CARTELS MAY USE GOLD TO LAUNDER PROFITS

GEORGETOWN, Guyana -- An airline pilot was arrested after the suitcase he
was taking aboard a plane he was about to fly was found to contain 155
pounds of gold. Eight businessmen are facing charges that they smuggled
more than a ton of gold to the United States, and rumors abound that a list
of other offenders has been compiled.

In mid-1995, American officials told the authorities here of a sharp surge
in the amount of Guyanese gold being declared to U.S. Customs in Miami and
in New York, whose metropolitan area is home to some 100,000 Guyanese
immigrants. A result has been a still-unfolding scandal that suggests that
Colombian and Bolivian drug cartels have found yet another way to launder
their profits: through exports from this small, dirt-poor South American
country.

"If this were just about the smuggling of gold, the United States wouldn't
be interested," said Edward Shields, director general of the Guyana Gold
and Diamond Miners' Association. "The Guyanese government is being
pressured because of America's concerns that finances derived from these
operations are being used for other ends."

As Guyanese authorities and gold miners tell it, drug dealers buy gold from
local prospectors and assayers, who agree to smuggle it for them to the
United States. The bulk of the money from sales there and in Europe or
India is then deposited in cartel-controlled bank accounts, with the
Guyanese middleman keeping 15 or 20 percent.

Guyanese officials have estimated that at least a quarter of the country's
total gold production between 1990 and 1995, or some 100,000 ounces with a
market value of more than $35 million, may have been smuggled out.

It is not a violation of American law for Americans or foreigners to take
large amounts of gold into the United States so long as they declare the
market value to customs officials on entry. For the United States to have
alerted Guyana to the traffic, and since then to have cooperated in
additional, still unspecified, ways, is therefore unusual.

"Any time you have vast quantities of any product going from one country to
another, you have the possibility of money laundering," an American
official explained.

The Guyana Gold and Diamond Miners' Association, which represents
prospectors and dealers, challenges the laundering explanation, suggesting
that Guyanese businessmen may simply have bought the gold in Brazil or
Venezuela. It notes that American records indicate large amounts of gold
are also imported from nearby Trinidad, a country with no production of its
own.

Nevertheless, gold smuggling has a long history in this former British
colony. During the 1980s, in particular, Guyanese prospectors considered it
a point of honor to evade government controls, which required them to sell
their production to the Guyana Gold Board, the government agency that
regulates sales. The board set a price, calculated in the weak local
currency, that was half that of the international market and well below the
prospectors' production costs.

Nowadays, the board pays the going market rate to registered prospectors
and that has led declared production to quadruple. But smuggling continues,
officials and miners agree, in large part because some prospectors resent
having to pay a 7 percent royalty to the Gold Board as well as taxes on
whatever mining income they declare.

In recent months, the price of gold has dropped sharply, to less than $300
an ounce. But that decline is unlikely to deter any Guyanese prospectors
and gold dealers who are working with the drug cartels, said Joseph de
Agrella, a former gold smuggler who until recently was a member of the Gold
Board.

"The money launderers here are not looking for a profit from the sale of
gold," he said. "They're just looking to bring money into the United
States, and as long as they keep getting their 20 percent cut, they're
going to be satisfied."

Guyanese miners argue that the best way to fight the combination of low
prices and smuggling would be to remove, or at least temporarily suspend,
the royalty payment. "Otherwise, a lot of operators are not going to be
able to remain open during 1998," said Stanislaus Jardine, president of the
gold miners' association.

On the Essequibo River, where powerful dredges suck muck from the river
hoping to find bits of yellow nuggets and dust, the same complaint is
echoed. "This whole year, we have taken a lot of punches and suffered a
lot," said Lenny Parsram, a dredge operator who like most of his fellow
workers earns not a fixed salary but a percentage of whatever his boss makes.

But President Janet Jagan said she saw no need to change the current
policy. "How can you allow your natural resources to be extracted without
anything going to the Treasury?" she asked in an interview just before the
Dec. 15 election in which she won a five-year term. "That's nonsense."

"They have been doing well," she said of gold miners. "They'll get over it."

Copyright 1998 The New York Times Company