Removing Mining Undersecretariat Will Harm Mexico’s Industry
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Removing Mining Undersecretariat Will Harm Mexico’s Industry

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Alejandro Ehrenberg By Alejandro Ehrenberg | Journalist and Industry Analyst - Wed, 06/10/2020 - 17:05

It has been almost a month and a half since President López Obrador signed an austerity decree that includes the disappearance of 10 undersecretariats. At the time of writing, the President has not yet defined which undersecretariats will be scratched out. Nevertheless, it is likely that the Undersecretariat of Mining is among the 10 chosen ones, according to El Economista. Senator Miguel Lucero has voiced opposition to this outcome, proposing instead the creation of a Ministry of Mining.

As reported by Outlet Minero, Senator Lucero said that “creating a Ministry of Mining is crucial for bringing to fruition all matters related to the mining industry, which is essential for Mexico’s development.” He went on to say that a way must be found for the Undersecretariat of Mining to become a federal Ministry. Senator Lucero added that the Ministry of Economy may successfully absorb some of the Undersecretariat’s functions, “but ideally there should be a specific office to meet the requirements of the industry.” Senator Lucero pointed out that the Undersecretariat of Mining’s potential disappearance is under discussion between President López Obrador and the Senate’s Mining and Regional Development Commission – which Senator Lucero heads.

Prominent labor leaders have voiced support for Senator Lucero. Javier Villarreal, Undersecretary of Labor of the Confederation of Workers of Mexico (CTM), considers the Undersecretariat of Mining key for Mexico’s industry, NTR Zacatecas said. According to the aforementioned newspaper, Villarreal remarked that “there are voices in the legislative branch that speak of elevating the Undersecretariat to the level of a Ministry. That could be positive. What is important for now is that the Undersecretariat is maintained and not lowered in rank.” Villarreal also said that killing off the Undersecretariat of Mining would represent a setback, “especially given that Mexico is a mining country and that today, more than ever, the sector must be strengthened.”

In terms of the total mining production of certain key minerals, Mexico’s main Latin American rivals are Chile and Peru. According to data released by the US Geological Survey, Mexico is the largest silver producer in the world, closely trailed by Peru. Regarding gold and zinc, Peru tops Mexico. Chile is the world’s top copper producer, followed by Peru — Mexico is the world’s eighth-largest producer of the red metal. In terms of mining’s contribution to national GDP, Mexico’s industry adds roughly 4 percent to the total. Peru’s miners contribute 10 percent to the national GDP. Chile’s mining industry represents 10.9 percent of the country’s GDP

Chile and Peru have ministries particularly dedicated to mining. The Chilean Ministry of Mining was created in 1953 and is in charge of coordinating and organizing the exploitation of Chile’s mineral resources. The Ministry of Energy and Mines of Peru is in charge of the country’s energy and mining sectors. It was founded in 1968. These ministries provide long-term, well-informed mining policies and legal stability to their respective countries.

Mining is an extremely capital-intensive activity with protracted ROI time frames. Thus, stability is absolutely crucial for attracting investment. To this point, Octavio Alvídrez, CEO of Fresnillo plc, commented during an interview with Mexico Business News: “Mexico has significant geological potential, but so do Peru and Chile — and Argentina, to a certain extent. Newcomers include Ecuador and Colombia. The US and Canada remain very competitive in designing and putting in place all the conditions necessary to invest in mining. Against this backdrop, it is crucial that Mexico create long-term mining policies that promote investment and guarantee legal and fiscal certainty.” Jason Reid, CEO of Colorado-based Gold Resource Corp, concurs with Alvídrez. In a conversation with Mexico Business News, Reid said: “If uncertainty in Mexico continues, investors are going to look elsewhere. We will continue to explore in our producing assets, but less exploration will take place in our other concessions until we see clear, positive signals from this administration.”

There may be some reasons supporting President López Obrador’s austerity measures in the face of the COVID-19 outbreak. However, eliminating the Undersecretariat of Mining would certainly be a step back, given the sector’s massive contribution to the nation’s GDP and the urgent need to solidify Mexico’s global mining competitiveness.

Photo by:   International Monetary Fund

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