Investments in the mining sector are forecast to fall sharply in 2022, mainly due to the government's ongoing efforta to implement unfavorable reforms, said the General Director of the Mexican Mining Chamber (CAMIMEX), Karen Flores.
The energy reform and the Mining Law's reform have generated great uncertainty for companies and investors in Mexico. As such, the amount of additional investments is expected to decrease, warned CAMIMEX. This year, on the back of the approval of the Mining Law’s reform, Mexico is expected to lose around US$24.2 billion in investment, warned the National Confederation of Industrial Chambers (CONCAMIN).
Flores stressed that the reform was unnecessary since key minerals are already property of the nation according to article 27 of the Mexican Constitution, so the reform only creates fear of expropriations and denial of permits. “Since 2014, we have registered that nearly 200 projects in the country stopped due to government policies such as the refusal to grant new concessions and mining permits… More than quantity, we have to look at the quality of the projects that remain,” said Flores.
CAMIMEX highlighted that if the government had opted for a more attractive policy, 350,000 jobs would have been added to the more than 3 million that already exist in mining, which generated investments of more than MX$24 billion (US$1.182.09 billion). Flores stressed that the mining industry should be encouraged to accelerate the country's economy furter, since “mining is the first link in the production chain of any other industry. If uncertainty is generated, the development of all sectors is compromised.”
In 2021, CAMIMEX reported that despite an improved market environment, the performance of the Mexican mining sector worsened due to government decisions and legal uncertainty. In 2021, the sector attracted US$4.24 billion, higher than what was collected in 2020 but 15.6 percent below what was expected, which was US$5.03 billion. “One of the factors that has discouraged investment is the lack of legal certainty. When there are conditions in a legal framework in which investors come to put their money and half of these change, this scares away investments,” said Jaime Gutiérrez Núñez, President of CAMIMEX.
In addition, Gutiérrez said that the lack of concessions and permits is impacting the arrival of new investments and even driving away certain companies with projects in Mexico. Gutiérrez stressed that only 30 percent of the territory has been explored, meaning Mexico’s mining potential is tremendous. However, these challenges are causing the country to miss out on opportunities valued around US$25 billion.
In addition, there is a significant amount of environmental permits pending from SEMARNAT and CONAGUA. Pablo Méndez, President of the Chihuahua Mining Cluster, said that this is one of the most pressing challenges facing the sector and stressed that misinformation is often the main reason for the denial of permits. “The greatest challenge that the mining industry faces is not related with authorities and whether they approve or deny the applications of projects, nor with the recognition of the rights of ejidos and Indigenous communities, but with the current stigma that exists regarding mining activities in our country. This, unfortunately, is generally unfounded,” said Méndez.