NOTE: This article is the tenth in a series by the CIP TransBorder Project that examines the water crisis on the U.S.-Mexico border.
The three richest men in Mexico – Carlos Slim Helú, Alberto Bailléres González, and Germán Larrea Mota-Velasco — are also the owners of Mexico’s top three mining corporations.
The three mining oligarchs – Larrea, Bailléres, and Slim – have mining and other enterprises throughout Mexico. All three men and their companies are prominent presences in Sonora – Mexico’s top mining state. Sonora’s profile as the state with the most mining permits and most minerals production attracted national attention in August 2014 after Grupo México flooded the Sonora River with toxic wastes – what a federal government official called the “worst natural disaster in Mexico’s mining history.”
Larrea, who Forbes magazine called the “King of Copper,” owns 51% of Grupo México, which is the Mexico’s leading mining company. Bailléres owns Grupo Bal, whose mining subsidiary Industrias Peñoles is Mexico’s second largest mining firm. Slim, the world’s richest man according to Forbes (for the fourth consecutive year), owns Minera Frisco among numerous other Mexican companies.[i]
All three companies and their owners are major economic players in Sonora. However, Grupo México is by far the leading mining corporation in the state. Its huge copper and molybdenum mining and processing operations in Cananea and Nacozari de García dominate the state’s mining sector.
Previous government ownership of Grupo México’s mining operations in Sonora helps explain the legacy of unregulated water extraction, environmental contamination, and general lack of regulatory oversight that continues to benefit this now-privately-owned company. Even before the Sonora River disaster, the reputations of Grupo México and its majority owner Germán Larrea were badly tarnished for their disregard for the environment and their workers. The Cananea mineworkers have repeatedly gone on strike, starting with 2004, because of wage, occupational safety, and environmental concerns. The strike launched in 2007 by Section 65 of the National Mining Union ended with 2010 when the company replaced the striking workforce with imported contract workers with the assistance of the federal police.
Grupo México renamed its Cananea operations Buenavista de Cobre. Grupo México’s copper mine in Nacozari de García also a felicitous name, La Caridad, which operates without a union. Part of the La Caridad complex in the Yaqui river basin is a large metallurgical complex. At both the Buenavista and La Caridad mining centers, Grupo México also mines and processes molybdenum. The company is also a major producer of zinc, gold, silver, and lead.
Huge footprints of these three giants of Mexico’s mining sector are showing up throughout Sonora.
Industrias Peñoles is Mexico’s largest gold, zinc, and lead producer, and the company is expanding rapidly in Sonora. In a partnership with two of the world’s most environmentally destructive mining companies — Fresnillo (Great Britain, and formerly a wholly owned subsidiary of Peñoles) and Newport Mining (U.S) — Peñoles has many gold and silver exploration operations in Sonora. Peñoles also has joint minerals exploration initiatives in Peru and Chile with Fresnillo, which owns the largest silver mine in Mexico.
Peñoles owns Mexico’s largest zinc mine, which is located near the international border on the Chihuahua side of the Sierra Madre Occidental. It’s subterranean mine has is depleting the aquifers in the border municipio of Ascensión and is reportedly threatening the water supplies of Ciudad Juárez.
In Sonora, Peñoles operates three gold mines: Herradura (with Fresnillo), Soledad-Dipoloes, and Noche Buena, all of which are open-pit mines. In the border municipio of Santa Cruz, Peñoles is expanding its copper mining operations at its Milpillas mine, and the company is developing another copper mine near Caborca called Los Humos.[ii] In its 2013 annual report, Peñoles acknowledged that water shortages present a major obstacle for its operations in Sonora and other arid states, notably Chihuahua, Zacatecas, and Durango.
Carlos Slim’s Minera Frisco has been expanding its open-pit copper mine in the Cananea area since 1980 through its Minera María subsidiary. In 1999 the company’s operation in Cananea started processing cathodic copper.[iii]
Mining Oligarchs Made by Mexican Government
The three giants of Mexico’s mining sector were products of the neoliberal reordering of the Mexican economy in the late 1980s and early 1990.[iv] As part of the wholesale privatization of government-owned companies, ownership of Compañía Refractarios Mexicanos passed to Industrias Peñoles in 1988. Through its subsidiary Grupo Frisco, Carlos Slim’s Grupo Carso took over the Mexican government’s stake in Química Fluor, Minera Lampazos, and Minera Real de Ángeles in 1989.
