CORRECTED-Miners say security "tax" excluded in Mexico royalty calculus

Wed Apr 24, 2013 4:37pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

(Corrects spelling of Ortega's name, paragraph 15)

By Gabriel Stargardter

MEXICO CITY, April 24 (Reuters) - Mining companies in Mexico, worried by falling metals prices, are tense about a government plan to slap a 5 percent royalty on their pre-tax profits, arguing they already pay a covert "security" tax to shield themselves from drug-related crime.

Under the terms of the bill, which is expected to come before Congress for a vote on Wednesday, miners' profits would be redistributed to the states and municipalities where they operate in Mexico, the world's top silver producer.

The royalty scheme is part of Mexico's larger plan to broaden its tax take, the lowest in the 34-nation Organization for Economic Co-operation and Development (OECD), and to gain parity with regional competitors like Peru, Brazil and Chile, which have already implemented royalty regimes.

But foreign and domestic mining companies, already nervous after seeing gold prices plunge to their worst two-day loss in 30 years last week, say the scheme is poorly timed and fails to acknowledge the sky-high security costs of investing in Mexico.

About 70,000 people have died in drug-related violence in Mexico since 2007, when the government launched a military-led assault on the violent cartels.

"The mining industry is under attack," said Keith Neumeyer, the chief executive officer of First Majestic, a Canadian silver miner that spends about 10 percent of its annual budget on security costs. "We have armed guards around all of our mines; 10 years ago we didn't have any security."

"It's just the cost of doing business in Mexico," he added. "We have no choice."   Continued...