Central American Nations Open Mining Doors as Mexico Falters

(Analysis) Recent developments in Central America’s mining sector are reshaping the regional landscape. El Salvador and Costa Rica are emerging as potential competitors to Mexico’s long-standing mining industry.

This shift comes as Mexico grapples with restrictive policies that have weakened its mining sector. El Salvador’s Legislative Assembly approved a law in December 2024 to allow metallic mining.

This marks a significant reversal of the country’s 2017 total ban on metal mining. President Nayib Bukele has been a driving force behind this change. He claims El Salvador has the world’s largest gold deposits per square kilometer.

Bukele argues that responsible mining could generate up to $131 billion for El Salvador. This amount is equivalent to 380% of the country’s current GDP.

The new law prohibits mining in nature reserves and sensitive watersheds. It also bans the use of toxic mercury in gold extraction. Costa Rica is also advancing an initiative to legalize open-pit mining.

The government of President Rodrigo Chaves has proposed a plan to allow large-scale extraction in the country’s northern region. This initiative aims to address the issue of illegal mining, which has been ongoing since 2010.

Mexico’s Mining Dilemma

In contrast, Mexico has seen a decline in its mining sector attractiveness. The Fraser Institute’s mining investment attraction index ranked Mexico 74th out of 86 jurisdictions in 2023. This represents a significant drop from its previous position.

Mexico’s declining position stems from several factors. These include a policy freezing the granting of new concessions since 2018 and slowdowns in permit processing. Reforms to mining laws that lack clear regulations have also affected exploration activities.

As a result, the Mexican mining chamber Camimex expects investments to fall by more than 20% in 2025. This decrease would bring investments down to about $3.8 billion from approximately $5 billion in 2024.

The contrasting approaches highlight the complex balance between economic development and environmental protection. El Salvador and Costa Rica face challenges in managing environmental risks and public opposition.

Mexico, on the other hand, is at a crossroads with its mining industry. These changes could potentially motivate Mexico to adjust its regulatory strategy. The country needs to maintain its competitiveness in the region.

As these shifts unfold, the mining landscape in Central America and Mexico is likely to evolve. Potential shifts in investment flows, environmental practices, and economic impacts are expected across the region.

The mining industry’s contribution to GDP varies among countries. In El Salvador, Guatemala, and Honduras, it has not exceeded 1% of their gross domestic product. The developments in Central America could reshape the regional mining industry.

They may also influence investment decisions and economic strategies in neighboring countries. As the situation evolves, stakeholders will closely monitor the impacts on local economies and environments.