Mexico Could Lose US$24.2 Billion in Investments During 2022
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Mexico Could Lose US$24.2 Billion in Investments During 2022

Photo by:   Giorgio Trovato
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Paloma Duran By Paloma Duran | Journalist and Industry Analyst - Mon, 04/25/2022 - 14:14

The National Confederation of Industrial Chambers (CONCAMIN) warned that the Mining Law’s reform will cause Mexico to lose important investments in 2022, further worsening its position as an attractive mining hub. The confederation stressed that if an attractive policy is promoted instead, Mexico’s economy could improve faster.

Despite operating in an improved market environment, the performance of the Mexican mining sector in 2021 worsened due to government decisions and legal uncertainty. In 2021, the sector collected US$4.24 billion, higher than what was collected in 2020 but 15.6 percent below what was expected, which was just above US$5 billion. This year, on the back of the approval of the Mining Law’s reform, which nationalized lithium and ensured state control over the resource, Mexico is expected to lose around US$24.2 billion in investments.

CONCAMIN reiterated that with the approval of the reform, the certainty of a legal, transparent and reliable framework has ceased to exist. In addition, experts say that the industry's uncertainty was further harmed after the government announced that it would review the validity of lithium concessions.  “We are very concerned about some of President Lopez Obrador’s proposals. If a government can unilaterally break existing contracts and nationalize an industry, foreign investors will generally reduce or avoid investing in all Mexican sectors,” Bradford Cooke, Founder and CEO, Endeavour Silver told MBN.

In addition, the reform includes “other strategic minerals” without clarifying which ones, am issue industry insiders say will generate greater uncertainty for investors and miners who have been working with other minerals in Mexico for years. Armando Ortega, Head, the Canadian Chamber of Commerce’s Mexican mining commission, said that the reform discourages investment and contradicts USMCA, since the Mexican government cannot impose new restrictions on investment beyond those included in the original agreement. As a result, experts believe that the reform could lead to international confrontations. “The possibility that private mining companies are allowed to explore certain metals but then be prohibited from exploitation and production is not viable,” said Ortega.

CONCAMIN stressed that contrary to what the government believes, it is necessary for the public and private sectors to work together to guarantee the supply of key minerals such as lithium, since the private sector has more experience and technology at hand. "Channels of communication and cooperation between the government and companies are essential to continue contributing to the development of Mexico," said CONCAMIN.

CONCAMIN called on the government to instead promote a policy that encourages investment, which could allow the Mexican economy to recover faster from the adverse effects of the COVID-19 pandemic. In addition, the confederation said that since the lithium industry is new in the Mexican environment, it could be an important source of employment. If promoted correctly, it would add 350,000 jobs to the more than 3 million that already exist in mining. Via a more attractive mining policy, an additional MX$23.5 billion could be collected in annual taxes, which would be added to the US$64 billion paid in 2021.

Photo by:   Giorgio Trovato

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