Peru isn’t merely one of the world’s largest exporters of gold—it’s also one of its dirtiest.

According to a recent report by international labor watchdog Verité, over 20% of the gold being mined in Peru is produced illegally. It’s higher in remote, hard-to-monitor regions; in Madre de Dios, for example, where nearly a billion dollars worth of gold was mined last year, as much as 97% of gold production is illegal. In total roughly $3 billion in illegal gold was not only mined, but exported out of the country in 2011.

In total, Peru now exports more illegally produced gold than cocaine, which is staggering, considering that Peru happens to be the world’s largest exporter of cocaine.

The working conditions in Peruvian mines, which often include severe isolation, staggering amounts of child labor, extreme cases of overworking, and countless incidences of forced labor and abuse, rival those of most any poorly-regulated industry around the world, Quinn Kepes, the report’s lead researcher, said in a statement. “Verité has done research on forced labor in places like Bangladesh, Guatemala, Bolivia, Liberia and the US. I haven’t seen anything this bad,” he said.

The industry employs tens of thousands of child workers. In many cases, they are lured with promises of lucrative salaries and plush treatment, only to find themselves working far more hours than is legal and for a good deal less than minimum wage. To conceal their growing illegal workforce, mining companies have begun to pay workers under the table in gold, which the workers often end up having to sell at a discount, the report notes.

Peru’s mountainous geography and complex land regulations make such abuses hard to control. “Many of the mining camps lack a police presence and authorities lack the resources, and in some cases are afraid, to visit mines located deep within the dense Amazon jungle or on protected lands,” the report says.

Verité

It has been just as hard for Peru’s government to keep tabs on gold exports. It is alarmingly easy for small and large-scale miners alike to sell their dirty gold. Much of it is laundered by legitimate, large business, which then mix it in with legally produced gold exports. The result is an inseparable mass of bullion.

Much of this gold gets to Switzerland, where it’s refined or used in luxury goods like watches and jewelry. In 2011 alone, Peru exported 25 tonnes (27.6 tons) worth over $1 billion to Switzerland, according to local environmental news outlet Info Región. (Spanish link) In total, Peru exports roughly $6 billion in gold to Switzerland every year. “Billions of dollars in illegally produced gold has made its way from Peru to Switzerland. Once it is melted down, we have no way of tracing it back to its country and region of origin,” Kepes says in the statement.

Peru exports gold to the likes of Canada and the US, too. It is reported to have the largest undiscovered gold reserves of any country in the world, and received roughly $53 billion in mining investments in 2012 to capitalize on that. It’s becoming all the more imperative that the country’s government work to crack down on the illegal practices that continue to stain its dangerously lucrative gold industry.