MINING IN MEXICO S - ProMéxico

16 Negocios i The Lifestyle
illustration oldemar
Mining: A Strategic Sector For
Mexico And The World
By MARÍA CRISTINA ROSAS *
Mining is a strategic sector for the Mexican economy and is one of the
country’s assets when it comes to attracting foreign direct investment.
Despite the international financial crisis, in 2009 Mexico remained as one of
the most attractive and safe destinations for mining companies worldwide,
reason why investors are taking increasing interest on Mexican mines.
Current economic dynamics would be
hard to understand without mining. Although
some insist that modern economies
derive a large proportion of their
revenue and prosperity from the service
sector, primary sector activities form the
economy’s real bedrock. Without exaggerating,
the World Bank confirms that the
most significant progress toward satisfying
human needs –including food, accommodation,
health, education, employment
and transport– relies on the increasingly
efficient use of mineral resources. Furthermore,
some studies suggest that activities
such as manufacturing, construction
and even agriculture, could not exist
without mineral production.
Mining plays a leading social-economic
role in Mexico. At its various stages –from
exploration to production– it generates a
significant number of jobs and income for
the country. In 2009, it accounted for 3.6%
of Mexico’s GDP (mining expanded), 4% of
Mexican exports and 270,000 direct jobs.
Due to the rising demand for minerals
by the world’s largest and most rapidlygrowing
economies, mining is becoming
increasingly important. China, for example,
has increased its mineral consumption
to support its dizzying economic
growth, contributing to the growth in global
prices for various minerals. African and
Latin American countries are among its
providers. The African continent is seen
as a gigantic deposit of mineral resources –
with everything from oil to coltan– and the
world’s largest economies are ever more interested
in that part of the world. But when
it comes to mining, Mexico has a number of
advantages, even over African countries.
Mexico offers a solid and less risky alternative
for mining production. Several African
countries suffer from armed conflict, endemic
diseases, poor infrastructure and lack
of governmental transparency, which exponentially
increases the operating costs for
foreign investment despite the abundance of
mineral resources.
Mexico possesses significant mineral deposits
that are widely sought after around
the world. The country is among the twelve
largest producers of 17 minerals. It is the
world’s second largest producer of silver, bismuth
and fluorite; the third of celestite; the
fourth of wollastonite and diatomite; the fifth
of lead; the sixth of cadmium and molybdenum;
the seventh of zinc, salt and graphite;
the eighth of manganese and baryte and the
twelfth of feldspar, gold and copper.
Investors are taking increasing interest
in Mexican mines given their reserves of
strategic minerals, some of which are key to
industries such as aerospace, military and
electronics.
This all explains how, despite the international
financial crisis, Mexico remained one
of the world’s top investment destinations
in 2009. In terms of mining exploration, it
ranked as the top investment destination in
Latin America and fourth in the world.
Mexican legislation encourages investments
in the sector. The 1993 Mining Law
(Ley Minera) replaced the 1961 legislation
and opened up new areas to foreign investment
previously limited to Mexican financing.
It also removed the requirement for foreign
capital investments to be associated with
Mexican capital in a proportion of 49-51 per
cent respectively. The Foreign Investment
Law further liberalized the mining industry
in a process consolidated by NAFTA and the
removal of several investment requirements
–for production work only to use Mexican
supplies, for training and technology transfer
or for nationality requirements imposed on
the majority of members sitting on boards of
directors– as well as tariff reduction on foreign
trade and the import of equipment and
machinery. That opened up unprecedented
opportunities for private foreign investors
interested in the mining sector. The new legislation
heralded another important change:
the duration of concessions, which are
awarded for 50 years and may be extended.
The Mexican mining sector is a highly
attractive investment. It is far quicker for
a company to obtain an operating license
in Mexico than in other countries. The US
company Hecla referred to the “comparative
advantages” offered by Mexico in relation
to its other commercial partners, confirming
that it had taken only eight months to be
granted the license concession for the project
at La Choya in Sonora. In the US or Canada
the process would have taken between five