Mining PPPs: Driving Rural Infrastructure in Mexico

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Public/Private Partnerships are a growing source of funding projects like infrastructure where the government or related parties have difficulty financing a given program or project. In many cases it is a situation of not having the funds to carry out something which the government sees as worthy but not a high priority and difficult in the circumstances to fund. In certain cases, it can be delayed without too great an inconvenience or financial loss, and in other cases it can be valuable to a specific community but hard to justify to the region or country at large. Macroeconomic projects like toll roads and harbors can be funded in part or entirely by a number of sources outside of the government. A friendly government can arrange a program in conjunction with the native country; however, recent experiences like China and its Belt and Road Initiative, or countries and organizations like the United States and NGOs, and even multinational institutions like the World Bank are becoming more critical of their support and look for the main purpose to name plate projects where they can be seen to be the source of the funding of the project while the resident government can take credit.

In a country like Mexico, especially with the widespread distribution of the rural population, it is difficult to provide infrastructure and services to many locations.  A number of those projects are local and not national in scale. A local mayor may appeal to the governor for support, yet in turn, the governor has numerous appeals for financing and yet a limited budget. It is not unique to Mexico, but the loudest noise and the largest voting centers remain in cities and some larger towns. As a result, the small projects in remote towns are never heard of. 

It is difficult or even unlikely for the funds that are distributed or sourced nationally to benefit a small town or even the individual campesino. Without those funds, basic infrastructure, roads, water supply, schools, and health clinics are limited at best.

Perhaps not recognized are the developments created by basic industries like mining. In the mining industry there is a diversity of activities, from early exploration to construction, production, and then ultimately to shutting down the mine. During the life of a mine, it can be a source of employment and taxes, but likely as important is the dual use facilities they provide. Upon closure, and with appropriate planning, it can leave assets that have a residual value to the local community. 

At the earliest exploration stage, most groups attempt to minimize disruption, knowing that finding an economic resource is highly unlikely. This tends to be a program of prospecting, perhaps employing some of the local community to support the program is where it stops.

With enough interest it can lead to trenching outcrops of minerals and ultimately bringing in a drill to test the third dimension. While even using the portable modular drill rigs available today, it’s likely that after an initial successful drill program a rough road might be built or an existing road improved to service the drill site. During this time, the exploring company generally employs and trains a number of local campesinos. Up to this point, there is little disruption to the environment and the community. The obvious return to a subsistence farming-based community is training, paid work, and federal taxes on consumption and payrolls.

The critical stage is when the holder of the concession decides to put the mine into production. Normally, in light of the high risks involved, this can take several years and a great deal of money if it does go ahead. Archeological, social, and environmental studies as well as the geological work all become available to the government. But here is where the community and the country get a substantial benefit, in what could be considered a joint public/private affair. By regulation and frankly through the need to work within the community, the benefits become more substantial.

Certain infrastructure projects need to be prepared before the mine construction can proceed. Roads have to be created or improved, and where required, power is brought in or improved. Generally, both are also available to the community and done in conjunction with local officials. If the size of the community cannot accommodate the construction or operating crew, generally the company arranges for accommodation for those not from the local community, providing electricity, water, and sewer services within that accommodation.

While most small villages have a primary school, it has become almost a standard for the mine to provide improvements, generally through supplies and equipment that the local community can use to improve the school’s facilities. Likewise, supporting medical clinics in the area is almost a standard practice. As mines are required to have a doctor available within a certain distance, their funding of regular medical care for employees results in a doctor who is effectively subsidized and available for the community. In many cases trained mine personnel can assist in emergencies and the requirement for an ambulance can service both the mine and a local small community.

Sometimes the dewatering required to keep a mine operating can provide an outflow, which can enhance local water supplies, supporting agriculture.

Ultimately a mine has a limited life, which can be extended based on metal prices but impacted negatively by rising operating costs, changing regulations, and taxes. The spin-off of additional capital being introduced to a community generating new projects and wealth can in many cases survive the life of the mine. Once the decision is made, there is time to look at what could be considered dual use assets, roads, electrical, and other types of infrastructure as well as mine-site accommodations and other buildings, water sources, among others. Traditional rehabilitation of some of the site is sometimes inappropriate where it can be integrated or adapted for the local community. 

There is an opportunity on the micro-economic level for local government to work with a local industry, especially mining, to address mutual issues with solutions that are under the federal horizon, and that are recognized for their contribution. In fact, many of these decisions can be part of the initial design of the facilities and integrated into the future community plan. Unfortunately, there is also an unrealistic expectation that an individual project can be burdened with the needs of a community and that represents the opportunity to work and fund some of these projects jointly with various levels of government. The situation where mining is unreasonably restricted, for example, simply eliminates the ability to address the needs of some of the more remote communities and alternative ways to address them. Perhaps there should be more input for smaller projects at the state or community level rather than just deferring to the federal bureaucracy and regulations.