Despite the vast unexplored potential of Mexico’s metal and mineral deposits, foreign investment in the sector has long been dominated by two countries. Of the 267 foreign mining enterprises registered on the Mexican Geological Survey (SGM), 173 are from Canada and 44 are from the US. While bilateral relations with the former go from strength to strength, the isolationist rhetoric coming from the latter’s President Elect is tempting Mexican policy-makers to look elsewhere in the search for foreign investment. And it seems they have identified China as their number one target.
“We are putting massive efforts into diversifying our sources of foreign investment, and China represents a huge window of opportunity for us,” Mario Alfonso Cantú, General Coordinator of Mining at the Ministry of Economy, told Mexico Mining Review in June 2016. “We have already visited the country on numerous occasions to hold talks with two multi billion-dollar private equity funds that see Mexico as a bright star in their Latin America portfolio.”
With 13 companies registered on SGM, China is already the third most active foreign player in the Mexican mining sector. Mexico’s President Peña Nieto has travelled to Beijing on at least five occassions to meet his Chinese counterpart Xi Jinping, each time accompanied by specially chosen representatives of the private sector. The goal is showcase the best of Mexico’s mining projects to interested parties from the Chinese investment community.
But the focus on China is explained not simply by the wealth of cash-rich investors in the country. The Mexican federal government has added incentive to draw Chinese eyes in particular onto its mineral deposits.
“Mexico has a massive trade deficit with China,” said Cantú. “Part of the strategy to reduce it is by creating deals with the country and encouraging them to capitalize on the opportunities to be found within our local mining industry.”
The first Chinese company to dip its feet in into Mexico’s mining pond was the Jinchuan Group, which acquired Tyler Resources and its Bahuerachi copper-zinc project in 2008. Located in the northern state of Chihuahua, Bahuerachi is a 12,000 hectare concession, and Jinchuan plans to invest a total of US$4 billion to develop the project in the coming years. The Tianjin Binhai Harbor Port company has also purchased three concessions in Colima, while there is also Chinese mining activity in parts of Baja California.
However, acquiring a concession in Mexico is not as simple as it may sound. A potential investor must successfully navigate a complex web of environmental, tax and financial regulation while also appeasing local communities whose demands differ from state to state. To make life easier for foreign investors, the federal government relies on The Government Trust for Mining Developent (FIFOMI) to promote the sector financially while SGM helps out on the technical front. The Ministry of Economy is currently setting up a taskforce in a bid to streamline the process of permit approvals the clarify the requirements for purchasing and renting mining concessions.
“The taskforce should be fully operational before the end of 2017,” said Cantú. “The ministry has made a strong effort to clarify the legal requirements that all concession acquistions and rentals must comply with, as it is a frequent stumbling block for foreign institutions in Mexico.”
Given the considerable language and cultural barriers, Chinese investors may require more guidance than most. However with uncertainty surrounding the future of US-Mexico bilateral relations, there may never have been a more apt moment for Mexico to start polishing its minerals and putting them on display in Chinese showrooms.
Source: Cluster Minero de Chihuahua