IRJ Country Profile: Mexico

Natural resources are abundant in Mexico, representing a very important part of the country’s economy. When the Spanish first arrived in the early 1500s, mining for gold and silver became a huge industry. Hundreds of mines around Mexico City were opened to extract the precious metals.

In Guanajuato, one of the first Mexican cities to be colonized, silver mines are still found everywhere. The city streets now wind through some of the old mine tunnels. Even today, Guanajuato's mines remain among the richest-producing and largest silver mines in the world. Aside from silver and gold, Mexico is the leading producer of a dozen resources, including sulphur, lead, tin, zinc, copper, coal and iron ore. 

As a resource-rich country, Mexico has carved out a niche for itself in Latin America as both a prime producer and manufacturer of goods. Due to the amount of local factories that make products for the United States, there is great opportunity to use natural resources at nearby facilities, thus reducing transportation of those raw materials. In addition, the raw materials themselves add to the country's overall economic output. In 2007, Mexico passed $1 trillion in GDP for the first time in its history.

The most important resource? Petroleum.

Petroleum
In 2008, Mexico was the seventh largest global petroleum producer and the third largest in the Western Hemisphere. The industry is run by the Mexican government through the giant Petroleos Mexicanos (Pemex) company, which has produced 13 billion barrels of oil. The state-owned company—holding $77 billion in revenue—holds a monopoly on oil production in the country as the sole supplier of all commercial gasoline stations. Pemex remains one of the largest oil companies in the world.

Unfortunately, oil production in Mexico has begun to slow down as production at the Cantarell—the largest oil field in the country—declines. This is problematic as the oil sector is vital to the Mexican economy. While its relative importance to the general Mexican economy has declined, the oil sector still generates well over 10 per cent of the country’s export earnings. More importantly, the government relies upon earnings from the oil industry for about 40 per cent of total government revenue that fund social programs, such as education. Any decline in production at Pemex has a direct effect upon the country’s overall financial balance.

Mining
As for other resources, Mexico is serious about mining. In fact, the exploration, exploitation and beneficiation of the minerals will have preference over any other use for land. Except for hydrocarbons, radioactive materials and salt, the law permits up to 100 per cent private ownership in equity exploration, development and production of mineral substances.

Mexico has benefited from considerable foreign investment into its mining industry. Some of the world’s largest mining companies have operations in the country. There are over 200 foreign publically traded companies involved in exploration and mining activities in Mexico, the majority of which are based in North America.

Political and financial stability, legal security for investors and its location next the United States—one of the world’s top importers of resources—are all positive factors impacting Mexico's mining industry today. Having said that, issues such as highly unionized mining and metallurgical workers, a lack of potable water and potential socio-economic issues generated by low wages and under-employment are obstacles in the way of prosperity in Mexico’s mining industry.