Andean Group - March 2026

In a high stakes bet, on 26 February Ecuador’s national assembly approved a sweeping mining and energy reform that aims to revitalise the economy, help combat criminal gangs, and shore up the public coffers. But the initiative has faced fierce criticism from opposition legislators, environmentalists, and indigenous organisations.

With a thin margin of 77 votes in favour and 70 against, lawmakers approved the government’s ‘law to strengthen the strategic mining and energy sectors’. The legislation aims to develop large-scale mining projects by cutting paperwork and environmental restrictions, by using the military to combat criminal gangs, and by regulating the artisanal mining sector. The law also regulates some aspects of the oil and electricity sectors.

Ecuador is under intense pressure to meet fiscal targets set by the International Monetary Fund (IMF). With oil production stagnating due to aging fields and drilling bans in the Yasuní region, mining is viewed as a growth engine that could be scaled up. Indeed, Ecuador sits atop some of South America’s most promising mineral deposits, yet the sector has historically punched far below its geological weight. The country’s mining sector revolves to a large degree around just two large-scale industrialised mines – Fruta del Norte, owned by Canada’s Lundin Gold, and the Chinese-backed Mirador copper mine.

Mining revenue has nevertheless been trending up in recent years. In 2025, mining exports were worth a record US$3.6bn, up 17% year-on-year, according to the mining lobby Cámara Minera del Ecuador (CME). A fortnight before the legislative approval, Lundin Gold announced a US$100m investment in an exploration campaign for 2026, a sum the company billed as the largest single-year exploration commitment in Ecuador’s history. The underground mine has been operating since 2019 and last year produced nearly 500,000 ounces of gold, which at March 2026 prices would be worth some US$2.55bn.

Criminal gangs

The government’s other objective is to drive out narco-traffickers and other criminal gangs that have been engaging in illegal mining as an additional source of financing, including to buy arms. In July 2025 the government’s mining regulator (Arcom) announced that it had identified approximately 387 illegal mining sites, some of them run by criminal syndicates, in 16 of the country’s 24 provinces.

The new law establishes ‘protected mining zones’, allowing the military to maintain a permanent presence in areas vulnerable to illegal activity. It also provides a legal framework for joint operations with regional allies. On 6 March a joint military operation by the US and Ecuador bombed a camp that belonged to Colombian crime group Comandos de Frontera, a dissident faction of the demobilised Fuerzas Armadas Revolucionarias de Colombia (Farc) guerrilla group, which is engaged in illegal mining in Ecuador.

“We are putting an end to the administrative chaos that only benefited those operating in the shadows,” President Daniel Noboa said. “This law is about bringing order to our natural resources, ensuring they serve the Ecuadorean people through formal, responsible investment rather than financing the organised crime that has plagued our mining zones.”

To help provide economic alternatives to local residents, the law promotes mining ‘clusters’ where minerals are not only to be extracted but also processed. It requires 60% of mining royalties to go towards local development. Royalties are set at 3%-8% of sales on a sliding scale tied to commodity prices. Artisan miners are to join the formal economy, thereby paying taxes and adopting safer and cleaner extraction methods. This should give them greater access to the legal market, where prices are higher – potentially boosting buy-in from local communities, which are often skeptical of the government and of large mining companies.

Environment

A key aspect of the law is a new three-tiered environmental authorisation process that is intended to streamline approval for mining projects. For high-impact large-scale projects a full environmental licence will be required; medium-risk developments require environmental registrations; and for low-impact or initial exploration activities an environmental certificate will suffice. The tiered approach aims to slash approval times from an average of three years to as little as six months, potentially unleashing a flood of investment. A ‘positive administrative silence’ clause – allowing projects to advance if regulators miss deadlines – is designed to end indefinite bureaucratic delay, though critics fear it will be exploited to bypass scrutiny.

The mining lobby billed the law as an opportunity for Ecuador to compete globally without giving up environmental, social, and governance (ESG) standards. “In an international context where minerals are essential for the energy transition, technological development, and industrial development, Ecuador has a strategic opportunity to position itself as a responsible supplier of crucial resources,” the CME said.

However, environmentalists are particularly alarmed by a provision that allows rock and mineral extraction in the Galápagos archipelago. While the government insists any extraction will occur outside national park boundaries, opposition lawmaker Verónica Iñiguez, of the left-wing Revolución Ciudadana (RC), warned the islands could become a “quarry” for construction materials.

Other concerns include the risk that efforts to regularise the informal mining sector could draw more people to the work, resulting in wider use of mercury, which has poisoned rivers and lakes in the vicinity of wildcat miners who use the toxic liquid metal to separate gold from ore. The risk is that more people turn to this sort of mining while the state lacks the resources to enforce environmental regulations.

Indigenous opposition

The umbrella indigenous organisation, Confederación de Nacionalidades Indígenas del Ecuador (Conaie), said the law “prioritises the acceleration of extractive investments without establishing clear and enforceable guarantees for prior, free and informed consultation” of indigenous peoples, a right recognised in the constitution and in international human rights instruments.

Conaie’s leader, Marlon Vargas, said in a social media video that “the water that you and your family drink every day is at risk”. He said that the government is “weakening the state’s capacity to protect nature – when protections are undermined, there is an increase in conflicts, criminalisation, and the militarisation of territories”.

The indigenous movement has historically been a political force to be reckoned with, and its opposition to oil exploration and mining activities prevented previous governments from advancing efforts to promote the extractive sector. However, Conaie’s influence is now in doubt after Noboa succeeded where his predecessors failed last year and faced down weeks of indigenous protests against the cancellation of fuel subsidies.

Legal battle

The passage of the law is likely only the first chapter in a long legal and social struggle. The Conaie indigenous organisation has filed a lawsuit challenging the constitutionality of the mining law. It alleges that the national assembly failed to carry out prior consultations with communities and indigenous peoples and that the law erodes environmental protections. Historically, Ecuadorean courts have been sympathetic to the ‘rights of nature’ – a provision in the 2008 Constitution.

Tax on mining concessions

In June last year President Noboa imposed a tax on the holders of mining concessions that the government said would raise around US$229m per year to help ensure that the mining sector is complying with regulations and environmental laws.