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Andrew Smolski

Andrew Smolski

Andrew Smolski is a contributor at Oilprice.com and specializes in Political/Economic Sociology. His work has been syndicated in many leading online publications and he can…

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Mining and Better Business Practices in Mexico

At the moment México has multiple mining operations and many are operated by transnational corporations, in a country known for its aversion to any form of foreign presence within its borders. On the other side, Mexico is also exporting more and more minerals to places such as China, with exponential growth in this area of trade due to a favorable climate for mining from the federal government. The people are against, the government for, and transnational mining companies are typically uninterested in what the people who live on the land or in the region think. This article will look at what is being exported, by whom, wages, and how it would be easier to conduct businesses if rule one of trade was followed, that everyone receives a benefit.
As of 2009 México was the 14th largest producer of gold, and as reported by Caminex, more mining companies are coming to México all the time. In 2009 alone it produced 51,392.85 tons of Gold, mostly in large mines. It produced 384,477.78 tons of zinc, 227,749.87 tons of Copper, and the list goes on and on with México being a resource rich country. It is a world leader in silver (#1 producer of silver), gold, and base metals, and ranks top 10 in salt, lead, and manganese. In total this industry produced in thousands of pesos, 94,816,874.5 worth of minerals, for the year 2009 with a .8% increase from the year 2008. However, in many sectors of the mining industry there were drops in production due to the financial crisis and the reduction in prices for base metals. The example of zinc is quite telling with a 70% decline, and lead and copper around 60%+ during that era. This reduced the Mexican government’s forecast of $15 billion USD foreign investment to $10.5 billion USD in foreign investment (as of 2009). Labor reasons are also important to understanding these developments and possible more so than the prices on the markets, and that will be looked at further down.
First, I would like to give an outlay of who is doing the exporting, to show that this is a liberalized market in México. In 1989 and before, most transnationals did not want to operate within México, because of the laws governing mining. These laws only allowed foreign companies to be a minority partner in any mining excursion, which did not incentivize to invest their capital. However, after NAFTA and during the 20 years of liberalization in México, companies are now permitted to be majority owners of their mining endeavors and explorations. This has sent foreign investment from $800 million USD in 1999 to what was discussed prior of somewhere near $10.5 billion by 2012. The market is separated by large private national firms such as Industrias Peñoles, small firms who as reported by La Jornada typically must use the larger firms to process their product, and transnationals. The smaller firms are now receiving federal and state help to produce processing centers that could handle up to 500 tons a day, which is meager compared to the 80,000 tons shifted and processed just by the transnational New Gold in just one of its sites. So, unlike México’s petroleum sector, which is a state monopoly, in the mining sector there is competition for resources, land, and also investors. However, all this is running into problems with labor unions and local activists groups.
México has a long history of resistance, which doesn’t make the mining industry an exceptional case. As reported in M2 PressWIRE, worker action has cost mining companies up to $3 billion USD since 2006, and this seems to be a continuing trend. Typically the federal and state agencies who regulate labor actions are supportive of the corporations, such as the labeling of a labor action at the Cananea copper pit as non-existent, when it had been ongoing for 18 months. As well, leases are given out without consideration to the view points of the local populations, such as along the border with Guatemala, where there are sizeable bases of the Zapatista Army of National Liberation and Popular Revolutionary Army. This in turn creates conflicts, and support for labor actions, all of which is halting business and makes problems for the extraction and exportation of minerals for global markets. When local communities do accept contracts with the mining companies it is for a portion of daily revenue, which is then not delivered, such as was stated to be the case of the Penasquito pit ran by GoldCorp, purported to be the richest vein in México. Also reported by M2 PressWire, “Penasquito has an estimated 400,000 ounces of gold and 31mn ounces of silver per annum for the 19 year life cycle of the project.“ The 7% daily revenue amounting to around 18 million pesos, is small compared to the profits that will be made by this one pit. All of these problems could evaporate if the mining companies would begin following rule #1 of trade, and stop enabling the corrupt government institutions in México.
Rule #1 of trade is that everyone sees a benefit, as the benefits decrease trade slows, and this is all attached to worker wages and local benefits. The local populations want stricter environmental regulations in order to avoid contamination of their resources, along with a share of the revenue that is derived from the land on which they live. The workers expect to receive a decent wage that can support their families for doing a job that is dangerous, and in the case of México not regulated to the extent which produces safety for workers. The companies receive the profit, and also the benefit of less work stoppages and less of a need to continuously retrain workers, because of loss of workers and strikes. México has a small but stable mining industry that could be quite profitable for all parties, just some parties will have to take into consideration economics as a totality and not just as the one side of profits. If not, it is expected that the money loss trend will continue and all sides will suffer from an inability to extract the resources and sell them on the commodities market. This is especially pertinent at a time when fear of markets has pushed gold to all time highs and doesn’t look to be decreasing dramatically anytime soon.

By. Andrew Smolski
Andrew Smolski is a contributor at Oilprice.com and specializes in Political/Economic Sociology. His work has been syndicated in many leading online publications and he can be reached at da.smolski@gmail.com

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