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Economy, Mining

white arsenic, Guerrero Negro, Petroleos Mexicanos, Pemex, fluorspar

Mining, especially of silver and copper, has historically been the most important extractive industry in Mexico. Although petroleum production has surpassed the mining of metals in importance, Mexico remains a major producer and exporter of silver. It also operates one of the largest salt extraction facilities in the world in Guerrero Negro in the state of Baja California Sur. Its chief mining regions are Chihuahua, Durango, Hidalgo, and Zacatecas. In the early 1990s mining accounted for about 2 percent of the nation’s GDP and employed about 1 percent of the labor force. In 1996 Mexico ranked eighth in the world in the total value of its crude oil production. It is also among the world’s top producers of celestite, silver, sodium sulfate, antimony, white arsenic, bismuth, fluorspar, and graphite.

Of the nation’s natural resources, petroleum far exceeds in value all other resources combined. In 1982 petroleum was Mexico’s number-one export product, accounting for 80 percent of the value of total exports. Until the 1930s many of Mexico’s natural resources were primarily controlled and operated by foreigners. After the Mexican Revolution (1910-1920), the nation began to nationalize many of its basic resources and industries. The nationalization of the petroleum industry in 1938, which had been owned primarily by U.S. firms, signaled the new lengths Mexico was willing to go to assert its sovereignty and regain control of its resources. Petroleum in Mexico is extracted, processed, and sold by Petroleos Mexicanos (Pemex), a government-owned company. Although most mining firms that the Mexican government once owned have been privatized, or sold to private investors, the petroleum industry remains largely in government hands. As of late 1996, some of Mexico’s petrochemical industries had been offered for sale, but only 49 percent of any operation can be purchased by foreigners.

Oil revenue is extremely important to the Mexican economy. In the mid-1990s oil accounted for about one-fourth of all government revenues and one-eighth of export earnings. In the 1970s reliance on petroleum earnings contributed to the country’s huge national debt. During this period, the government borrowed money at high interest rates and used the loans to finance the development of manufacturing and service industries. The government anticipated that it would be able to pay the loans off quickly with oil revenues. When the price of oil dropped steeply in the early 1980s, the Mexican government was unable to meet its loan payments and was forced to cut spending on economic development and social services.

In early 1998 a world oil surplus prompted Mexico to join forces with Saudi Arabia and Venezuela, other leading oil-producing countries, to restrict oil production. The surplus had caused a drop in oil prices, lessening Mexico’s earnings from petroleum. The reduced oil revenue led the government to cut $1.05 billion from the country’s budget.

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