Mexican mining industry to benefit from NAFTA

The creation of freer trade among Mexico, the U.S. and Canada will require that mining companies in the Latin American country become more efficient and productive, according to a study.

In an analysis of the implications that the North American Free Trade Agreement (NAFTA) will have on Mexican mining, the country’s mines ministry says major benefits will result. Chief among these are lower tariffs, increased sales of Mexican goods and more foreign investment. The study stresses, however, that higher efficiency and productivity are required because NAFTA will result in greater competition among companies, making it more difficult to gain access to new markets and conserve traditional ones.

Imports from Canada and the U.S. will grow as investment increases, the study predicts. Mining companies will benefit economically from the new legal framework, especially when they modify or expand their plants. Also, greater investment in mining will result in more jobs, which will be immediately evident at local and regional levels.

Trade tariffs will be reduced for minerals, metals, machinery and equipment, the study confirms. Reductions will range from 5% to 10% and will be immediate in some cases, while gradual in others.

The gradual reductions will occur over 5-10 years (retroactive to Jan. 1, 1994). However, tariffs on nickel, cobalt, gold and silver will be fully removed in all three countries.

Mining will also benefit from the “rules of origin” contained in NAFTA, the study says. These guarantee preference for goods fully produced with a high content of parts from NAFTA countries. The nature of mining production makes these guarantees especially attractive to Mexican producers. The study also assesses other NAFTA provisions which are expected to benefit Mexico’s mining industry. These include standards (technical specifications, weight and content, etc.), government purchases, unfair competition, safeguards, intellectual property and dispute settlement.

Large-scale mining operations are expected to benefit the most from NAFTA, provided they remain competitive, the report says. It adds that the outlook for small- and medium-scale companies will depend on their ability to adapt to partnership arrangements which would provide access to financing, technology, training and marketing systems.

— From the Mexican Investment Board, Mexico City.