In Mining, Mining Coffee Chats

Historically high metal prices have continued to generate interest and investment in Mexican mining, despite numerous challenges ranging from unpredictable territorial security threats, disruptive mining unions, political interference by the national government, among other issues.  Many of the risks facing mining investors in Mexico vary by state and even municipal level, as well as political and other actors. 

Our Mining Coffee Chat on Tuesday, October 5, 2021, focused on dissecting the complexities of Mexican mining risk. John Price, (Managing Director, Americas Market Intelligence), was joined by two experts, Fernando Varela (Founder, FV Consulting) and Jorge Sanchez (Partner, Haynes & Boone), in a fascinating discussion of Mexico’s mining sector.

Among the key highlights of the Chat:

  • Criminal organizations present a significant security threat to mining companies operating in Mexico. The level of threat varies by state and is directly related to the state’s level of corruption, police training, and geography. More isolated communities are at greater risk of being under the influence of such criminal organizations.
  • These criminal organizations, or cartels, go to great length to protect their drug routes by adopting military-like defenses. Regional and national authorities have been slow to respond to incidents and blockades, while litigation can take years to push through the court system.
  • Partnering with local Mexican companies offers more flexibility and local knowledge to international mining companies who wish to enter the market, as the local miners tend to have better connections with the communities and their leaders.
  • Mining companies should clearly label their operations—with visible logos on their property, vehicles, and worker uniforms, while avoiding colors that may be interpreted as part of criminal groups or police—so that their employees are not mistaken for scouts of cartel rivals.
  • Mexico’s organized crime groups are sophisticated in imposing extortion schemes, employing tactics such as offering services to miners through legitimate companies. The miners are then obliged to use these services if they wish to operate in certain jurisdictions.
  • President Andrés Manuel López Obrador does not seem as though he is going to increase mining taxes, as to not jeopardize his party’s position in the 2024 presidential elections. Rather, President AMLO is attempting to increase revenue by collecting taxes more efficiently.  

In addition to these main points, the Chat also focused on questions from the audience. Click below to see the full Mining Coffee Chat, including detailed, insightful answers from the panel to audience questions.

Mining Coffee Chats are monthly meetings in which AMI explores important topics affecting the mining industry. The Chats are held via Zoom during the first Tuesday of every month at 11 a.m. ET (New York) time, usually featuring expert speakers and always allowing for attendees to obtain answers to the challenges that face them during COVID-19 and beyond.

If you have not already registered for Mining Coffee Chats, please click here to do so.

To find out more about AMI’s consulting work in the area of risk management for mining in different areas, please explore our case studiesour whitepaper on 7 key risks, and our analysis articles, which cover topics such as industry outlooks, political risk, operational risk, reputational risk and more.

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