Mining History of Mexico

The history of commercial mining in Mexico dates back at least over 500 years. Today, Mexico continues to stand as one of the world's largest producers of several minerals. It is known as a major destination for companies seeking mineral exploration. Non-commercial mining preceded the arrival of the Spaniards. Pre-Columbian populations held gold, silver and other metals in high esteem. Later, in the name of Spain, Hernan Cortez came to the Americas including Mexico in 1521. During the Spanish conquest, the original inhabitants of the territories of Mexico were forcibly introduced to an unfamiliar world and economic marketplace. The exploitation of metals established a hierarchy between the Spanish conquerors and the native populations and also resulted in a mixed race of Spanish and Mexican Indians.

Colonial mining began when European techniques of production were introduced into the 'New World' to satisfy the insatiable European demand for metals. Within a matter of years, gold and silver started to flow into the Spanish treasury from Mexican mines. During the next 300 years of Spanish rule, many other minerals were extracted from the ground, such as copper, coal, lead and iron.

The bedrock deposits of the great silver-gold vein system of the Veta Madre at Guanajuato was discovered in the year 1550 and unearthed almost immediately after that El Oro, located near Mexico City one of the leading gold districts, was discovered in 1521, developed to a great extent by 1530, and mined regularly with some interruptions for about 400 years. During this period over 5 million ounces of gold was extracted.

During the first American silver boom, from the 1570's to the 1630's, the Mexican industry was overshadowed by the mines of Upper Peru, which supplied Spain with 65 percent of its registered bullion imports from the New World. By the eighteenth century, however, Mexico again emerged as the world's chief producer of silver.

From the late sixteenth century until the 1870's, silver was Mexico's chief export, amounting to more than 70 percent of the total exports. During this early period of mining in Central America, mining techniques were very precarious and amounted to slave labour in many cases. Miners faced several dangerous problems such as; deep narrow shafts, longer narrow tunnels, wooden ladders and supports, limited use tools which amounted to very hard labour, underground flooding, inadequate ventilation systems and what amounted to a generally unsafe work environment.

The seeds of economic modernization began to be laid under the restored Republic (1867--76). President Benito Juárez (1857--72) sought to attract foreign capital to finance Mexico's economic modernization. His government revised the tax and tariff structure to revitalize the mining industry, and it improved the transportation and communications infrastructure to allow further development and production of the country's natural resources.

In the late nineteenth century the mining industry in Mexico expanded. General Diaz effectively governed Mexico until the Revolution of 1910, serving as president from 1877 to 1880 and from 1884 to 1911. It was during this period that a new Mexico emerged. Diaz established order and a workable government. Civil wars ceased and banditry disappeared from the countryside.

Foreign investment rushed in to take advantage of the new political and economic climates. In 1884 and 1892 the Mexican mining law was reformed, integrating the most liberal codes which changed the old Spanish mining code (Ordenanzas de Mineria) resulting in the granting of subsoil ownership (mineral rights) to landowners. The consequences of these changes broke the old dominance of Spaniards and European mining owners allowing for new North American based companies to begin forming in Mexico. This revived mining and also created the discovery of major oil fields. Exports and national income increased and new industries dotted the countryside.

Under the regime of President Porfirio Díaz, with subsoil ownership now allowed, several mining concessions of certain mines located within the Sierra de Peñoles in the State of Durango resulted in Compañía Minera de Peñoles being founded in 1887.

Even though an economic downturn began in the early 1900's in Mexico due to nervous investors wary of the nationalization of subsoil rights, several mergers, acquisitions, and fusions with other mining companies were taking place between 1890 and 1960.

The revolution of 1910 paved the way for the new Mexican Constitution signed into law in 1917 which included Article 27 allowing Mexico to regain direct control of mineral resources. Later, in 1934 the government limited the size of the mining concessions, promoted the formation of cooperatives and created the 'Commission of Mining Promotion' (Comision de Fomento Minero).
Despite widespread land reform and nationalization of the country's basic industries being undertaken during the 1930's, i.e.: nationalization of the railroads in 1929-1930; and, nationalization of the petroleum industry in 1938, mining was not affected.

As a result of this reform, consolidation of mining in Mexico continued with several Mexican industrialists such as Raul Bailleres and Jorge Larrea, purchasing the majority of stock from shareholders from Great Britain, USA, and Germany and forming what is known today as Industrias Peñoles and Grupo Mexico.

Legislative changes to Article 27 again took place in February 1961 with the enactment of the Constitution on the Exploration and Treatment of Mineral Resources, which effectively nationalized the mining industry by stipulating a mandatory minimum 51% Mexican ownership of mining projects. Such regulations forced foreign investors to sell their mining interests or re-incorporate themselves as Mexican companies.

The term of President Luis Echeverria Alvarez in the early 1970's was marked by economic instability and political unrest. His successor, President Jose Lopez Portillo, exploited newly found oil reserves which entered Mexico into a period of economic prosperity. However, the decline of the world oil market in the early 1980's, plunged Mexico into a serious economic crisis. In 1982, Mexico's economy was on the verge of collapse. The government imposed vast austerity measures and in 1985 signed with foreign creditors the first stage of a 14 year debt restructuring plan. In September 1985, the Mexican economy suffered an additional setback when earthquakes severely damaged the capital, killing and injuring thousands. Although inflation accelerated and the foreign debt grew, economic prospects began to brighten again as oil prices began to recover in 1987.