Insecurity Imposes 10 Percent ‘Tax’ on Mining Companies

Insecurity is one of the most common issues companies in Mexico face. Mining is one of the economic sectors that suffer the most from this uncertainty, as thefts of equipment and processed minerals are all too common. This issue has led industry insiders to consider insecurity as a tax, as it takes away over 10 percent of the value companies produce. 

According to José Gutiérrez, President, the Mexican Mining Chamber (CAMIMEX), the mining sector has been a target of thieves that mostly go scot-free. This resulted in operational cost increases between 10 and 20 percent. He added that these numbers could even be considered a sort of tax to the industry, and added that the figure could be bigger if we take into account that mining companies have heavily invested in personnel training and hiring more security guards to watch the mines. Gutiérrez said that thieves usually steal expensive supplies and extracted minerals. 

The most affected mines are those operating in the states of Zacatecas, Sonora, Durango and Guerrero. Gutierrez said that in Zacatecas the problem is more complex since every mining project has its specific issues to solve even though operations are not carried out as remotely as elsewhere. He added that both federal and state governments must ensure safe operating conditions for the industry. 

Luis Vázquez, President, the Mexican Association of Miners, Metallurgists and Geological Engineers (AIMMGM), reported that some companies have even paid off criminal gangs, resulting in a 3 percent increase in the final cost of minerals. Vazquez added that states with long mining histories like Chihuahua, the State of Mexico, Guanajuato, Sonora and Zacatecas rank among the states with the highest perceived insecurity.

Alfredo Phillips, Local Director and Vice President of Corporate Matters, Argonaut Gold, said that companies in high-risk areas like Guerrero and Zacatecas use 2 percent of their budget on establishing security, which is extremely high in comparison to the 0.5 percent used by companies operating in less risky areas. For Phillips, the solution is not hiring more security personnel but improving the country’s security conditions, arguing that private security bodies cannot prosecute crime like public security forces can. 

Industry experts assure that the worsening security conditions and the lack of new concessions are the main factors that have scared investors, who perceive other markets like Canada, Chile or the US as safer destinations.