Loss of attractiveness for mining investment expected to pressure next Mexico government

Mexico’s loss of attractiveness for mining investment, as reflected in the latest survey published by Canadian think tank The Fraser Institute, will put pressure on the next government – which assumes office on October 1 – to change the approach to the sector.

Mexico’s mining investment attractiveness score fell by 23 points, leading to a drop from 37th in 2022 to 74th in 2023 in the ranking due to increasing concerns over infrastructure, uncertainty regarding protected areas and regulatory duplication, according to the annual survey.

The Latin American country’s Policy Perception Index (PPI) score fell by 5 points, leading to a drop in the policy ranking from 44th to 68th.

The next Mexican president, who will be elected on June 2, must take into account the importance of the mining industry, sector representatives say. According to data from mining chamber Camimex, the industry is the sixth generator of foreign currency and one of the sectors that contributes the most taxes in the country, at almost 73bn pesos (US$4.37bn) in 2022.

“This new low in the international benchmark will just make it more arduous for Mexico to attract new mining investments,” Armando Ortega, president of the Mining Task Force of the Canadian Chamber of Commerce (CanCham), told BNamericas. 

“We have to look forward and convince the soon-to-be new political actors that there is no stronger ally for the energy transition than mining. And that mining offers worthy jobs and sustainable community development in regions where the only other option is organized crime,” he added.

According to preliminary economy ministry data, in 2023 the Mexican mining sector attracted US$3.49bn in FDI, up from US$1.60bn in 2022, including oil and gas extraction.

However, the figure was 27% lower than the US$4.8bn in 2021 when the industry benefited from high metals prices and the end of measures to contain the COVID-19 pandemic, among other factors.

When asked about the reasons for Mexico's loss of attractiveness for mining investment, Ortega mentioned “precarious respect for the rule of law, a hostile and unpredictable regulatory ecosystem for investment and deteriorated security environment.”

A respondent to the survey, an exploration company VP, was quoted as saying that “recent amendments (in 2023) to mining activity have emerged as a significant impediment to exploration efforts.” 

“This decline [in the 2023 ranking] is attributed to various political and security factors. This situation highlights the importance of changes in legislation and regulations, which can significantly impact the sector,” said Karen Flores, general director of Camimex, at the recent XV International Mining Meeting in Lima, Peru.

“Our industry will continue boosting investment and development in the country, seeking to contribute to the advancement of communities and the development of industries to promote safer communities and better-paying jobs,” Flores added. 

Metallic and non-metallic mining has been affected by the policy of the government of Andrés Manuel López Obrador to freeze new concessions, the slowness of permitting processes and the uncertainty generated after last May’s mining reforms, which, among other changes, gave geological service SGM exclusive exploration rights.

The lack of regulations for the four modified laws that apply to the sector keeps various mining processes halted, especially those linked to exploration, according to the industry.

A new presidential initiative for constitutional reform presented in January to prohibit open pit mining and prioritize domestic water consumption would pose new obstacles for mining and have serious economic effects if approved, according to sector representatives.

“Security, corruption, lack of commitment from the authorities, lack of issuance of mining concession titles for five years without any legal reason, a reform that prohibits exploration by private parties, the creation of protected natural areas without studies and without a budget... In a few words, there is a lack of the rule of law in Mexico,” Alberto Vázquez, partner at the Tête à Tête Abogados law firm, told BNamericas when asked about what is affecting the Mexican mining industry.

Mexico is the world’s largest silver producer and a leading producer of copper, gold and other metals.