COLUMN ONE : Peru Gold Rush Fails to Pan Out : Amazon Basin’s harsh realities conspire to foil government dreams of an economic miracle.

On the banks of the Madre de Dios River, men dream of the mother lode but scratch for a few grams of shiny dust. Golden butterflies shimmer in the air, but tarantulas as big as a fist lurk for the unlucky.

Whether they stay only for a 90-day contract or linger for years, Peru’s jungle gold miners soon abandon hopes of big strikes and happy endings. Life is as brutish as the midday sun in the upper reaches of the Amazon Basin.

For the government of Peru, too, the Amazon frontier has lost much of its sheen as the font of solutions to the nation’s chronic miseries. A tangle of realities has conspired to make the jungle’s riches as elusive as its imagined El Dorado.

Nowhere is Peru’s inability to plan and control its destiny as apparent as in this ramshackle riverside smuggler’s haven, carved out of the jungle hillside in the province whose name means Mother of God.

“There is a lot of gold fever, and not much else,” said clerk Lourdes Medrano in Laberinto’s town hall, a bare-plank, two-room office on wooden stilts.

Founded in 1969, Laberinto has grown to 600 families and serves as base for perhaps 2,000 registered miners who work the sandy banks of the broad, muddy river as it winds down from the Andes and on to Bolivia and Brazil. There are streetlights fed by occasional electricity, but no phones or even radio or television signals.

The town’s two rutted streets are cluttered with cafes and shops in brightly painted clapboard sheds. The Texas Cafe and Laramy’s are popular places to sit on a wood bench and sip a beer. Every kiosk, every street vendor, appears to be in the gold business.

By law, the government is supposed to be the final purchaser of all gold mined in Peru. In reality, even the managers of the government Miner’s Bank admit that they obtain only 10% to 20% of the gold found in these parts.

The vast majority is contraband, sold illegally to buyers from across the borders or from Lima, the capital. Nearly all the considerable mineral riches from Peru’s Amazon, which makes up 60% of the nation’s land area, are vanishing.

“It’s nearly 100% flight; nobody sells to the government,” said Sixto Yamoca, the exasperated part-time mayor and full-time schoolteacher. Exploitation, he adds, is rife.

“The miners don’t pay their workers well, they employ children, they don’t feed them sufficiently,” Yamoca said. “Sometimes they treat them very badly and don’t even pay them at the end of their 90-day terms. They say that the worker broke something; they seek any pretext.”

On weekends, the miners bring the town a modicum of prosperity when they come to town to buy supplies, drink and sell their packets of gold dust at a makeshift market at the river’s edge, a virtual gold fair.

Yamoca, 31, said that after five years in Laberinto, he is thinking of returning to his hometown in the Andes.

“Most of these people want to earn their money and run; they don’t care whether we prosper,” he said. “To stay is not pleasant. We are isolated; we are very depressed economically.”

Gold mining in the Amazon, a tradition in Brazil, is expanding in the tributary rivers of surrounding countries nearer to the Andes, the source of the gold. The closer the mountains, the richer the deposits.

Everywhere, mercury is used to separate the ore from the sand. There are few studies, but concern is growing over the potential damage to the waters from mercury contamination, given the near-complete absence of government supervision. American ecologist Tony Luscombe, based in Lima, estimated that 70 tons of mercury are used in gold mining in the Amazon each year.

The use of mercury is also putting a powerful poison into the atmosphere. Miners heat the already volatile liquid metal to make it bond with the ore. In doing so, they breathe in the toxic fumes.

Increasing worries are being voiced, too, over the erosion that the mining causes as it evolves from simple river panning to more sophisticated operations. As the river beaches have been worked out in the two decades of mining, leading to reduced output, miners have turned to carving out the river banks themselves and to river dredging.

As a visitor travels upstream, west from Laberinto, on a three-foot-wide, 30-foot-long dugout canoe powered by a Yamaha outboard motor, the shoestring mining operations come into view. Shacks for owners and workers are set on higher ground, with the jungle crowding against them; below are the pitted banks, where workers dig out the gravelly sand with shovels and load it into wheelbarrows in 90-degree heat.

Some miners rely on old-fashioned panning, but others use wooden sluices, on which workers filter the ore through gauze or burlap screens, washing it with river water raised by gasoline-powered pumps. At one site, thousands of brilliant butterflies coated the sand like a soft blanket.

Laborer Hernan Quisbi, glistening with sweat, said he began work at 5 a.m. each day and worked eight straight hours, until the heat became unbearable. He earned 7,000 intis a day, about $1.20, more than he could get in his native uplands province of Apurimac, and more than most miners pay.

On a neighboring site, foreman Eduardo Mamani Bedoya, 37, complained that the invasion of miners has lowered the take substantially in the five years since he arrived. With his team of eight, he mines 2.5 to 3 grams of gold a day. That is worth $25 to $30 officially or $25.80 to $31, no questions asked, on the black market. Like many miners, he has cleared some of the jungle to grow vegetables to help himself get by.

In the rainy season, Mamani said, the river shows its power, suddenly rising as much as 23 feet and submerging the entire site. A stain in the red soil revealed the high-water mark halfway up the steep cliff on a bend in the river. When it rises, he and his family of five flee further into the jungle to safety.

It is this annual flooding that makes mining possible, bringing the gold downstream, churning up the banks and enriching the soils for farming. Colonist farmers have settled many small tracts along the river and the parallel dirt highway to Cuzco in the uplands, to the consternation of environmentalists.

Yet Madre de Dios province, an area of 30,000 square miles, remains among the wildest regions in the Amazon Basin, with just a handful of large plantations and ranches--in part because gold has distracted attention from such development.

