The Silver Veins of Mexico: A 500-Year History of Mining and Investment Potential

• Silver mining in Mexico has occurred for over 500 years, with Mexico being a major world producer today.
• In the 16th-18th centuries, silver was Mexico's main export, comprising over 70% of total exports.
• Mexico's mining laws changed in the late 1800s, allowing more foreign investment and ownership. This boosted production.
• The Mexican Revolution in 1910 led to the nationalization of the mining industry in the 1960s.
• Legislative changes in the 1990s again allowed more foreign investment, causing an explosion in mining activity. Mexico is now a top global producer of silver, gold and copper.

Mexico has a long and rich history of silver production, with active mining occurring for over five centuries. While this history has seen shifts between foreign investment and domestic ownership, Mexico remains one of the world's leading silver producers. For investors, the country offers substantial opportunities in both established mining companies and exploration projects.

Early Beginnings: Spain Discovers Mexican Silver

The origins of commercial silver mining in Mexico can be traced to the arrival of the Spanish in the early 1500s. The native populations had valued metals like gold and silver, but large-scale mining only commenced with the Spanish conquest led by Hernán Cortés in 1521. Eager to satisfy European demand for precious metals, the Spanish began extracting silver through the indigenous workforce. The extent of deposits in Mexico soon became clear. In 1550, massive silver veins were unearthed in Guanajuato, quickly making it one of the world's most productive mining areas.

For the next 300 years of Spanish colonial rule, mining expanded across Mexico. Silver production drove the economy, comprising over 70% of total exports. Mexico fueled the Spanish empire, providing wealth that spurred further colonial expansion across South America. While mining output was high, conditions for indigenous workers were extremely harsh. Dangerous, precarious shafts and tunnels coupled with primitive tools, inadequate ventilation and the ever-present risks of accidents and flooding led to hazardous work environments and high mortality rates.

Waves of Foreign Investment Drive Growth

After Mexico gained independence in 1821, the young nation sought to boost the mining sector. Liberal reforms to the mining law in the late 1800s allowed substantial foreign capital to flow into the country. Whereas mining had previously been dominated by Spanish companies, these reforms enabled American and British firms to acquire concessions and incorporate new Mexican entities. This influx of investment and expertise caused silver production to surge, with new railroads constructed to connect remote mining towns.

The economic stability and pro-development policies under President Porfirio Díaz from 1877-1911 further facilitated mining development. Major discoveries like the Peñasquito mine drove mergers and acquisitions as companies rushed to capitalize on Mexico’s mineral wealth.

Revolution and Nationalization

The outbreak of the Mexican Revolution in 1910 brought profound political changes, but mining remained resilient through the turmoil. While the 1917 Constitution enabled the government to reassert control over subsoil mineral rights, it wasn’t until 1961 that the industry was truly nationalized.

The establishment of state-owned mining companies reflected a global trend of resource nationalism in the 1960s. But with mineral exports still crucial for Mexico’s economy, production continued with government support.

Resurgence Through NAFTA

In the late 1980s, facing economic crises, Mexico embarked on sweeping market reforms. Amendments to the mining law allowed 100% foreign ownership of Mexican mining companies, spurring a wave of international investment.

The passage of NAFTA in 1994 turbocharged this growth. Mining companies poured billions into exploration and existing projects, developing some of Mexico’s largest mines. Thanks to these changes, Mexico is now one of the world’s foremost mining nations. In 2019, it was the largest producer of silver globally with over 5,600 tons. For gold and copper production, it also ranks among the top 10 countries.

Current Developments and Future Prospects

Today, Mexico’s thriving mining sector is supported by a strong legal framework, extensive infrastructure and a skilled workforce. Major players include Mexican conglomerates like Grupo Mexico, Industrias Peñoles and Fresnillo Plc.

There remains extensive potential for new discoveries and mine development across Mexico’s varied geology. The country offers stability for mining investments relative to other mineral-rich emerging economies. While commodity price fluctuations create some uncertainty, demand outlook and Mexico’s low operating costs underpin optimistic forecasts. The government aims to double mining GDP contribution by 2030 through permitting reforms and promotional agencies.

With continuing foreign investment and several new projects in the pipeline, Mexico’s 500-year mining history still has many more chapters to come. For investors, it represents an appealing jurisdiction to gain exposure to silver and gold reserves through the equity of established miners or explorers and developers.