In the mid-1990s, during the presidency of Ernesto Zedillo, these mining giants acquired control over Mexico’s railway system. Grupo México gained control over the nation’s largest railways, including Ferrocarril Pacífico Norte and Chihuahua Pacífico, while Industrias Peñoles acquired the Coahuila Durango line and Grupo Frisco received Ferrosur.
The country’s two largest copper mines in Cananea and Nacozari de García were government-controlled (albeit heavily indebted and effectively owned by U.S. banks) before being transferred to Grupo México in 1989 and 1990. As part of the nationalization of the Compañía Minera de Cananea, the government – through the Commission to Foment Mining and governmental financing agencies — obtained an $80 million loan from Chase Manhattan Ban and First National City Bank. By the time the mining operation was turned over to Grupo México, the government had invested more than $1 billion in the Cananea mine – most of it in the form of foreign loans. While the reins of the company were in government hands, U.S. banks retained financial control of the Cananea copper mine.
Grupo México was likely the biggest winner in the Mexico’s privatization sweepstakes. The holding company’s Minero México gained ownership at bargain-basement prices of Mexicana de Cobre in Nacozari in 1989 and Minera de Cananea in 1990. Privatization also gave Grupo México oligopolistic control of the nation’s railroads with its acquisitions of the major railways of Ferrocarriles Nacionales – what became Ferromex.
As with virtually all of the privatizations under President Salinas, the transfers from the public sector to the private sector were insider deals – part sales, more giveaways. The Salinas administration didn’t open the privatization process to competitive and transparent bidding among Mexico’s capitalists. Instead most of the state’s mining and other assets went to members of Mexico’s national bourgeoisie who were closest to Salinas and PRI.
Grupo México bought Mexicana de Cobre for $475 million, even though the federal government’s credit office NAFINSA had set its value at $2 billion the year before the purchase. The administration of President Carlos Salinas de Gortari (1988-94) had rejected a prior purchase offer for more double the price that Grupo México offered.
The transfer of the government corporations occurred as part of a neoliberal restructuring process. Yet the term privatization doesn’t adequately capture what was happening in Mexico in the late 1980s and early 1990s.
For one thing, the Mexican government had only nominal ownership of the companies it was privatizing. The government companies like Mexicana del Cobre were highly indebted to foreign banks including Chase Manhattan – an indebtedness that had accumulated through government financing and development programs such as the national Commission to Foment Mining (COFOMI) and its successor and related government credit agencies – the most recent being the Fideicomiso de Fomento Minero (FIFOMI). Mexicanización, as it turned out, wasn’t nationalization at all but rather substituting direct foreign investment largely with foreign debt, along with passing out favors to allies.
What is more, most of the mining and other firms “sold” to Mexican capitalists such as Larrea, Bailléres, and Slim already counted on these investors as partners. As became apparent during the privatization process, the Salinas government wasn’t so much selling nation’s mining assets to the national bourgeoisie as much as to an inner circle comprising the country’s political and economic elite. “Very soon it became evident that the true objective of state policy was to strengthen and leading sector of mexicanizado mining capital, converting it into one of the most successful of monopoly capital in Mexico and the one with the greatest international presence,” wrote scholars Raúl Delgado Wise and Rubén Del Pozo Mendoza.[v]
Evolution of Control and Ownership of Mexico’s Mining Sector
- When Cananea mineworkers protested low wages and working conditions in 1907, Mexico’s mining sector was nearly totally in foreign hands.
- In 1908 Mexico had 1,030 mining companies, of which 840 were U.S.-owned.
- President Cárdenas, as part of the post-revolutionary government’s nationalization and modernization plans, attempted to moderate foreign control of the mining sector by creating the Comisión de Fomento Minero – COFOMI (precursor of today’s FIFOMI) — and creating a national mineworkers’ union in association with the ruling party.
- However, the country’s mining sector remained largely in foreign hands. COFOMI drained government revenues and relied on foreign credit to finance mining development by Mexican capitalists and government corporations.
- In 1961 the Mexican government passed what is known as the Ley de Mexicanización de la Minería, which aimed to increase the participation of Mexican capital in the mining sector by limiting foreign ownership to 49%, and new mining concessions were largely limited to Mexican citizens and companies with majority Mexican ownership.
