When Illegality Becomes Legitimate: Governance Risks for Responsible Mineral Supply *Villegas; Inocente; Rómulo Isaac 1 2 ¹Socio-Political Specialist, Centro Wiñaq, Peru ²Executive Coordinator, Master’s Program in Social Management, Pontificia Universidad Católica del Perú (PUCP), Peru Abstract Illegal mining in Peru has evolved from a peripheral criminal activity into a structurally embedded economic and political actor with territorial control, financial scale and social legitimacy. Rather than operating solely outside the law, illegal mining increasingly competes with the State and formal industry in shaping rules, influencing legislation and occupying governance vacuums. This paper argues that illegal mining must be understood not only as an environmental or security issue, but as a legitimacy-based governance challenge that directly threatens the integrity of responsible mineral supply chains. Drawing on a mixed-method exploratory and analytical approach, the study integrates financial intelligence data (USD 80 billion accumulated in suspicious transactions between 2014–2024), labor dependence indicators (up to 600,000 livelihoods linked to small-scale and informal mining), REINFO registry analysis (over 50,000 revoked registrations in 2025), territorial overlap with formal concessions, and public opinion surveys evidencing partial social acceptance. Using organizational legitimacy theory, the paper identifies three reinforcing pillars that sustain illegal mining: social legitimacy (employment provision and narrative framing such as “ancestral mining”), economic legitimacy (integration into formal gold value chains and financial systems), and political legitimacy (legislative pressure, regulatory capture risks, and mobilization capacity). The findings reveal a hybrid governance environment where illegality coexists with formal market structures, diluting traceability mechanisms and undermining ESG credibility, investment security and regulatory authority. The paper proposes a Legitimacy Risk Framework for Extractive Governance, aimed at helping governments and industry anticipate institutional vulnerabilities, strengthen territorial intelligence systems, improve financial traceability and rebuild trust in mineral supply chains. Addressing illegal mining therefore requires more than repression or formalization extensions; it demands governance innovation capable of restoring institutional legitimacy while safeguarding responsible mineral production. In the context of global demand for critical minerals, failure to confront legitimacy competition may compromise both trust and long-term supply stability. 26
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