Mexico: Mineral Policy
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KeywordsForeign Direct Investment Mining Company Free Trade Agreement North American Free Trade Agreement Metallogenic Belt
General Information on Mexico
Mexico covers an area of 1.96 million km2 and accounts for 11,593 km of coast line. Overlapping the Tropic of Cancer, Mexico is a megadiverse country, holding between 10% and 12% of the known species worldwide across prodigious and diverse ecosystems from arid deserts to tropical rainforests and coral reefs.
Mexico’s Federal Republic is composed of 32 states and 2457 municipalities. The government structure is comprised of the Presidency and its secretariats, the Legislative which is arranged into a bicameral Congress (Senate and Chamber of Representatives), and the Judicial power. States also have their executive, legislative, and judicial branches.
The country is the second largest economy in Latin America. In 2015, the GDP almost reached US$ 1.3 trillion. The primary sector of the economy generates 3.3% of the total GDP, secondary activities (where mining is included) generates 32%, tertiary activities generates 59%, and the remaining 5.9% corresponds to collected taxes (http://www.inegi.org.mx/est/contenidos/proyectos/ce/ce2014/default.aspx).
Distribution of wealth is notoriously uneven. On the one hand, indigenous people (25 million self-identified) and women figure as the poorest among the 55.3 million inhabitants living in poverty in 2014. On the other, from a total population of 122 million inhabitants, 1% owned, that same year, 21% of the national income (Esquivel 2015).
Need of Minerals: Reserves, Production, Exports, and Imports
Other mineral reserves include those of barite (mainly in Nuevo León, followed by Coahuila and Zacatecas with shared deposits in Jalisco-Michoacán and Oaxaca-Puebla), titanium (such as the occurrences in Baja California, Baja California Sur, Sonora, Tamaulipas, Colima, Oaxaca, Guerrero, or Chiapas), lithium (Sonora and Zacatecas), platinum (Sinaloa), and uranium (mainly in Chihuahua, Nuevo Leon, Sonora, Durango, Oaxaca, and Baja California Sur).
The official geographical information system of mineral deposits, activities, and other mining-related information is available at http://mapasims.sgm.gob.mx/GeoInfoMexDB
Mexico was in 2015 the worldwide leading producer of silver; the second in fluorite; third in bismuth, celestite, and wollastonite; fifth in lead, cadmium, barite, and molybdenum; sixth in zinc and salt; seventh in gold, selenium, plaster, and diatomite; ninth in manganese and graphite; and tenth in world copper production (SGM 2016).
The value of mining production has increased from MXN $ 45.2 billion (It refers to a thousand millions or 109) in 2002 to MXN $ 264.3 billion in 2015; a value lower than that of 2012 – the best year in the last decades when production value reached MXN $ 291.1 billion (SGM 2015, 2016). Mining and metallurgic activities combined reached MXN $ 417 billion in 2015, 37% more than in 2011 (SMG 2016). Precious metals represented 30.5%, industrial minerals 22.5%, and nonmetallic minerals 47% (Ibid). In terms of volume, mining productivity (comprises both volume and cost basis) has increased 4.7% annually during the period 2001–2012, more than the double experienced during the 1990s when productivity increased only at a rhythm of 2% (DOF 2014). In 2015, Mexico extracted 1550 million tons of materials from the Earth’s crust, almost 32% more than in 2014. Limestone, sand, basalt, gravel, and other stone aggregates represented 89% of the total, mostly stimulated by the renovation and expansion of domestic infrastructure (based on SGM 2016).
Main producer states in terms of value were Sonora (27.9%), Zacatecas (22.9%), Durango (10.1%), Chihuahua (8.7%), and Coahuila (8.4%) (Ibid). Nevertheless, just ten municipalities from three states generated 46.5% of the total value of the national mining production in 2014 (SGM 2015).
