of mines. "This will attract investors and more buyers too."

Mr. Mejia is the first to admit it won't be easy controlling what has been a lawless industry dating back to the days of the Spanish conquest in the 1500s.

In more recent times, bloody feuds raged in the western emerald zone as mining kingpins fought for turf. In frustration, the government abandoned its monopoly over the mines in the late 1960s, leaving the region to the emerald kings and their Uzi-carrying henchmen. In the so-called "green wars" that lasted until about 1990, an estimated 4,000 people were killed as forces loyal to Hector Carranza battled armed followers of Jose Gonzalo Rodriguez Gacha, who had close ties to the Medellin cocaine cartel.

With the death of Gacha in 1990, relative calm has returned to nTC the main emerald zone, a hot, sticky and largely inaccessible region about 220 kilometers northwest of Bogota.

Mr. Mejia points to a surge in legitimate emerald exports as proof the industry is now better controlled. Shipments reached a record $434 million in 1994, up from just $150 million in 1991. Yet some industry observers say the real production figure is about $1 billion a year, meaning 55 percent of the emeralds mined each year are smuggled out of the country en route to jewelers in New York, Tokyo, and London.

Colombia produces 60 percent of the world's emeralds and almost all those of gem quality.

"A part of emerald production has clearly established its own commercialization routes," Mr. Mejia said. "So it's hard to say what the real [export] figure is."

Smuggling emeralds, after all, isn't a terribly challenging proposition. They're easy to stuff in a pocket, and no one has yet trained police dogs to sniff them out. With some finer specimens fetching $10,000 to $50,000 each, a smuggler can carry a fortune in stones without much trouble.

And with so many emeralds whisked from the mines to dealers without being registered, the municipal and federal governments are losing out on the mining royalties, currently 1.5 percent of the stones' value, Mr. Mejia said.

Mr. Mejia said the solution is an emerald exchange, similar to the precious stones exchanges in Johannesburg and Tel Aviv. The government would benefit from increased regulation because sellers would have to show that royalties were paid on the stones.

"The idea is to regulate the market through an exchange, where the stones would be bought sold and all would be legal," said Juan Manuel Pelaez, president of Gran Colombia Resources, a Colombian mining company owned by Canadian mining company Bolivar Goldfields Ltd. of Vancouver.

With or without the exchange, Mr. Mejia is counting on foreign investors to finally discover the potential of Colombia's emerald business.

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