Mining Sector in Mexico Next Target of “AMLO Effect,” Shares Plunge

Mexico is #1 silver producer in the world, #2 gold producer in Latin America, and a major copper producer.

For a president who hasn’t taken office yet and whose government is still in waiting, Mexico’s Andres Manual Lopez Obrador (AMLO) has managed to ruffle a lot of very important feathers. First, he scrapped the country’s most lucrative infrastructure project, a partly built airport for the capital that was expected to generate billions of dollars for many of the country’s richest companies, banks and families. Then, two weeks ago, his National Regeneration Movement (MORENA) party proposed a bill that directly threatens one of the banks’ core businesses: fee gouging. Since then, billions of dollars have been wiped off the banks’ market value.

Now, the same party, which, together with its allies, holds majorities in both houses of Congress, has set its sights on the activities of the mining industry. On Tuesday Senator Angelica Garcia presented a bill that would make significant changes to Mexico’s mining laws, including a proposal that would allow the country’s Energy Secretary to declare certain parts of the country off-limits for mining companies due to their negative social or environmental impact.

Shares in Grupo Mexico, the country’s largest mining company, responded to the news by slumping 5% on Tuesday, 2% on Wednesday and another 5% on Thursday, to hit a 2-1/2-year low of 39 pesos. Shares in the company’s biggest domestic competitor, Penoles, have shed 13% over the last three days, and are now at their lowest level since April 2016.

Two analysts consulted by Reuters said the losses were fueled by concerns about the potential impact of the bill, if it is approved. The section of the bill that most worries investors is a clause that would require the consent of indigenous communities before granting mining concessions on their land

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