Exports and Imports
Mexico commercialized 1% of minerals globally in 2001, reaching 1.7% by 2012 (DOF 2014). The volume of minerals mobilized in 2014 thru Mexican ports, for the most part – measured in terms of value – gold (29.5%), copper (17.2%), silver (16.1%), and lead (10.9%), has been estimated at 28.8 million tons. (Precious metals represented 44% of exports value, industrial minerals 49%, and nonmetallic minerals 7% (Ibid).) Exports value in 2015 kept dropping, reaching US$ 14.6 billion in 2015 or 55% less than in 2012.
More than half of 2015 mineral exports (52%) had the USA as final destiny (mainly palladium [99% of all volume exported], gold [92%], barite [81%], fluorite [40%], lead [28%], zinc [16%], molybdenum [16%], and copper [14%]), 16.2% Europe (mainly bismuth [82%], fluorite [29%], molybdenum [26%], zinc [23%], and lead [17%]), 10.4% China (mainly copper [62%], silver [41%], and lead [21%]), and 7% South Korea (mainly molybdenum [33%], lead [18%], zinc [32%], and silver [12%]) (SGM 2016).
The value of mineral imports in 2014 increased 4% in relation to 2013, while in 2015, it decreased from US$ 8.6 billion in 2014 to US$ 8.1 billion. Industrial minerals represent 67% of Mexico’s imports (mainly aluminum [32% of the total], iron [13.3%], copper [10.3%]); and nonmetallic minerals 29% (coal leading with 9.7% and sodium with 3.4%); and the remaining 4% corresponds to precious metals (gold, palladium, silver, and platinum). Most of Mexico’s mineral imports, in terms of value, occurred from the USA (50.6%), Europe (9.4%), India (6%), China (4.6%), and Australia (4.2%) (SGM 2016). In relation to the metallurgic industry, production has increased from 263.7 million tons in 2010 to 287.2 million tons in 2014 (SGM 2015). Major metallurgic production, in terms of weight, corresponded to ferroalloys with 88% of the total (Ibid). Apparent national consumption of steel was 51 million tons in 2014, about 33% more than 2010 (Ibid).
Mining Industry Structure
Mining activities generated 0.98% of the total GDP in 2015, while the metallurgic activities added 1.95% of the total GDP (https://www.camimex.org.mx/index.php/secciones1/publicaciones/informe-anual/). Both recorded 344,912 direct jobs in 2015 which is about 0.6% of Mexico’s economically active population: 67.5% of jobs corresponded to the metallurgic industry. Indirect employment has been estimated at 1.7 million jobs.
There are around 3700 mining and mining-related companies in Mexico, including intermediaries (www.desi.economia.gob.mx/DES/) which by the end of 2015 served 1558 operating mines, 1156 exploration projects, and 19 metallurgic facilities (www.camimex.org.mx).
Extraction of gold, silver, lead, zinc, copper, molybdenum, manganese, and cadmium is highly or totally controlled by big-size companies (from 97% to 100% of total production); 84.6% of iron extraction is carried out by big-size companies and 14.8% by midsize companies; barite is extracted 59% by midsize companies and the remaining 41% by small-size companies (SGM 2015, 2016).
Total investment in the mining sector, domestic and foreign, reached US$ 4.6 billion in 2015 and US$ 4.8 billion in 2014, a cutback of 24.7% in relation to 2013 and of 38.5% in relation to 2012 (year of the highest investment ever). Total accumulated investment from 2001 to 2015 is about US$ 46.8 billion.
Foreign direct investment participation has no limitations, yet a clearance is required for those investors who intend to exceed 49% of the capital stock if the value of the target company exceeds MXN $ 4 billion.
