Mining in Mexico: navigating the security challenges

iStock/Sunshine Seeds

Summary

Mexico has maintained stable growth in both mining investment and production for at least a decade now, but violence related to organized crime has increased significantly during the current presidential administration, becoming a major concern for all companies engaged in the primary sector. Ahead of the 14th International Mining Congress in Sonora, Southern Pulse Senior Consultant Fernando Varela outlines the necessary provisions to safely develop and operate a mining project in this challenging, yet rewarding, environment.

Strong sector statistics

According to figures from the 2022 Annual Report of the Mexican Mining Chamber (CAMIMEX), the mining industry represented 2.5% of the National Gross Domestic Product and 8.6% of the Industrial Gross Domestic Product in 2021.

That same year, mining activity grew 7.1%, though it is necessary to consider the 2019–2020 decrease related to the COVID-19 pandemic.

The report by CAMIMEX also places Mexico as the first destination for mining exploration investment in Latin America, with 23% of regional investment, followed by Chile with 21%, and Peru with 16%. In monetary figures, the investment dedicated to exploration activities in the country reached USD391 million (solely among the national and international companies affiliated with the chamber), while the total investment in the sector reached USD4.8 billion.

According to CAMIMEX, in 2021, the value of national mining production reached USD16.5 billion — up 19% over 2020.

Concerning criminal developments

Despite these strong growth figures, the day-to-day operation of large scale mines has become increasingly challenging in a security environment where criminal cells armed with assault rifles patrol dirt roads on armored pick-up trucks and launch all-out confrontations against their rivals. Even hours-long firefights with the Army and Navy have become more and more common in the last four years, usually resulting in numerous criminal and occasional military casualties.

This grim reality is reflected in the data. According to figures from the National Public Security Secretariat, there have been 121,655 intentional homicides since President Andrés Manuel López Obrador took office 45 months ago. That’s the equivalent of 28 murders per 100,000 inhabitants, per year.

In the last two decades, the country has become a jigsaw puzzle of local and regional criminal organizations, of which the two most powerful are the Cártel de Sinaloa, extending throughout northeastern Mexico, with a presence in the states of Chihuahua, Durango, Sonora and Sinaloa, and the Cártel de Jalisco Nueva Generación, active throughout central western Mexico, with a presence in the states of Colima, Jalisco, Nayarit and Zacatecas. Elsewhere in the country, the Pacific coast states of Guerrero and Michoacán harbor dozens of small criminal gangs disputing local territory. Similarly, border states with the US are also fought over in a constant turf war to maintain access to the northern neighbor.

Impact on the industry

For the mining industry operating in Mexico, the presence of drug cartels and smaller gangs engaged in turf wars translate into different criminal risks: theft of vehicles, machinery or diesel; theft of refined minerals; extortion; and in two extreme incidents in the state of Chihuahua, the kidnapping and murder of workers in 2013 and 2016.

According to confidential reports from companies operating in Chihuahua and Sonora, major cartels have created companies and invested in heavy machinery to offer services to the industry. Along the lines of a sophisticated protection racket, the offer of services comes in exchange for peaceful operations.

An additional indirect risk is workers and/or company vehicles getting caught in the increasingly frequent gunfights on state and federal roads.

Prevention and resilience

In spite of this security context, international companies can operate every day without incident, even in the most violent states. International mining companies are renowned for their willingness to invest in challenging and hostile environments.

The key measures that can achieve a stable operation for international mining companies in Mexico are also what is considered industry best practice:

Despite the recent free-trade disagreements with Canada and the US over energy policy, the Mexican government has made clear that mining is a priority industry and that foreign investment in the sector is welcome. Analysts predict continued growth, and exploration projects continue to develop apace. Risk prevention best practices continue to be key to this thriving industry, and the statistics prove it.

Active in Mexico’s mining space? Southern Pulse has the experience, network, and relationships to simplify this challenging sector with honest, direct answers to your most complicated questions. Catch up with Southern Pulse Senior Consultant Fernando Varela at the 14th Sonora International Mining Congress this week in Hermosillo to learn more.

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Southern Pulse

Southern Pulse provides strategic advisory services to help businesses operate successfully in Latin America.