Legislators Demand Reactivation of Mining Fund
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Legislators Demand Reactivation of Mining Fund

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Karin Dilge By Karin Dilge | Journalist and Industry Analyst - Tue, 04/12/2022 - 17:03

Local legislators from the state of Guanajuato are asking Mexico’s federal government to reactivate the Mining Fund, which was used to distribute cash fees from mining developments to local communities.

Aiming to improve the well-being of miners and surrounding communities, Guanajuato’s local congress approved to send an exhort to the federal government in the hope that the president considers the reactivation of the Mining Fund and analyzes the negative impact caused by its elimination.

The proposal was presented by the PAN party, which said it seeks to protect the inhabitants of mining communities. The decision was approved with 28 votes in favor and 7 against coming from the MORENA party.

Mexico introduced a mining royalty of 7.5 percent and an extra tax for extraordinary mining rights of 0.5 percent on the income of silver and gold producers in 2014. Most of the fund’s resources were destined for social infrastructure projects in mining communities. The fund was seen as a key tool to keep the support of the communities to the mines and projects.

Under Andrés Manuel López Obrador’s administration, the Mining Fund was eliminated, its resources now allocated differently: 85 percent go toward a federal infrastructure budget for schools, the rest is divided between the government and the Ministry of Economy.

Last year, José Bermudez Méndez, a PAN senator, said that it is not clear where the money previously used for the Mining Fund has been going since the fund’s elimination in 2020. “As of today, it is unclear how much money the Ministry of Education and Economy have received, it is unknown what they have done with those assets, in what construction or program it has been invested, in what states or regions it has been used and under what criteria the projects and amount of investment have been assigned. Until today, all this appears to be under the discretion of the executive power,” said Bermúdez. With its decision to remove the Mining Fund two years ago, the government aimed to establish greater control over the resources delivered to mining communities.

Currently, the sector pays around MX$400 million (US$20.1 million) toward social benefits on a yearly basis. However, these funds no longer directly go to the communities where minerals are extracted. By eliminating this direct investment, experts worry that mining communities have lost out on MX$640 million (US$31 million), mainly used to implement projects that improved their quality of life, said Pablo Méndez, President, the Chihuahua Mining Cluster.

The mining sector, as well as several communities, have said that eliminating the Mining Fund was a big mistake because it was an important financial driver for marginalized communities. Bradford Cooke, Founder and CEO, Endeavor Silver, told MBN that the federal government's decision to introduce the mining tax to return funds to states and local municipalities was never fully implemented. “Returning the Mining Duties to the local states and municipalities for the benefit of the local communities would be a good way the federal government could help its own citizens,” he said.

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