- With financing, logistical, and other support from COFOMI, the Mexican government fostered the creation of new mining companies owned by nation’s leading capitalists.
- Major foreign mining companies, including ASARCO and American Metal Climax, found ways to make Mexicanización of the mining sector work for them. Government-guaranteed financing increased profit even though they shared ownership with Mexican capitalists.
- The Ley Minera de1975 facilitated direct governmental participation in mining exploration and development, a prime example being La Caridad mine in Sonora, opening up a rush of government funding into the mining sector not just for mineral extraction but also for metallurgical plants. But most of these revenues came from foreign creditors.
- Mexicanización resulted in increased government dependence on foreign credit and financing from mainly U.S. banks, such as Chase Manhattan and First National City Bank.
- With capital provided by the Mexican government for the new Mexicanized firms, such as Compañia Minera de Cananea, provide a firm financial foundation (again because of government-guaranteed debt) for new transnational mining ventures involving Mexican capitalists such as Carlos Slim Helú, Alberto Bailléres González, Germán Larrea Mota-Velasco, and others.
- During the 1980s about 40% of Mexico’s mining sector was held by what was euphemistically known as the “social sector” – technically owned by the government but actually owned by foreign banks.
- By 1982 Mexico had accumulated a foreign debt of $80 billion in part due to private and international development bank financing for Mexico’s government-owned corporations. This crisis precipitated a neoliberal reordering of the Mexican economy, including the selling or handing off companies either completely or largely owned by the government, such as the largest mining firms.
- The primary beneficiaries of this privatization were Mexican capitalists close to the PRI and in particular to President Salinas de Gortari.
- With most of major mining operations already sold to Mexican oligarchs – all of whose companies worked closely with transnational mining companies and banks – as part of the privatization and structural adjustment programs, the Mexican government in 1990 passed a new Ley Minera. An estimated 1.8 million hectares of national mining reserves had already passed into hands of Mexico’s mining giants by the time the government opened up the mining sector to ownership by foreign mining companies.
- The 1990 law and its amendments through 1996 reversed the nationalization thrust of the Lázaro Cárdenas era and the Mexicanización of the 1960s and 1970s (partnership of private capital and government financing), opening ownership of mineral resources and 100% ownership of mining companies to foreign companies.
- Over the past two decades, hundreds of foreign firms – more than three-quarters from Canada – have rushed into Mexico, with 75% in gold and silver exploration and mining.
Sources: Raúl Delgado Wise and Rubén Del Pozo Mendoza, “Minería, Estado y gran capital en México,” Economia e Sociede, Campinas, (16), June 2001; Juan Luis Sariego et al, “La industria paraestatal en México,” El Estado y la mineríamexicana. Política, trabajo y sociedad durante el siglo XX (México: Fondo de CulturaEconómica, SEMIP) 1988; Homero Urías, ”¿Quién controla la minería mexicana?” Comercio Exterior, v. 30, n. 9, Sept. 1980.
Foreign and Mexican Mining Companies
That the three richest people in Mexico own the country’s three largest mining companies is no coincidence.
The close historical and current links between Mexico’s major mining companies and the federal government help explain the rapid ascent of Grupo México, Industrias Peñoles, and Minera Frisco as transnational mining firms.
Also critical to the rise of Grupo México, Industrias Peñoles, and Minera Frisco is the impunity enjoyed by these mining giants: The government simply does not enforce the existing (albeit weak) laws and regulations regarding occupational-safety, environmental-protection, and national water laws.
The mining sector’s ties to the Mexican government and its impunity are among the leading factors contributing to the industry’s globally recognized low costs of production and high profitability.
Transnational Mining Industry in Mexico:
Foreign and Mexico Miners
- 70% of exploration investment in Mexico made by foreign-based firms, but 60% of total mining production by Mexico-based companies, mainly Grupo México, Industrias Peñoles, and Minera Frisco – which themselves are transnational corporations owned in part by foreign investors.
- 268 mining companies with majority foreign investment have mining projects in Mexico.
- Canada represents 75% of total foreign investment in Mexico’s mining sector.
- 79% of 642 exploration projects are Canadian, followed by U.S. companies with 13% of exploration projects.
- Mexico ranks 4th in world in attracting foreign investment in mining.
