Mining in Mexico, its risks and rewards

Mining investments in Mexico have ongoing and evolving risks like many others countries in Latin America. Mining Technology revealed that a report says the country’s tax agency was holding more than $360m in tax rebates owed to six Canadian miners. This includes $230m for Goldcorp, despite the stability of Mexico’s government and its favorable investment environment. The situation leveled up into a showdown ongoing between the Mexican Government and the Canadian mining firms operating there.

Mining companies, which export much of their product and spend heavily on machinery and equipment, typically generate large VAT returns. Head of Mexico’s Tax Administration Service Osvaldo Santin addressed the problem in an interview, saying the agency had seen a spike in VAT refund requests.

Meanwhile, other investment risks in Mexico mirror problems in neighboring countries, for example, cartel activity, resistance to projects from indigenous peoples and illegal mining. “We see illegal gold mining and gang activity as more pertinent downside risks to mining in Mexico. Unregulated gold mining often attracts violent criminal activity to control the deposits and sell the material and, in general, the widespread presence of criminal syndicates can create security concerns for authorized mining operations,” says Molly Shutt.

Furthermore, two striking workers were fatally shot at a blockade mounted in November 2017. This was reportedly a part of a stoppage they were participating in at a gold mine owned by Toronto-based Torex Gold Resources. These strikes, tragedies, and actions do not only impact lives, but also lead to the reputation, incurred costs, and loss of output.

In the end, Shutt believes that the rewards are inevitable while these trials persist. BMI’s Americas Mining Risk/Reward Index reveals Mexico in the seventh rank out of the 17 countries. “The country’s score is boosted by a well-established mining industry, diverse competitive landscape, and low labor costs,” Molly Shutt shared.

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