Retaining Strategic Influence

Retaining Strategic Influence

In 2020, the Mexican mining sector demonstrated its strength and resilience despite the pandemic. In a year characterized by a shortage of demand, rising mineral prices and a sharp drop in others, Mexico’s mining industry moved forward despite these unforeseen difficulties.

According to Mexico Mining Chamber (CAMIMEX) projections for 2020, the country’s mining industry was forecast to attract approximately US$4.5 billion in total investments for the year. But this figure fell by half, according to CAMIMEX. “There is no need to be overly concerned," says Fernando Alanís, President of CAMIMEX. "We work in an industry that has always worked for the long term.”

Today, mining, as Minister of Economy Tathiana Clouthier highlighted at the Mexico Mining Forum 2021 (MMF21), is among the most strategic industries in the country. “The Gross Domestic Product (GDP) that is generated through mining is about 3.2 percent and we are pleased to see that these numbers continue to favor the country’s economy and the earnings of many Mexican families,” says Clouthier.

Despite these optimistic views, there are some in the private sector who view the public sector’s predictions and analysis with caution. According to Grupo México, investment in the sector fell by 36 percent between 2018 and 2019, while investment in exploration dropped 68 percent since 2012. “There is no adequate design for public policies that promote investment development and correct the lack of legal security and certainty,” says Xavier Garcia de Quevedo, Vice President of Grupo México.

The mining industry, which generated 379,000 jobs in 2019, will face in 2021 some of the most important challenges in its modern history, including the digitalization of operations, the safety of workers and communities, health issues as a consequence of COVID-19, the sustainability of the industry and the discovery and exploitation of new minerals, with lithium considered a new, but contested player.

Lithium, better known as the white gold, is key to the manufacturing of batteries. The metal, for which Sonora holds the most reserves, has been a source of contention as the government has sought to nationalize its production. Armando Alatorre, President of CIMMGM, says Mexico’s lithium possibilities are, however, “limited.” “The Senate's initiative to nationalize the lithium industry could have negative effects for the mining sector,” he said during MMF21. In his opinion, the bill lacks reliable information and today not a single mine or company in the country is involved in lithium production. “The most advanced Mexican project has only conducted pilot-plan-testing that is, by definition, in a very reduced production scale,” wrote Alanís in his article titled, Mexico’s Lithium Misconceptions and Facts, published in July by MBN.

Major Goals

Sustainability, inclusion of women, digitalization and the implementation of new technologies are major goals the Mexican mining sector wants to achieve. During the two months of closure due to the strict protocols the government enforced as a result of the pandemic, the industry decided to update itself in regard to technology and processes. Nevertheless, it is still far from the levels of technification in other mining jurisdictions such as Canada and the US. The US-Mexico-Canada Agreement (USMCA) does not incorporate mining as a subject, but rather as an object, since it is considered an essential industry for the development of other industries that are strategic in the agreement. “It is of utmost importance to highlight the true nature of the modern and professional mining industry that operates in Mexico. Mining is a responsible activity and demonstrates much respect for the environment. It is committed to the economic development of communities, regions and states where it operates. Mining develops supply chains and provides jobs, access to education, health and basic services. It is an industry that ultimately boosts the quality of life of the people in our communities,” says Alanís.  Doris Vega, Vice President of Women in Mining (WIM), considers that inclusion of women will also be an important topic of discussion in 2021. “Mining offers many opportunities for women that must be seized,” she says.

COVID-19 and the temporary shutdown of some of the world’s most important economies, such as China, the US and the EU, caused instability in the price of metals as a result of the imbalances in the demand of consumer countries, as well as production difficulties in manufacturing countries. CAMIMEX points out this situation had a direct impact on Mexico but also opened windows of opportunity for the mining industry, just like it did for the automotive industry, which is an example the mining sector could follow. According to CAMIMEX´s 2020 Annual Report, by implementing strategic support and a long-term plan, the Mexican mining industry could generate 50,000 direct jobs and 300,000 indirect jobs, which would increase the industry’s contribution to GDP by 0.5 percent. Such a plan would attract US$24 billion a year in investments, which in turn would have a US$1.2 billion yearly fiscal impact.

The Mexican mining industry continues to seek its place in a new post-COVID-19 reality, torn between focusing on strengthening the national economy while tackling its internal challenges. Convincing the population of the advantages of living in a mining country, demonstrating the sector's enormous influence on the country's economy and politics, and improving the relationship between the public and private sectors are the main concerns for a sector that sees 2021 between an optimistic future and an uncertain economic recovery.