National Mineral Policy
Increase investments and promote competitiveness (e.g., by extending the Mexican Geological Service research with the purpose of delivering more precise information for investment decision-making and by increasing legal certainty to sectorial investments while simplifying legal procedures)
Procure funding for extractive activities and its value of chain (e.g., thru the creation of regional mining clusters, by supporting mining councils at the state level and enhancing, diversifying, and expanding Mexico’s Mining Development Trust (Fideicomiso de Fomento Minero) portfolio and terms credit, as well as other public and private funding options
Support the growth and capitalization of small- and midsize mining and metallurgic businesses (private and socially owned) (It refers to micro mining undertakings, family owned or cooperatives. It’s mainly focused but not limited to construction materials and stonework.), including actions for transferring know-how and for the introduction of new efficient and sustainable technologies
Modernize the sector’s regulation and procedures to increase its accountability (Ibid)
In addition, special interest has been expressed in relation to the advancement of the exploitation of industrial materials, particularly iron and rare earth deposits; on the promotion of high impact mining projects (which are not defined); and regarding the need for expanding the financial support to metal processing plants, smelters, and collection facilities, as well as to those economic agents involved in the commercialization of minerals and mineral concentrates.
The metrics proposed for evaluating the Program are reach 45 points in the Behre Dolbear’s index (in 2013 Mexico had 43.1 points; by 2014 it already has 46 points); expand the geological cartography at a 1:50,000 scale, from 35.8% to 44.8% of the national territory (or 877,717 km2); increase the amount of loans allocated and the number of companies assisted; and reduce the time necessary to evaluate and issue mining titles (from 140 days to 90 days).
Despite the intentions to strengthen the value chain of the mining sector, there is a continuity on an export-led scheme (as the data presented above shows). Improving conditions for exporting as many minerals as possible is clearly a motivation. (This can be as well concluded from the outlook studies carried out by the Mexican Geological Service at the state level, available online: www.gob.mx/sgm/articulos/consulta-los-panoramas-mineros-estatales. Data from the National Chamber of the Iron and Steel Industry of Mexico show an increasing negative trade balance (Mexico is currently exporting 4.3 million tons and importing 13.7 million tons of steel, mainly to assemble vehicles), decreasing investments in the sector (from US$ 2557 million in 2013 to US$ 1311 million in 2015) and a persistent reduction in employment created since 2010 (www.canacero.org.mx/Es/assets/infografia.pdf).) Yet there is a lack of public transparency and accountability by the government agencies regarding future minerals demand, national production and export capacity building, and the associated socioecological implications. At the same time, there is not a clear-cut vision to strengthen the relationship between mining and the metallurgic-mechanical industry. Thus, the possibilities to foster national value-adding processes, in a sustainable and socially responsible manner, are certainly not being fully pursued, specifically in those areas where most of the value is generated but also in relation to know-how and innovation in manufacturing machinery (currently imported from Germany, Japan, and the USA). This issue may change as more attention is paid to the domestic market because of an eventual reduction of commercial relations with the USA. This seems to suggest the “made-in-Mexico” initiative (February 2017) and the intentions of Giant Motor’s (controlled by Carlos Slim’s financial services conglomerate) of manufacturing a made-in-Mexico electric vehicle by 2018.
A long-term vision Program may be part of a profound transformation of Mexico’s productive matrix, one aimed toward a more knowledge-intensive, low-carbon, and sustainable economy, a context in which energy consumption efficiency and recycling are two key actions to confront environmental constraints, material supply risk, and reserve depletion. However, currently there is not a specific federal program for metal and scrap recycling despite the fact that the country disposes of about 1.1 million tons of metals annually of which only 39% are in the best case recycled (SEMARNAT 2013). Due to Mexico’s low technological development in the metal recycling sector, a great part of the collected metals – formally and informally by waste pickers – are exported and processed elsewhere. Major challenges therefore are the high degree of informality, the lack of sufficient data, and a weak regulatory framework.