- Fresnillo, the world’s largest producer of silver from ore and Mexico’s largest gold producer, illustrates the difficulty of distinguishing foreign from Mexican mining firms, given that it was until recently a wholly owned subsidiary of Industrias Peñoles, yet is no longer Peñoles subsidiary and currently has its headquarters in London although most of its mining production is in Mexico.
Sources: www.proveedoresdemineria.com ; Mining Industry in Mexico, Deloitte, May 2012, at: http://www2.deloitte.com/content/dam/Deloitte/mx/Documents/energy-resources/mining-industry-mexico.pdf; Mining in Mexico: Country Mining Guide, KPMG, 2013.
Prior to the 1910-17 Mexican Revolution, foreign mining companies, mainly U.S. firms, defined the shape and character of Mexico’s mining sector – its treatment of mineworkers, privileged status with the government, disregard for the environment, displacement of communities and indigenous groups, and the immense profits that flowed north to the United States.
Despite the recent proliferation of foreign mining firms (overwhelmingly Canadian), Mexican investors and Mexican “social capital” (injection of government revenues) still constitute the core of Mexico’s mining sector.
The foreign mining firms – which since the mid-1990s have spread throughout Mexico looking for precious metals — are follow the lead set by the practices of the Mexican mining giants — whether it be environmentally reckless mining operations, illegal consumption and contamination of water, or abusive treatment of communities near mining sites.
The federal government’s economic ministry publishes a list of mining companies with foreign capital. However, this extensive list includes only mining companies based outside Mexico. By not including Mexico-based companies such as Grupo México that also include foreign investment, the Secretaría de Economía’s listing, “Mining Projects in Mexico with Foreign Capital,” perpetuates the myth that Mexico’s major industrial firms are purely national entities, whereas the companies have transnational identities and financing.[vi]
The Mexico-based mining companies account for about three-fifths of the nation’s minerals production. Their privileged relationship with the government and its regulatory agencies has set the pattern of favored treatment that the new mining investors also enjoy.
Underscoring the transnational identity of Mexico’s dominant mining firms is their preference for using English rather than Spanish in most of their media releases, stock offering, and company profiles. Any differentiation between Mexico-based and foreign-based firms is also blurred by the transnational flow of credit, capital, income, and profit. Although Mexico’s mining giants are headquarted in Mexico City, it’s on Wall Street where they do most of their financial business.
[i] Érika Ramírez, “Empresarios mineros, los más ricos de México,” Contralinea.com, 23 de abril de 2013, at: http://contralinea.info/archivo-revista/index.php/2013/04/23/empresarios-mineros-los-mas-ricos-de-mexico/
[ii] Industrias Peñoles, Reporte Annual 2013, at: http://cs.penoles.com.mx/cs/groups/public/documents/document/bmv0/mda0/~edisp/prodextranet004678.pdf
[iii] Minera Frisco: Minera María, at: http://www.minerafrisco.com.mx/ES/Unidades_mineras/Paginas/minera_maria.aspx
[iv] The following section relies extensively on the work on the excellent overview of Mexican mining capital in Raúl Delgado Wise and Rubén Del Pozo Mendoza, “Minería, Estado y gran capital en México,” Economia e Sociede, Campinas, (16), June 2001.
[v] Raúl Delgado Wise and Rubén Del Pozo Mendoza, “Minería, Estado y gran capital en México,” Economia e Sociede, Campinas, (16), June 2001, p. 105.
[vi] “Lista de Proyectos Mineros en México con Capital Extranjero,” Secretaría de Economía, at: http://portalweb.sgm.gob.mx/economia/es/mineria-en-mexico/lista-de-proyectos.html
All articles in this 13-part series:
1. The Yaqui Water War
2. Sonora and Arizona’s Uncertain Water Futures
3. The Illusions of the New Sonora
4. Sonora Launches Controversial Megaprojects in Response to Water Crisis
5. Origins and Disappearance of the Yaqui River
6. The Old and New Sonoras: The Context for Sonora’s Water Wars
7. Making the Desert Bloom: The Rise of Sonora’s Hydraulic Society
8. The Damming of the New Sonora
9. Mining Boom in the Sierra Madre
10. Mexico’s Three Mining Giants
11. Mining Water in Sonora: Grupo México’s “Irregular” Water Permits in the Sonora, Yaqui, and San Pedro River Basins
12. Making Mining Dreams Come True in Mexico
13. Mining, Megaprojects, and Metrosexuals in Sonora