Mexico to Let Foreigners Own 100% of Mines : Third World: Previously, the limit was 49%. The change is aimed at doubling investment in mining operations.

In a bid to encourage a doubling of investment in mining, Mexico announced rules Thursday allowing 100% foreign ownership of Mexican mining operations, opening new areas to exploration and simplifying permit procedures.

Previously, foreign investors were permitted to own no more than 49% of mining enterprises.

The object of the rules changes is to bring annual investment in mining to $800 million a year.

The new regulations, which take effect immediately, “are important to making our mining industry dynamic again,” said Alfredo Elias Ayub, undersecretary for mining and basic industry.

“This will interest every multinational mining company in the world,” predicted Dan Roling, a Merrill Lynch mining industry analyst. “It opens a whole new district to exploration. . . . This could be a very exciting possibility.”

Mexico is the world’s top silver miner, accounting for 17% of international production, and is also an important source of gold, copper and zinc. Elias Ayub estimated that only 20% of the country has been explored for mineral resources.

U.S. and Canadian mining companies have expressed enthusiasm about operating in Mexico under the new regulations, and European companies also have shown interest, Elias Ayub said.

He has heard little from the Japanese, he said. In the past, the Japanese have been reluctant to invest in Mexico under liberalized regulations without changes in underlying law.

In Mexico, the government owns all mineral rights and issues permits to private companies to explore and develop mines. Currently, production is dominated by four Mexican companies, all with minority foreign partners.

High taxes and foreign investment restrictions slowed mining investment to barely $100 million a year by 1987, compared to $500 million in 1980--despite Mexico’s reputation for mineral wealth.

Investment picked up after tax changes announced in 1988 and is expected to reach $400 million this year. The new regulations are expected to raise investment to $800 million a year by 1992, Elias Ayub said.

First, the government hopes to attract foreign corporations that had balked at the rules limiting them to 49% ownership of mining companies.

Under the new regulations, foreign investors may create trusts that allow them 100% ownership of mining companies for 12 years. At that time, they must sell 51% to Mexicans. However, they may sell that interest on the Mexican Stock Exchange, scattering shares among small investors and retaining control.

Private investors, including foreign companies, can now form limited partnerships with government agencies to explore for and mine sulfur, phosphoric rock and potassium, minerals previously exploited only by the government.

The new regulations also reduce the red tape that often delayed mining permits four to five years, becoming another significant barrier to foreign investment.

“No one was going to come from abroad to spend four years doing paper work,” a government official said. Permits will now be processed in eight to 10 months, Elias Ayub said.

Finally, the regulations are also designed to provide investors with increased access to potential mine sites. The new rules change tax laws that encouraged companies to hold permits for mineral rights to huge tracts of land without exploring them, and they open to exploration land that the government has held in reserve.