According to Mexico’s Federal Constitution, minerals are property of the nation, and thus, its exploration and exploitation can only be carried out thru concessions granted by the General Direction of Mining Regulation of the Secretariat of Economy. Mining concessions grant the right for exploiting all types of minerals, excluding oil and gas and radioactive materials. Titles for mineral exploration and exploitation are granted for 50 years, renewable for a second period of the same length. In both cases, a first-come, first-served approach has been established for allocating titles, yet mining rights and surface rights are separated. (Mining rights are separated from surface rights; therefore, companies must buy or rent land with the expressed consent of landowners. Mining companies may have access to the surface of the area covered by the mining title through temporary occupation, a sort of mandatory lease (see: www.economia.gob.mx/files/comunidad_negocios/industria_comercio/informacionSectorial/minero/guia_de_ocupacion_territorial_0513.pdf).)
During 2001 to 2012, 28,807 titles were approved, covering 61.7 million ha. Only 198 titles or 0.68% of total titles granted allowed the control of 34.6% of land area concessioned to mining activities during that period (DOF 2014). Between 2013 and 2015, almost 3000 new titles or renovations were granted (for a full list of such titles, see www.siam.economia.gob.mx/es/siam/2015).
Mining activities are regulated by multiple laws, the core one being, the Ley Minera of 1992 (latest amendment: August, 2014) (see www.diputados.gob.mx/LeyesBiblio/pdf/151_110814.pdf) and its latest rules of procedure of 2012 (Reglamento de la Ley Minera; latest amendment: October 2014). Environmental aspects are regulated by the Ley General de Equilibrio Ecológico y Protección al Ambiente (latest amendment: May, 2016) (see www.diputados.gob.mx/LeyesBiblio/pdf/148_130516.pdf) and five environmental standards (NOM-120-SEMARNAT-2011, NOM-141-SEMARNAT-2033,NOM-155-SEMARNAT-2007, NOM-157-SEMARNAT-2009, NOM-159-SEMARNAT-2011); water concessions and regulations are regulated by the Ley de Aguas Nacionales (latest amendment: March, 2016) (see www.diputados.gob.mx/LeyesBiblio/pdf/16_240316.pdf) Water concessions and land ownership are separated. Water concessions are granted by Comisión Nancional de Agua for 5–30 years, and may be extended for the same period. Concession holders may transfer rights after the approval of the Commission; land tenure and other related aspects are regulated by the Ley Agraria (latest amendment: April, 2012) (see www.diputados.gob.mx/LeyesBiblio/pdf/13.pdf); waste management is regulated by the Ley General para la Prevención y Gestión Integral de los Residuos (latest amendment: May, 2015) (see www.diputados.gob.mx/LeyesBiblio/pdf/263_220515.pdf); mining rights and fees are regulated by the Ley Federal de Derechos (latest amendment: December, 2016) (see www.diputados.gob.mx/LeyesBiblio/pdf/107_071216.pdf); foreign direct investment is regulated by the Ley de Inversión Extranjera (latest amendment: December, 2015) (see www.diputados.gob.mx/LeyesBiblio/pdf/44_181215.pdf). Other regulatory instruments are the Federal Civil Code (latest amendment: December, 2013) (see www.diputados.gob.mx/LeyesBiblio/pdf/2_241213.pdf) and the Ley General de Desarrollo Forestal Sustentable (related to sustainable forestry; latest amendment: May, 2016) (see www.diputados.gob.mx/LeyesBiblio/pdf/259_100516.pdf), among others such as those regulations related to labor conditions (NOM-023-STPS-2003), archeological preservation, and regular taxation.
Rights and Royalties
Rights must be paid for all mining concessions to the federal revenue service (Servicio de Administración Tributaria). Concessions are established in terms of land area, not on the type of extracted mineral. Applications for titles, studies, and resolution fees are determined by the extension of the area involved. In 2016, the annual fees per hectare for exploration and extraction were established as low as MXN $ 571 (about US$ 28) for up to 20 hectares and as high as MXN $ 177,495 (about US$ 8658) for more than 50,001 hectares. Renovations pay only 50% of the amount previously indicated. Other fees apply as well for a diversity of specific legal procedures such as registering to mining societies, notarial notifications, cartography, etc. (see Article 64 of the Ley Federal de Derechos).