Manual Sihuay Liudo, who oversees Laberinto’s branch of the Miner’s Bank, has the frustrating job of trying to reap some of the profits for the state.

“Illegal buyers are everywhere,” he said. “And the judges and prosecutors are . . . involved in buying. We have raided the buyers, we take their scales, but the prosecutors do nothing.

“We are close to applying brute force,” he continued. “We are also trying to reach the miners to show them we will support them with equipment.”

The bank has a shop that sells Briggs & Stratton motors, picks and hoes and other gear, at reduced prices. Still, hardly anyone sells gold to the bank. The government has raised its price to near that of the black market, still with little success. There appears to be no apparent effort to police the business.

Puerto Maldonado, the provincial capital, is two hours’ drive east of Laberinto on the back of a two-ton pickup truck stuffed with as many as 25 passengers. There, regional mining bank manager Maximiliano Yaguas vents his anger as much at the government as at the miners.

“One of the most suffocating things that impedes growth here is centralism,” he said. “Almost all the decisions are made in Lima, and they don’t make decisions. When they do, they don’t take into account the local factors and realities.

“For 25 days last month, we didn’t have any phone service. They just fixed it. How can we make decisions without communications?”

Yaguas insists that the miners are fooling themselves in thinking they do better on the black market because “the illegal merchants use doctored scales and cheat the miners.”

So the gold escapes, the province loses its 3% gold tax “and that’s why Puerto Maldonado is like it is. I am waging this fight so that there will be paved roads, clean water, good schools. But put simply, the authorities have not been interested in seeing that this happens.”

Puerto Maldonado, founded in 1902, has crept to a population of 22,000, while across the border in Brazil the frontier towns have mushroomed and modernized. In this capital of a district that is only slightly smaller than the state of South Carolina, there are virtually no private cars because the roads are so bad. The trip on the dirt road to Cuzco in the Andes, the only land connection to the rest of Peru, takes two days in good weather and up to two weeks in the rainy season.

Hailing a cab means flagging down one of the town’s many 50-cc motorbikes and hopping aboard. Lately, progress has come in the form of pedicabs, homemade motorbike contraptions with a bench above two rear wheels.

A 1986 book on the province by the local development corporation estimates the loss of revenues from gold contraband at $100 million a year.

With proper planning and control, the region could harvest its rich reserves of Brazil nuts, natural latex and other resources without causing serious ecological damage, the study contends, if gold were not such a fixation.

Yet, with the kind of optimism often still accorded the Amazon, the book adds: “It’s not an exaggeration to say that the ‘conquest of the east’ is a sine qua non for the self-sustaining development that our country urgently needs.”

Sergio Sosa, a lawyer and local commerce booster who settled in Puerto Maldonado from highlands Ayacucho 14 years ago, said gold has pulled people away from more permanent, but less immediately profitable, development. The region’s whole mentality is one of extraction, he said--of gold, of hardwoods, of rubber--and every man for himself.

“Here it is all corruption,” he said. “Things get done when money changes hands. There is no control at all.”

Sosa favors the kind of agricultural development common in adjacent Acre province in Brazil, and he scoffs at environmentalists’ fears of destroying the rain forests and damaging the environment.

Acre is the site of major cattle-ranching projects, where natural rubber tappers are confronting ranchers and where tapper-conservationist Chico Mendes was killed. It has suffered less deforestation, so far, than other provinces.

Mayor Juan Aguirre Perez, the town’s first native-born mayor, shares Sosa’s view. Each December, he said, “we have to throw tons of mangoes into the river because they fall and create a health hazard. Imagine what a business we could do if we had a processing plant to make jams or can the fruit?

“Before this gold fever arrived, agriculture was developing well. But when gold was found, the fields were abandoned. And we are poorer than ever,” he said. “The future of Madre de Dios must be agriculture and ranching. Coffee grows here like a bad weed. But if we plant, how do we get it out of here?”

As the accessible gold reserves dwindle, halting attempts are being made to improve the mining technology. In the past two years, river dredgers have begun to be used. Now they number no more than 20 or 30, compared with thousands in Brazil and hundreds in Bolivia downstream.

On a larger scale, a few companies have moved upstream into old riverbeds, long since dry after river-course changes. In the hilly jungle, they are using machinery to strip off yards of accumulated topsoil to get at the buried alluvial deposits.

This kind of operation, mining bank manager Yaguas said, holds the potential for earning serious money. But the areas are inaccessible, the costs high.

Both the dredging and the stripping of old beds could increase the hazards of erosion and silting-up of the river, said veteran miner Salvador Pardo.

He has recently added a mercury collector system to his mining operation, in which the mercury vapors do not escape into the atmosphere. It is not only safer and cleaner, but cheaper, since he can recapture the mercury. A number of miners are following suit, he said.

Pardo complained that miners are offered few options in the Amazon region. He sought government help to plant mango and Brazil nuts, but the local agricultural station had no seedlings and no advice.

Alfredo Garcia, an adviser to a native Indian association, said uncontrolled gold mining and other development has disrupted the lives of many of the 4,000 or so natives who live in the forests and along the riverbanks.

“This population has come under tremendous pressure from all the interest groups here in the last 20 years,” he said. “Gold has been an important impetus in this process, causing conflicts with the indigenous peoples.”

Heinrich Helberg, who works on health problems with the dwindling number of native communities in Madre de Dios, said gold was not a serious ecological problem when it was simply pick-and-shovel work. “But now that it is becoming more technical, and they are mining the old beds, this is changing.

“I believe that our problems here are more of social control, though, not technological,” Helberg said. “When you start projects and then abandon people there without control, of course the problems are going to be exacerbated.

“The local shamanist traditions here say that illness is closely allied to personal behavior. You could say that the problems in this part of the Amazon are a reflection of just that.”