What Is the Extent of Foreign Capital in Mexico’s Mining Sector?

In today’s global economy, capital goes from any country to any country in so far as an opportunity exists to gain market share and, obviously, profits. Oftentimes, those investments are regarded as extremely good for both sides of the equation, both those who send money and those who receive it. Also, in general terms, nobody questions the relevance of such capital investments. However, when mining is involved, everything is turned around and foreign investment is not fully recognized for what it mainly provides: a complement to growth. Part of the problem stems from the foundation that all resources belong to the “nation.” As a result, many people wrongly believe that means that  mining activity should not have any component from other countries. Let us state clearly that not a single foreign mining company holds rights for exploration, development and, eventually, mining production; what happens in real life is that those foreign companies must establish a Mexican company that holds the cited rights throughout mining concessions and where the foreign shareholders apport their money following what the law establishes on that subject (Ley de Inversión Extranjera).

The Mexican Chamber of Mines (CAMIMEX) in its most recent annual report (2022) states that direct foreign investment in 2021 was just 43.8% of the total invested in all aspects of mining, from exploration to ecological and social issues. In order to have a better idea based upon that same report as well as INEGI data, the following lines will show how much of the leading Mexican mining products are obtained by companies that have investment coming from somewhere else and, obviously, also what is produced by Mexican companies. CAMIMEX has established that our country is a relevant producer of 22 different products: eight metals —silver, lead, molybdenum, zinc, cadmium, gold, copper and manganese — and 14 industrial minerals —  fluorite, sodium sulfate, wollastonite, celestite, barite, diatomite, magnesium sulfate, salt, gypsum, feldspar, kaolin, graphite, silica sand and phosphorite.

Probably the easiest way to illustrate the landscape is to first establish those cases where all of what is produced comes from 100% Mexican mining companies, or at least, where nearly all of the significant volumes are obtained by such companies. That list comprises 10 of the 22 products (two metals and seven industrial minerals): fluorite (second  in world production) at about roughly 1 million metric tons per year), sodium sulfate (third place) at nearly 780 kt/year, celestite (fourth place) at around 21 kt a year, magnesium sulfate (fifth place) at nearly 64 kt/year, molybdenum (fifth place) and around 17 kt/year, cadmium (eight  place) and close to 1,000t per year, manganese and kaolin (both in 12th place) at about 220 kt/year each of them, graphite (13th place) with a tiny output of 1.7 kt/year, and, finally, phosphorite (22nd place) with only 450 kt/year.

In contrast, let’s look at those cases where all of what is produced comes from 100% foreign-controlled mining companies, or at least, where nearly all of the significant volumes are obtained by such companies. This list embraces just two and both are industrial minerals and not a single metal: wollastonite (third  place) with almost 100 kt/year, and diatomite (fifth place) at nearly 150 kt/year. There are two additional products where most of the Mexican production comes from companies that have  foreign investment but where there might be small national producers for which it is difficult to identify and measure their contribution. Those two are feldspar (eighth place) with 350 kt/year, and sílica sand (15th place) at nearly 2.5 Mt/year.

The remaining eight products: silver, lead, barite, zinc, salt, gypsum, gold and copper need a more elaborated analysis because, on the one hand, the production is distributed among several companies in each case and, on the other, both national and foreign-related companies are prominent contributors in the output; so, let look at each one.

Silver: Obviously, this is the most significant Mexican metal, holding the No. 1 place in world production. For 2021, CAMIMEX reported production of 196.04 Mozt,  breaking it down for the 15 main mines in the country representing 135.39 Mozt or about 70% of the total; from that amount, 44.2% was obtained by Mexican companies and 55.8% was from companies that have foreign investment.

Lead: Fifth place in world production; 272.231 kt was produced in 2021, as reported by CAMIMEX. From that, nearly 80 % (217.39 kt) was obtained from the 15 main mines, with  45.3% from companies of this country and 54.6 % from companies whose capital is not national.

Barite: fifth place in world production. 2021 Mexican production was  321 kt. There is little information about the producing mines, but an “educated guess” suggests about 60-75% was produced by Mexican companies and the rest from others that have some proportion of foreign capital.

Zinc: fifth place in world production. 2021 Mexican production added up  to 742.926 kt, with the 15 main mines in the country representing 618.58 kt or about 83% of the total. From that, 63.6% was obtained by Mexican companies and 36.3% was from companies that have foreign investment.

Salt: eighth place in world production. 2021 Mexican production was 7.64 Mt, from which about 73% came from a single operation that had 49% of foreign capital invested.

Gypsum: eighth place in world production. 2021 Mexican production reported by CAMIMEX totaled  6.39 Mkt; there is little information about the producing mines, but an “educated guess” is that  about 60-75% was produced by companies that have a large proportion of foreign capital.

Gold: eighth place in world production. 2021 Mexican production reported by CAMIMEX totals 4.01 Moz and breaks .The 15 main mines in the country represented 2.75342 Moz or about 69% of the total. From that, 28.3% was obtained by Mexican companies and 71.8% was from companies that have foreign investment. Therefore, in this case, the main component of production, by far, comes from foreign investment.

Copper: 10th place in world production. 2021 Mexican production reported by CAMIMEX totaled 734.137 kt. The 15 main mines in the country represented 560.94 kt or about 76% of the total. From that  amount of the metal, 91.2% was obtained by Mexican companies and just 8.8% was from companies that have foreign investment.

In summary, all economic activities benefit from direct foreign investment that helps to grow both production and value, in addition to several other beneficial aspects, such as taxes and employment. From what has been observed in this article, it should be noted that investment coming from other latitudes into the Mexican mining industry is, obviously, relevant in the 22 products for which the country is a world reference, and in some minerals more than others. Gold has a strong influence on such capital as well as feldspar and silica sand, whereas silver and lead are not exactly even, but close to attaining that level. By contrast, the mining of 10 products have not a single operation where foreign investment is involved: fluorite, sodium sulfate, celestite, magnesium sulfate, molybdenum, cadmium, manganese, kaolin, graphite and phosphorite, while copper has an outstanding 91.2% produced by Mexican companies. It must be said that the information analyzed here covers just the 22 main mining products, but the same CAMIMEX report lists figures for about six others: bismuth, selenium, coal, coke, sulfur and dolomite where the national component must be close to 100%.