A Central Banker's Perspective: Central Bank of Ecuador's gold acquisition program
The Central Bank of Ecuador (CBE) has strengthened its gold acquisition program over the past three years.
The program has made significant progress towards formalisation and access to finance – with good terms – for small-scale and artisanal miners. This important initiative aims to promote sustainable mining practices, foster economic development, enhance financial inclusion within mining communities, and expand the country's international reserves.
The CBE's gold acquisition program is based on a strong legal framework. Relevant legislation includes the Mining Law (2013) and the approval and reforms of the Monetary and Financial Code (2014 and 2021) as well as regulations passed by the Monetary Board. These legal provisions give the CBE authority to acquire non-monetary gold from small-scale and artisanal miners, either directly or through authorised entities.1 Recent reforms have strengthened the Central Bank’s mandate and operational autonomy, reinforcing its strategic role in Ecuador's small-scale and artisanal mining sector (ASGM).
Underpinning the acquisition program is a structured governance framework in which six relevant CBE divisions play key roles:
The Central Bank of Ecuador has strategically located gold acquisition offices in the capital, Quito, and Machala and with a further office in Zamora – due to open in Q2’25. These offices operate as hubs that facilitate accessibility and gold commercialisation, improve operational workflows, reduce costs for miners and foster formalisation in local mining communities.2
Gold acquisition office locations
Source: Central Bank of Ecuador
The Central Bank’s gold commercialisation program focuses on eight strategic goals:
The gold acquisition program is underpinned by five key elements.
In addition, the Central Bank stipulates that all authorised miners must comply with the following six requirements if they are to participate in its gold acquisition program:
One of the program’s strengths is its due diligence process. This rigorous process not only helps to strengthen participants' operations but also mitigates risks associated with illicit activities, thereby enhancing the credibility of Ecuador’s ASGM sector. Staff from the CBE conduct field visits to identify each authorised supplier’s mining facility and assess production levels, ensuring transparency and accountability. These visits follow the due diligence practices set-out by the London Bullion Market Association (LBMA) and add integrity and credibility to the program.
The CBE’s gold acquisition program takes the following steps when buying non-monetary assets from the ASGM sector:
Since the beginning of the gold acquisition program in 2013, this initiative has allowed the CBE to increase Ecuador’s international reserves by US$534.3m. During this administration, in the past three years, the Central Bank of Ecuador has successfully refined 4.04 tonnes of non-monetary gold, equivalent to US$234.6m. In 2024 the Central Bank estimates it will buy 0.42 tonnes of non-monetary gold for an equivalent of US$31.42m. The opening of new offices in the cities of Machala and Zamora will ensure the continued growth of gold purchases as well as the strengthening of Ecuador’s international reserves and dollarisation regime.
It is important, however, to continue to build on these achievements. The CBE’s recent actions to strengthen its gold acquisition program include the Monetary Board’s approval of a new policy that aims to optimise the management of gold reserves, and ensure greater efficiency and effectiveness in resource allocation. Furthermore, the CBE has signed a cooperation agreement with the Ministry of Energy and Mines, the Ministry of Environment, and BanEcuador, showing its commitment to improving access to finance for miners and implementing best environmental practices within its gold acquisition program. The Bank’s monetary gold has facilitated access to liquidity of US$1.1bn via international organisations such as the Bank for International Settlements and the Latin American Reserve Fund.
Additionally, it is important to highlight the CBE has been an active member of the ASGM Study Group, led by the World Gold Council and comprised by several Central Banks around the world, that manage gold acquisition programmes as part of their functions. This Study Group has supported and guided its participants to take strategic actions that will improve our programmes and efforts in the ASGM sector. This initiative has also facilitated to exchange valuable experiences with other members and share commitments aiming to strengthen our programmes’ institutional framework.
As a result of this joint effort, the members of the ASGM study group signed the London Principles in June 2024, which is a document that establishes the guiding features for our Domestic Purchase Programmes (DPPs). These principles aim to support all efforts for miners’ formalization, implement Environmental, Social and Governance (ESG) standards and improve the livelihoods of responsible ASGM sector. The London Principles seek to promote the following twelve aspects in our DPPs:
As previously mentioned, the CBE’s gold acquisition program complies with all the Principles, this reflects our tireless work over the past three years to become a reference for similar central bank programs. Being part of this milestone reflects the commitment of the CBE to a more institutionalized approach and the well-being of mining communities.
Our DPP was recognised as Initiative of the Year at the 2023 Central Banking Awards, which noted the program’s efforts to formalise the small-scale gold mining industry, and to promote responsible mining by implementing good environmental practices and rigorous due diligence to prevent illicit activities. Furthermore, the CBE currently holds the chairmanship for the 2024-2025 ASGM Study Group, which deepen our international commitment on best practices for gold acquisition programmes managed by central banks.
Even though ASGM programs are seldom an explicit part of a central bank’s mandate, the CBE believes that its gold acquisition program stands as an example to other monetary authorities, demonstrating a positive impact on the well-being of gold mining communities and the strengthening of our country’s monetary system.
Footnotes
1Non-monetary gold is gold that the monetary authority holds that does not meet the criteria of monetary gold or which the monetary authority has chosen not to classify as monetary gold. Monetary gold is gold held by a monetary authority and is designated as an element of its foreign exchange reserves. Monetary gold includes allocated gold bullion and unallocated gold accounts with non-residents that give title to claim the delivery of gold. Gold bullion can take the form of coins, ingots or bars with a purity of at least 995 parts per 1000, Monetary gold must meet the 3 criteria of holder, function and purity
2The CBE is building a gold acquisition office in the city Zamora, and renewing the one located in Machala. Machala station is scheduled to begin operations during the second quarter of 2025, while Zamora station will begin operations during the third quarter of 2025. Machala’s current office is still in operations, but it will be replaced by a modern and high-end installments, guaranteeing operations to small-scale and artisanal miners.
Source: https://www.gold.org/