Mexican industry associations warn of economic fallout if open-pit mining is banned

Even though a proposal by Mexican President Andrés Manuel López Obrador to ban open-pit mining is not among the priorities of president-elect Claudia Sheinbaum, the lower house committee on constitutional matters approved the initiative last week, ringing alarm bells in the mining industry.

The proposal is part of a package of constitutional reforms presented by the executive branch in February, within what it calls Plan C, and which includes the controversial reform of the judiciary.

Three of the country's biggest mining associations have warned of the serious risks that such a ban would pose to the country if approved by lawmakers and senators in the coming weeks.

The Mexican mining chamber (Camimex) estimates that if the reform is passed as it is currently drafted, it would lead to an economic contraction of 250 billion pesos (US$13.2bn) annually, equivalent to around of 1% of GDP.

“It would remove Mexico's status as a mineral producer, turning it into an importer. These imports would grow by 132%, causing a trade deficit of 93bn pesos,” Camimex said in a statement.

The chamber also noted that Mexico's role as a producer of nine critical energy transition minerals for the North American region would be restricted, since both the US and Canada allow open-pit mining, albeit with regulations.

The Mexican association of mining engineers, metallurgists and geologists (AIMMGM) calculates that the ban would have a serious negative impact on national economic growth, because 59% of the value of domestic mining output is contributed by these types of operations.

The AIMMGM also warned that any such prohibition would lead to the destruction of a strategic sector for the national economy and threaten Mexico's mining sovereignty by forcing it to depend on imports.

"The resulting economic depression would be difficult to reverse in large regions of the country, mainly in states with mining activity, since mining is carried out in 696 communities in 212 municipalities," the association said in a statement.

Meanwhile, the college of mining engineers, metallurgists and geologists (CIMMGM) claims that approval of this reform in the upper and lower chambers of congress would halt investments in mining.

“Informal mining and unregulated trade in minerals and metals would be encouraged,” it said in a bulletin. “In the near future, the country would be deficient in some minerals and metals that are essential for human and national development.” 

The three associations argue that, rather than banning open-pit mining, it should be encouraged in a responsible manner to serve Mexico's best interests, as well as to avoid penalizing industry that acts responsibly or limiting the country's competitiveness.

“Open-pit mining should be regulated, not stigmatized. Let us continue to keep Mexico in its leading position as the main producer of essential minerals for the development of renewable energy, technology, medicines, transportation, furniture, household appliances and practically everything that humanity requires to make its life more productive and efficient,” the AIMMGM said.

Both the AIMMGM and Camimex reiterated their continued willingness to participate in constructive dialogue with the executive branch, as well as all other authorities and stakeholders, to find solutions that contribute to fair environmental, social and economic development.

The CIMMGM also offered its collaboration to legislators and the government executive and reiterated its commitment to responsible mining in Mexico.

The ministry of economy has a register of 264 open-pit mines, most of which are located in Sonora, Zacatecas, San Luis Potosí and Chihuahua states. Large mines such as Newmont's Peñasquito mine and Grupo México's Buenavista del Cobre asset are open pit operations.

On September 1, ordinary sessions will begin in congress, where the ruling Morena party and its allies hope to have a qualified majority, although the councilors of electoral authority INE still have to assign the plurinominal seats in the lower house. However, the opposition is disputing how these remaining seats should be divided with the aim of preventing the governing coalition from gaining n overwhelming majority.