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News Article

Sustained Investment Benefits Mexico’s Mining Industry

By Karin Dilge | Mon, 06/13/2022 - 13:36

Despite lingering political and legal uncertainty, the Mexican mining industry remains a key target for a sustained surge in foreign direct investment (FDI), fueled by strong metal prices. For 1Q22, FDI in the metallic mining sector stood at US$610 million.

Although this figure is significantly lower than the US$1.06 billion in 1Q21, it represents a positive outcome for the industry in a second consecutive year of US$2 billion-plus of investments, reported BNamericas. In 2020, full-year FDI was US$295 million, while between 2016 and 2019, the figure was around US$700 million annually.

Investment in the mining sector is being stimulated by strong metals prices, with gold being traded in the range from US$1,750 to US$2,000/oz during the past 24 months. Silver is being traded between US$20 and US$30/oz range and copper has remained in the range from US$4 to US$5/lb since the beginning of 2021.

Nonetheless, investments in the mining sector are forecasted to fall sharply in 2022, mainly due to the government's ongoing efforts to implement unfavorable reforms, said the Director General of the Mexican Mining Chamber (CAMIMEX), Karen Flores.

Since the beginning of his term, President López Obrador has been openly critical of mining companies, claiming that they are socially and environmentally damaging. His administration has taken measures that have weighed on the investor sentiment. Some of the steps taken include a freeze on new mineral concessions and increasingly stringent environmental permitting.

“The annulment of mining concession due to issues that are not expressly considered by the Mining Law and its regulation, such as the lack of previous and informed consultation procedures (…), reflects unreliability to the international community and potential foreign companies seeking to invest in our country,” said Pablo Méndez Alvidrez, Managing Partner, EC Rubio.

Nevertheless, the mining sector is in the leading position when it comes to Mexico’s industrial activity. The National Institute of Statistics and Geography (INEGI) informed that the Monthly Indicator of Industrial Activity (IMAI) of Mexico increased by a 0.6 percent monthly rate in April 2022.

The monthly variation reported by the INEGI showed that mining advanced 1.4 percent, the manufacturing industries 1.2 percent and construction 0.5 percent. Meanwhile, the production, transmission and distribution of electric energy, water and gas to the final consumer increased by 0.2 percent. 

The data used in this article was sourced from:  
Mining Mexico, Bnamericas, MBN
Photo by:   pixabay
Karin Dilge Karin Dilge Journalist and Industry Analyst