Mining companies must pay a conventional income tax (ISR – impuesto sobre la renta); a special mining tax on income before tax, depreciation, and interest of 7.5%; and an additional tax of 0.5% on gross revenues generated from gold, silver, and platinum mining. An additional 50% fee may be charged by the government to all non-explored or exploited concessions during two consecutive years. During 2015, mining companies paid MXN $31,780 million in taxes and duties (www.camimex.org.mx). In 2006, the total amount of taxes paid by mining companies was MXN $12,060 million, in 2009 MXN $17,537 million, and in 2012 MXN $ 22,267 million (Camimex 2015).
Land Access and Social Conflicts
Mexico has three types of land property: private, public (of the State), and social. About 53% of land is social property (composed by 2344 communal units and 29,441 ejidos, all covering more than 100 million hectares of which 62 million are forests, jungles, and scrublands) (Reyes et al. 2012). This land property implies a complex and uncertain relationship between landowners and mining companies, particularly in those cases where indigenous communities are involved (as there are specific indigenous rights recognized in Mexico’s legal framework in accordance with the ILO Convention 169). Obtaining, and even more, maintaining the consent of landowners – beyond the legal consent and procedures – can be an everyday challenge and may derive into a social conflict.
Other disputes may rise from tensions related to the amount of fees and land rents to be paid by mining companies to landowners, complaints about potential or existing environmental degradation, water access and use, population displacement, or even the disappearance and murder of social leaders. See some study cases at the Latin American Observatory of Mining Conflicts website (basedatos.conflictosmineros.net/ocmal_db) or the Environmental Justice Atlas website (ejatlas.org).
Mexico’s International Memberships
Mexico is a member of the International Monetary Fund, the World Bank, G20, UN – Conference on Trade and Development, World Trade Organization, Organization for Economic Co-operation and Development, Inter-American Development Bank, World Intellectual Property, and International Labour Organization (including the ratification of C169 in Indigenous and Tribal Peoples Convention), among other international institutions and organizations.
The country has signed several free trade agreements including the North American Free Trade Agreement – NAFTA (1992) and an agreement with the European Union (1997). Bilateral Investment Treaties have been signed with almost three dozen countries from all continents, omitting Africa. All of them impact mining and metallurgic activities somehow. Additionally, some memorandum of understanding related to mining cooperation has been signed with China, South Korea, and Cuba.
Mexico is not yet a member of the Extractive Industries Transparency Initiative, but efforts are under way since mid-2014 (www.gob.mx/cms/uploads/attachment/file/58733/EITI-M_xico_Avances_Febrero_2016.PDF).
The country has signed and implemented multiple environmental multilateral agreements, including the Stockholm Declaration (1972), the Montreal Protocol (1987), the UN Convention on Climate Change (1994), and the related Paris Agreement (2016), among others.
- Camimex (2015) Informe annual 2015. Cámara Minera Mexicana, México. www.camimex.org.mx/index.php/secciones1/publicaciones/informe-anual/informe-anual-2015/. Accessed 8 Feb 2017
- DOF (2014) Programa de Desarrollo Minero 2013–2018. Diario Oficial de la Federación. Mexico, 9 May. www.dof.gob.mx/nota_detalle.php?codigo=5344070&fecha=09/05/2014. Accessed 8 Feb 2017
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- Reyes JA, Gómez JP, Muis RO, Zavala R, Ríos GA, Villalobos O (2012) Atlas de Propiedad Social y Servicios Ambientales en México. Instituto Interamericano de Cooperación para la Agricultura. Cooperación Técnica Registro Agrario Nacional – Instituto Interamericano de Cooperación para la Agricultura, MéxicoGoogle Scholar
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- SGM – Servicio Geológico Mexicano (2015) Anuario Estadístico de la Minería Mexicana, 2014. México’s Federal Government. MéxicoGoogle Scholar
- SGM – Servicio Geológico Mexicano (2016) Anuario Estadístico de la Minería Mexicana, 2015. México’s Federal Government. MéxicoGoogle Scholar