Adrián Juárez
Founder & CEO
CTA Consultoría y Tecnología Ambiental
Expert Contributor

Mining and AMLO's Economic Policy

By Adrián Juárez | Wed, 03/31/2021 - 09:05

Metal mining is strongly anchored in Mexico’s history and has been a great pillar in the economic and social growth of many rural areas, where the presence and investment of the federal and state governments is minimal.

In Latin America, sources of employment and production are concentrated in urban centers, where consumers are and the best infrastructure and service conditions are offered to set up and operate an industry. Rural areas do not normally offer the conditions for an industry to establish itself and offer jobs. As a result, there is little competition for human talent and wages are low.

Mining and agriculture are almost exclusively the only sources of employment in rural areas, and these two activities represent the basis of human development. What is not cultivated and harvested is extracted from the ground.

The economic policy outlined by President Andrés Manuel López Obrador considers job creation, lifting Mexico out of economic stagnation, raising the minimum wage, and rescuing fields from abandonment. Mining contributes to the achievement of all these objectives, because its natural environment is the field, it can offer from 300 to 2,000 direct jobs and hundreds of indirect jobs with higher wages than other industries, exceeding the minimum wage.

Other countries in Latin America have made mining a pillar of their economic and social development. The example that I would highlight is that of Chile. In Chile, government-led mining is promoted through CODELCO (Corporación Nacional del Cobre) and ENAMI (Empresa Nacional de Mineria) whose mission is to promote the development of small and medium mining businesses, providing services such as recognition of mining resources, technical and credit assistance, purchasing, processing and marketing required by thousands of mining producers throughout the national territory. In Chile, the two companies have different roles and are not monopolistic.

Mining carried out by private companies with Chilean capital and foreign capital is promoted. The world’s main mining companies (BHP Billiton, Glencore, Lundin Mining, Sumitomo, TECK, Newmont, Barrick, Rio Tinto, Vale, Kinross, Freeport-McMoRan, among others) are in Chile (and not in Mexico yet) and have large investments, mainly in copper mining, with developments that exceed US$1 billion and generate hundreds of jobs. The benefits that foreign investment in mining brings to Chile include, in addition to the obvious ones such as the payment of taxes and the creation of jobs, the implementation of innovative technologies (desalination plants, renewable energies, remote-controlled electric mining vehicles), training of personnel, strengthening of the supply chain, which also contributes to the development of mining carried out by Chilean companies. It is worth mentioning that salaries in Chile are higher than in Mexico (the minimum wage was 2.7 times higher in 2019), that the bureaucracy is slow and tedious, but that is compensated by low crime, little corruption, and a stable and favorable vision for foreign investment.

AMLO should take a look at the Chilean model and adopt the elements that fit into his economic strategy to favor his base.

The most visible mining policies promoted by the AMLO government do not contribute to its economic objectives and do not benefit its base: those in the countryside and the poor. Here are some recent examples of related comments: “No new concession for mining exploitation, ratified by AMLO” (the Zacatecas Conference, March 11, 2021); “We are going to see how important it is, or rather, what benefits it has for the nation, but the natural resources of Mexico have to benefit the people of Mexico. General Cárdenas used to say that whoever delivers the country's natural resources to foreigners is a traitor to the homeland;” “Minera Canadiense seeks to avoid arbitration in dispute with Mexico” (Bnamericas, March 22, 2021) in relation to the Americas Gold and Silver company. Finally, First Majestic Silver, which until recently had mentioned with some pride that it was focused on Mexico, plans to take the tax dispute to an international arbitration court. It has also just announced that it will buy a mine in the U.S. state of Nevada.

If AMLO's policies drive away foreign companies, the only loser is the people. Mineral resources will remain underground, without generating any benefit, since Mexican mining companies cannot replace the initiatives of foreign companies that are investing in Mexico. International investment goes where political, fiscal and security conditions favor it.

Photo by:   Adrian Juárez