Mexico’s president asked Ottawa through its Embassy in Mexico to support the Canadian mining company First Majestic Silver Corp. to cover its tax obligations, which it estimates of $500 million dollars.
Andrés Manuel López Obrador (AMLO) said: “Hopefully, the Embassy of Canada in Mexico will make them come to their senses. We cannot allow mining companies not to pay taxes”, and added: “In Canada -as in any country- companies pay for the extraction of minerals. We don’t want to increase taxes; we just want them to pay”.
AMLO’s government decided to use a strong hand against international companies that evade taxes. Mexican tax authorities collected payments from nearly 900 macro companies last year in an attempt to increase tax collection. Mexico is the country with the lowest tax collection in the Organization for Economic Cooperation and Development.
For the Mexican government, tax collection becomes more important just now that the Covid-19 pandemic has caused an increase in the demand for metals and minerals for the energy, pharmaceutical, automotive and technology sectors. And this growing demand has driven investment by Canadian companies in the exploration and exploitation of natural resources in Mexico.
Canadian mining companies are focused on Mexico
According to Douglas Coleman, president of the Mexico Mining Center consultancy, Canadian mining companies injected an average of 30 million dollars a month during 2020, and since September last year to date, they have invested around 170 million dollars.
In an interview, Coleman assured that there are several reasons for this injection of investment, but “we are observing a marked demand for metals destined for industries that are recovering from COVID-19 or that require raw materials, such as the energy industry,” he said. .
The Mining Chamber of Mexico (of which several foreign companies are members), estimates that 4,981 million dollars will be invested this year in the mining sector in Mexico, which will mean an increase of almost 7% compared to 2019.
Mexico is the largest silver producer in the world with a production of 6,300 metric tons, according to the United States Geological Survey; in other words, almost a quarter of the silver that is mined on the planet comes from Mexico and many Canadian mining companies operate there.
First Majestic Silver Corp will seek protection in the CUSMA
Through a press release, First Majestic Silver Corp assured that it will appeal to all legal channels, including in the field of international law, to reconcile a protracted tax dispute with Mexico.
At a media conference, AMLO clarified that his administration does not seek to create or increase taxes, but simply wants “companies to catch up with their tax obligations.” Now, this Canadian company seeks to take refuge in the Free Trade Agreement to avoid the coverage of its tax obligations, “he added.
The Vancouver-based firm has three operating mines in Mexico: San Dimas’ gold-silver mine, Santa Elena’s gold-silver mine and La Encantada silver mine, as well as eight other projects in various stages of development.