Mexican Mining Sector Aims to Have a Great Year for FDI

This year Mexico has been attracting large sums of Foreign Direct Investment (FDI), compared to 2020 considered one of the lowest years. The Minister of Economy reported that the price of metals and an increased demand have been the main factors that have benefited the sector and FDI is expected to increase for the rest of 2021.

During H121, foreign investment totaledUS$1.5 billion, much higher than the US$296 million it attracted in 2020. That year, mining investments were affected by the pandemic as investors became more cautious. Mexican authorities had plans that in 2020 the sector would attract US$344 million; however, the pandemic and national uncertainty affected the sector.

During 1Q21, the Mexican mining sector reported FDI totaling US$1.05 billion. According to the Ministry of Economy, mining FDI in 1Q21 was 176 percent higher than in 1Q20, when it totaled US$381 million. This increase is because the mining sector has learned to operate despite the COVID-19 pandemic, providing confidence to investors. Projects were not suspended due to the pandemic, which could have led to significant monetary losses.

According to the authorities, 1H21 records exceed the annual investment attracted from 2015 to 2020 and has already reached more than half of the US$2.3 billion dollars generated in 2014, one of the highest years in FDI. In 2013, mining broke a record by attracting US$5.4 billion. Authorities believe that this year will not be as high as 2013; however, its increase is a considerable one .

The country's economic recovery and increased demand for minerals for the energy and automotive sectors have also fueled investors’ interest in Mexico. However, investment uncertainty persists. “In 2021, other (negative) factors that are affecting the sector became more evident. It is no longer COVID-19, but a general uncertainty in the industry,” says the President of CAMIMEX, Fernando Alanis. He explained  a dozen companies are planning to invest elsewhere as regulatory and tax problems compromise Mexico’s attractiveness in the Americas.

Certain Mexican authorities have sought to improve the sector´s situation. For instance, Minister of Economy Tatiana Clouthier told MBN that the Ministry is working to provide  regulatory framework that would increase investment certainty. Efraín Alva Niño, Extractive Industries Unit Director of the Ministry of Economy, told MBN that the Ministry is also making a proposal with CAMIMEX to improve the exploration phase for companies, in addition to exploring the possibility of reducing taxes and implementing other incentives.

Some of the biggest companies investing in Mexico in 2021 are Torex Gold, which raised its investment budget to US$100 million for its El Limón-Guajes and Media Luna projects; MAG Silver and Fresnillo Juanicipio project, which will have a US$215 million investment in 2021; and Newmont, which plans to invest US$155 million in its Peñasquito mine.