Speaking about mining in Mexico, should we start with its strengths or its vulnerabilities? It generates 416,000 direct jobs and pays salaries 34% higher than the national average. It is the sixth largest generator of foreign currency in Mexico, among other things because we are the world’s largest producer of silver and one of the 10 largest producers of copper. The sector represents 2.77% of the national GDP, almost 9% of the manufacturing GDP.
It is such a powerful sector with so much history in Mexico that its vulnerabilities draw attention. In the last 12 years, only an average of 4.3 mining projects have been launched per year. This has to do with an inadequate legal framework, which highlights the fact that the granting of new mining concessions has been suspended. Additionally, there is a tax burden that is significantly higher than that of other countries or mining regions. In Mexico, the load can be up to 52.65%, while in Chile it is 35.66%; in Ontario, Canada, it is 34.61%; in Peru 39.93% and in Arizona, United States, 30.17 percent.
The Fraser Institute, based in Canada, presents observations on the way international investors perceive Mexico on mining-related issues. “The Mining Law of 2023 creates unnecessary uncertainty…non-transparent issuance of licenses, strict government control and lack of a clear process create uncertainty and deter investment.”
The annual survey, carried out by the Fraser Institute itself, offers us a more or less clear perspective of the concerns of mining investors: regulatory duplication and inconsistencies, political stability, labor regulations, uncertainty about environmental regulations… the geological database of Mexico.
Between thunder and lightning, the renegotiation of the T-MEC represents an opportunity to take Mexico’s mining industry to another level. It could all start with including a chapter on Critical Minerals in the trade agreement. The proposal is being made jointly by the Chamber of Mines of Mexico, the National Mining Association of the United States and the Mining Association of Canada.
The mining chambers of the three countries propose aligning policies and fostering collaboration to trigger the necessary investments and strengthen North America’s position as a world leader in responsible mining and development of critical minerals.
Critical minerals are a central component of North America’s strategic security agenda. They are essential for the development of artificial intelligence, hybrid or electric cars, robotics, aerospace and defense industries. Mexico is the main supplier of three minerals considered critical to the United States: fluorite, silver and copper. It has the potential to increase its production in six others: barite, graphite, magnesium, manganese, zinc and silicon.
Is the T-MEC required to take mining to another level? The United States needs to reduce its vulnerability/dependency on China in minerals and has begun to sign agreements with other countries, for example Japan and Australia. That’s where the world is going and moving at great speed. Given the size of the challenge for the United States, these collaborations do not exclude the possibility of working with Mexico and Canada to build a large regional mining project in North America.
The Mexican government needs to promote a stable legal regime and ensure that judicial reform strengthens legal security, says the Mexican Mining Chamber in a document signed by its president Pedro Rivero and addressed to Marcelo Ebrard. With clear and stable regulatory conditions, the industry assures that it could increase its contribution to the national GDP from 2.7 to 3.2%; create half a million new jobs and invest 28 billion dollars.
There is no free dessert. Do we want to pay the price to be a mining power of the 21st century?
