A Framework for Industry GrowthWed, 10/16/2019 - 17:09
Q: What are the main changes that you foresee for the mining industry with the change in administration?
A: In 2018, there was an environment of confusion among industry stakeholders but this is common with most governmental changes. President López Obrador is trying to approach many interested parties and include them in the discussion about the country. Mexico needs to attract capital and a stable and consistent message would calm the market and help the mining industry as well as most of the Mexican economy. The first concern from the mining side is related to unions. There is a real concern about how this issue is evolving. Second is the Mining Law regarding investment and finance. The current government has a chance to bring back mining investment if it takes action and aligns with experts in the industry. From my perspective, the regulations are being discussed and decisions are so far not yet supportive for rapidly attracting capital or creating jobs but this could definitely improve.
Q: What are your recommendations for designing a framework that ensures the industry’s growth?
A: The framework should provide incentives and allow the government to immediately liberate land to attract new investment and allow for consolidation of projects so they can actually move forward or be tested and relinquished. The current situation is not a win-win, it is stuck and this does not help Mexico. Second, we consider the consultation important but executing this process should be a part of what corporations do with the involved communities, instead of it being a government mandate. Whenever the government participates, the process slows down and investment is reduced. In a really competitive world, the most favorable option is that which attracts capital.
Looking at the 2018 Annual Survey of Mining Companies from the Fraser Institute, Mexico has dropped many places in the index due to the negative perception of the country among international investors. I would recommend managing this perception to show stability and better development conditions. The administration could identify both which states have mining potential and which communities are willing to support this activity. In Mexico, the mining industry is not a big deal at a country level, but in terms of regions, it does have an important impact. Instead of executing mining activities all over the country, focus on the regions where this industry could flourish.
Q: How does supporting mining activity in the country translate into benefits for communities?
A: The first advantage will be infrastructure. I went to the Mulatos area in Sonora when it was a small town with a strong drug-trafficking situation and very difficult road access. The infrastructure that came along with Alamos Gold’s operations transformed the region in positive ways. The second advantage that mining puts on the table is education. Apart from the jobs that are offered, schools are available for workers and their children. If you want to improve prosperity in a country, it should be through investment and education. The third advantage is the resulting economic growth that keeps people in the region. In many countries, when people do not have access to job opportunities in the countryside, they have to move to cities. By creating this infrastructure in remote areas, the pressure that large metropolitan cities face could be diminished.
Q: How can mining companies work with the government to make this happen?
A: This action should be localized where mineral companies have their resources. In these specific locations, mines could be really helpful in designing the future of the region. These resources and the related infrastructure support community development. The operating companies could really benefit from having a stable investment: changing the way taxes are levied confuses and slows investment. Mexico has been the world’s leading producer of silver for 500 years but right now the big discoveries are in other jurisdictions and the money is starting to flow to those regions away from Mexico.