At lunch today a colleague posed the question, would you invest in a Mexican mining enterprise? My answer: I honestly don’t have a clue.
A rational approach could be, you have a country that is a member of the OECD, is experiencing steady post-recession growth which all seems to point to a relatively good place to do business. On the other hand you must accept the other reality, that the drug war still rages on, and the destruction and mayhem with which it is associated would make any investor wary.
I thought I’d have a look first, whether there are many mines in Mexico to start with? Initially I went on to the Company/Properties search on InfoMine, but then I decided to go see a colleague who has a map of all the Central American mines on her wall. If you are jealous, you can go here to get one. What I found was a depiction of a very well developed mining sector, almost 90% of the mines in Central America, located in Mexico. For a more comprehensive look at mining in Mexico, have a look at the country profile.
So at least there is one thing I found out with a little bit of research, it is not uncommon to operate a mine in Mexico, bravo. However, what about setting up a mine in Mexico? There is no wall chart adorning anyone’s wall that can help me there.
Corruption is an obstacle that may have to be overcome. In terms of making as sure as possible that your mine will get the go ahead, there are a number of ways to approach this. On the one hand, an ethical approach could be followed making it beneficial in terms of employment and improved services for the local population. Or the other way, choosing a smaller group of beneficiaries, local politicians etc. which may prove to be quicker. The very recent occurrences at major Canadian Engineering firm show that there is always potential for people in power (even successful people with much to lose) to forget their companies code of ethics in search of prestige and profit.
Canadian mining has the lion’s share of development in Mexico with 210 of the 279 mining corporation operating in the country. The same article also points to bribery in what would appear to be a profitable gold mining sector. It is also worth noting, that paying such a bribe in Mexico is a crime in Canada.
So again, is Mexico a good place to invest in mining? All I have established is that, there exists a developed mining industry, with a large Canadian presence, which seems to be turning a tidy profit irrespective of the current security situation. But is there something my little desk study has missed? Or is investing in a Mexican mining enterprise as valid as in Chile, Peru, or even Canada?
I´AM MEXICAN AND I HAVE MINES HERE IN MEXICO. THE MAIN PROBLEM IS OWNER´S LAND. MAINLY IN MEXICO THE PROPERTY OF LAND IS CALL “EJIDO” IS WHERE A LOT OF PEOPLE HAS THE SOME PORTION OF LAND AND IS NO EDUCATION PEOPLE IS VERY HARD MAKE SOME NEGOTATION WITH THEM.
IS EASY TO RENT THAT LAND BUT THE PROBLEM IS WHEN YOU START THE PRODUCTION OF THE MINE EASILY THEY CAN CLOSE THE MINE TO ASK MORE MONEY , DOESN´T MATTER IF YOU HAVE A CONTRACT THE GOVERMENT NEVER GONNA RESPECT YOUR CONTRACT YOU ARE IN INDEFENSION TOTAL
LATELY THE INSECURITY, OFTEN THE DRUGS CARTELS MEMBERS STOLE YOUR PRODUCTION YOUR TRUCKS EVEN THE TOOL AND EQUIPMENT.
IS NOT THE BEST MOMENT TO BRING YOUR MONEY, PERHAPS GET THE PROPERTY AND STAN BY HOPING BETTER TIMES.
Hi Jack, I appreciate your comment and research about this topic. Unfortunately your understanding about bribe and corruption is quite accurate; we have learned to deal with it. Of course in Canada is a crime while in Mexico is a common activity, the hardest part is to explain that to Canadian Directors. Some politicians, I can’t speak generally, but some will be happy to help you in your operations if you cooperate with them as well. Otherwise permits, grants and even return on taxes will take forever.
As Antonio said, Mexico is not governed by rule of law, mainly when it implies social issues government stay aside since it might affect them in politic terms, so land owners plus other groups of interest could have advantage and affect the company’s operations. But in my opinion this mostly happens when a company didn’t manage its operations smartly from the first beginning.
There’s also a good part!!! Mexican people is easy to work with, noble and willing to cooperate.
I think if a junior company plan ahead to invest in Mexico a smart movement is just to do things right from the beginning, not to create big expectations in an early stage, work with government and mainly include them in land negotiations, hire locals, they are the people that will give you the social license to operate.
There are more probabilities to succeed than failed by following common sense.
Getting back to your question about if its Mexico is a good place to invest in mining? I would say yes, it will depend on the company and the experience from people that run their operations just like in any other country.