A proposed increase in mining royalties in Mexico could block more than $6.9 billion in investments over the next two years, the industry’s local chamber said on Thursday.
As part of its budget proposal published last week, the Mexican government proposed raising mining royalties under the argument that metal prices have risen in recent years.
The government plans to bump up two separate royalties from 7.5% to 8.5% and 0.5% to 1.0%, respectively.
“The measure… would have an impact on a sector that has already seen its contributions and investments reduced due to paralyzation (of the sector),” the chamber said in a statement responding to questions sent by Reuters.
The proposed hike comes after Congress last year shortened concessions from 50 years to 30 years and tightened water-extraction permits. Another reform aimed at banning open-pit mining remains in the legislature.
The royalty increase, “coupled with the lack of permits and exploration restrictions in recent years, could inhibit more than $6.9 billion that the mining sector could invest in new projects in the next two years,” the chamber told Reuters.
Mexico is the world’s leading silver producer and a top producer of copper and gold. The industry contributes around 2.5% to the nation’s gross domestic product (GDP).
But an additional tax burden could make Mexico less attractive compared to other major producers such as Chile, Peru and Canada, the chamber said.
The group represents some of the nation’s largest miners, such as Grupo Mexico, Minera Autlan, Industrias Penoles and Newmont’s Penasquito mine.
(By Noe Torres and Kylie Madry; Editing by Sarah Morland)
