Mexico: The Undiscovered Potential of a Historical Mining Country

Mexico is a historical mining country. For over 300 years – from the 16th century through the 1870s – over 65 percent of all American silver came from Mexican mines (Hispanic American Historical Review, 1970). After Independence, with the introduction of foreign investments and new technologies, the country entered a new era of mining exploration and production, so efficient and profitable, that Cecil Rhodes stated that 

“… Mexico will someday furnish the gold, silver and copper of the world that will build the empires of tomorrow and make future cities of the world veritable new Jerusalems (The History of Mining in Mexico and its Economic Development, 1916).” 

Despite the many challenges – social, geopolitical and economic – the country has endured since Cecil Rhodes expressed his vision of the Mexican mining sector, the country remains one of the most attractive mining jurisdictions worldwide. Through independence, revolution and most recently a global pandemic, the sector has shown time and again its resilience and proven to be a cornerstone of the country’s economy. 

Today, mining in Mexico faces political risk and uncertainty, highlighted by the regulation of the lithium market (that has significantly contributed to private investors’, and particularly, foreign companies’, hesitancy to invest in the country), the amendments to the Mining Law earlier this year and the obstruction of new permits. Also, there are more critical views on mining from civil society – from community rights to environmental protection – that demand more transparency and regulation on mining activities throughout the country. The current federal government, although it has not increased taxes for the industry, has implemented stricter tax enforcement, and security concerns related to organized crime remain a pressing issue. 

However, Mexico remains a highly attractive mining jurisdiction. Why? Mexico has a unique combination of being a low-cost jurisdiction with highly skilled labor, a historical understanding of mining and resource-richness with high potential for new discoveries. Particularly in the gold space, Mexico’s northwest remains a highly underexplored region. 

Regarding exploration, this week CAMIMEX announced that in 2022, Mexico's mining industry plans to invest US$5.5 billion, up 15.2 percent from 2021 (Reuters, 2022) and the country was the biggest target of exploration budgets in Latin America in 2021, according to a report by COCHILCO (Chilean Copper  Commission) (BNamericas, 2022). The potential for new discoveries remains most attractive as the country is among the Top 10n global producers of more than 15 metals and minerals and, in 2021, boasted a production value of more than MX$281 billion (Statista, 2022). 

One essential aspect to take into account when discussing the country’s potential for exploration is the low cost of drilling and the rapidness in which permits are granted. Especially in times when cash availability is a growing concern in the market, the fact that Mexico has such potential for the discovery of significant deposits, with very competitive drilling costs  (compared to other high-potential jurisdictions such as Nevada), must be considered when making an investment decision. 

In regard to civil society, in spite of the tensions between civil society and the mining industry, the sector is an essential part of the economic makeup of the country. In 2021, it represented 3.06 percent of national GDP (INEGI, 2022) and generated 399,366 direct jobs (Ministry of Economy, 2022). From a taxation perspective, the mining sector contributed a total of MX$64.1 billion (US$3.2 billion) in taxes just in 2021 and contribution to the treasury climbed last year to 124 percent owing to the cyclical rise in metal prices. 

In remote areas, mining has played an important part in bringing road infrastructure and basic services to towns that had been neglected because of their distance from the main urban areas. In the areas where they operate, mining companies have undertaken projects that service the communities they work in, in an effort to better understand the people who are directly impacted by mining activities and to improve the ties between them. 

Mining is an essential sector worldwide. Not only are metals, such as silver and copper, indispensable for the world’s green transition but mining is indispensable down to the clothes we wear, the buildings we live in, the roads we travel. In Mexico, the industry has been a major player in the country’s economic development and geopolitical history. Given the human and natural resources the country is endowed with, it will remain so in the future. Therefore, it is fundamental that mining companies, government (both at the state and federal level) and civil society continue to look for ways to make mining more sustainable socially and environmentally, to increase the industry’s contribution to the country’s economy and to facilitate the exploration of the territory and discovery of new deposits. 

The objective has to be to increase the sector’s attractiveness and to address security, environmental, social and regulatory concerns to ensure that Mexico remains a top mining jurisdiction in the years to come.