Nearshoring and industrial development in Mexico require 'robust' mining sector

Bnamericas Published: Thursday, December 15, 2022
Nearshoring and industrial development in Mexico require 'robust' mining sector

The relocation of companies is an opportunity for Mexico due to its privileged location in North America, but it requires having a strong mining industry that is able to provide the inputs that the industrial sector needs and place the country in a better position to face external volatility, according to Mexican economist José Luis de La Cruz (pictured).

“Mining is one of the strategic sectors for the performance of the rest of the industry because of the inputs, and it is important to have a sector that is robust because it depends a lot on prices that are set abroad. Counting on domestic strength makes it possible to face any scenario of rising or falling prices,” De La Cruz, who is general director of the Mexican institute for industrial development and economic growth (IDIC), told BNamericas.

“In the short term, the generation of all types of energy and, with it, the use of the inputs that are required for them to be produced is one of the central issues. I would add the famous nearshoring...which depends on energy and all these inputs," he said.

The former head of economic studies at the Mexican confederation of industrialists (Concamin) forecasts that the prices of some minerals and metals will generate pressures in 2023 and 2024, and therefore it is important to consolidate the domestic side of the business to avoid having to import them to take advantage of the industrial growth potential.


The industrial activity figures from statistics agency Inegi show that in the first 10 months the growth of mining (including the oil and gas sectors) was only 0.2%, driven by strong growth in January that was followed by predominantly negative seasonally-adjusted figures.

Oil and gas registered a decrease of 1.2% in January-October while the mining sector recorded a decline of 0.5%. Services related to the mining industry saw an increase of 12.1%.

The mining sector was expanding until the COVID-19 pandemic, but has since then stagnated and in the last months of 2022 it has seen a slightly downward trend, according to De la Cruz.

“This stagnation is mainly due to investments. It is a sector that requires a lot of investment because the necessary works take time to produce results,” he said.

In January-September, foreign direct investment in the mining sector fell by almost 56%, according to preliminary data from the economy ministry.

De la Cruz said the sector depends on the prices of commodities such as gold and silver, which have been at very high levels since last year - and helped offset the lack of production growth in the recent years.

“And in terms of non-metallic minerals, a lot depends on the construction sector that use these inputs, and the fact that construction is having only modest growth means that many of the inputs are not in strong demand. That explains the stagnation,” he added.

For 2022, De la Cruz forecasts that the growth rate of the mining sector will be 0.4% and then rise to 1.2% next year, when including the oil and gas sectors.

When excluding the oil and gas sector, mining will expand 0.9% this year and 1.8% in 2023, according to De la Cruz, who said there are downside risks to his forecasts that are related to economic activity and issues that need to be resolved by the government and the private sector.

Last week, economy minister Raquel Buenrostro said "very big" corruption problems had been detected at the ministry regarding some concessions, which have been put on hold as an internal investigation is being undertaken.

For its part, the mining industry has criticized both the government's suspension of granting new concessions and delays in the issue of environmental permits, and other types of permits, that the sector needs to attract more investments.

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