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Worldwide Banking Services with Mining Core

Carlos Díaz de la Garza - Scotiabank
Managing Director of Corporate Banking and Head of Global Loan Syndications Mexico

STORY INLINE POST

Wed, 10/21/2015 - 15:41

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Q: How does Scotiabank’s vision for growth in Mexico vary from your strategies in other countries?

A: Mexico is one of Scotiabank’s most important bases as we have over 650 branches and we have purchased other franchises in the country. We are very focused on growth in Mexico and we want to involve ourselves in all types of investments, including commercial banking and corporate banking, as our strategy fits perfectly with emerging markets. It does not matter if investments go to Turkey, Brazil, China, or India because the flow of global investment is easy. In other words, it is easy for companies to go to any part of the world to invest even while regions are competing between themselves to receive these investments. Against this backdrop, Mexico needs to be competitive to be an attractive destination. It needs to improve its security and it must provide stability in terms of taxation. If these areas are not improved, investments will go to Colombia, Chile, Poland, or any other country with mining sites that can more easily be developed. Structural reforms were passed in Mexico during 2013 and 2014. If the country is able to properly implement these reforms and provide the required certainty that companies need, we will see a boom in the amount of investment and the amount of companies coming to Mexico.

Q: How important is mining to Scotiabank’s overall operations worldwide?

A: Mining is one of our most important practices. We have a head mining hub located in Toronto, as well as additional teams focused on mining in Vancouver and other parts of the world. These hubs contain certified and qualified geological engineers who are very knowledgeable about industry requirements. Our ScotiaMocatta brand is also used to purchase and monetize gold and silver and handle silver streaming. It is a unique franchise that provides a competitive advantage for purchasing precious metals. We are the largest bullion purchaser around the world and are responsible for transporting 25% of the physical gold and silver worldwide. We do this by purchasing doré bars from international mining companies and providing them with liquidity. Local producers sell us the doré bars that they produce. They call to inform us of the purity of the bars, we establish a line of credit, and then deposit the money immediately. Sometimes, we stock the bars in different regions so that we always have access to the metals that we are being asked for. ScotiaMocatta is a one-stop shop for handing in mining products.

The bank holds an international conference on mining, known as the Scotiabank Mining Conference, every year in November. It is a two-day event where we invite the CEOs and CFOs of all the mining companies to give presentations for investors. Last year, some of the themes discussed were the uncertainty in commodity prices, the fact that gold and silver prices were going down, and the difficulty in making these businesses as profitable as they were.

Q: How do you think changes to the regulatory environment are affecting the mining industry?

A: I always supported a mining royalty in Mexico. The fact that the royalty was passed was not a surprise, but the amount of 7.5% was. My view is that the government is knowledgeable enough to identify a situation where business is being damaged and will seek to correct it. Since only 25% of the Mexican territory has been explored, I am certain that the country still holds many mines of a comparable size to Peñasquito. Mining has a lot of room to grow, and I think that the government understands that it needs to act as a regulator, promote business, and provide certainty in terms of rule of law and future business practices. They should not change the taxation scheme on an annual basis, and if something does not work, the government needs to go back, modify it, and present it to Congress for approval.

Another matter is that companies should receive certain special benefits during the exploration process, particularly in the projects they set up among communities. I have seen many Australian, Canadian, and Mexican companies go to local communities and municipalities and actually change the living standards of the people. They invest in new hospitals, roads, and schools, all of which are sorely needed. These expenses are all part of what the tax aims to cover. The government should take this into consideration and reduce the amount of tax that these companies have to pay. In essence, companies that have been socially conscious have already been paying these taxes.

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