Mexican Cartels Hurting Silver Mining

| Fri Oct. 22, 2010 2:22 PM EDT

As one of the world's largest silver producers, Mexico stood to gain from a global rise in silver prices. Instead, some mining companies are finding that it's just too dangerous, or expensive, to keep up business as usual. Cartel members rob and ransom workers, try to sell drugs to employees, coerce mine-owners into money laundering, and are now stealing raw ore and selling it to other countries. As the Latin American Herald Tribune recently reported:

In one recent operation against the nation’s cartels, the arrest of the reputed money manager of the crime syndicate La Familia Michoacana, it was discovered that that organization sold 1.1 million tons of illegally extracted iron ore in China for $42 million.
The theft of minerals in the western state of Michoacan has increased in recent years as that area has come under the control of La Familia, the Mexican Attorney General’s Office said.

In response, certain mining firms are choosing to stop exploration projects. Mexico's Chamber of Commerce says the threats are not just to mines in established areas, but those in more isolated places where cartels grow opium poppies and marijuana. Security costs are up 5 to 10% over last year, one firm reported. Canada's Goldcorp—under fire for not providing promised jobs and services to local peoples—has gone so far as to build a private airstrip near its mines to prevent ore shipments being hijacked on Mexican highways. Such is the cost of business in Mexico. The question is if there will come a point for the majority of mining firms in Mexico when the security costs and collateral damage are higher than any potential profits. Already cartels have shut down schools and brought city life to a standstill. Some think they may do the same to Mexico's already struggling economy if they keep interfering with Mexico's major industries.