ENGLISH TRANSLATION OF ING. LUIS DE LA PEA PORTH'S SPEECH INAUGURA-TING THE NINTH NATIONAL CONVENTION OF THE ASSOCIATION OF MINING, ME-TALLURGICAL AND GEOLOGICAL ENGINEERS OF MEXICO. Preamble by the Press, as published in the Hermosillo Daily "Imparcial" De la Pea Porth Demands Unity of Endeavor and Unity of Resources for Mexican Mining. Taking the speaker's stand to expound his concept of the general pa-norama of mining in Mexico, the Deputy-Minister of "Recursos Natura-les No Renovables', Luis de la Pea Porth, delivered a vibrant mes-sage to more than 1,600 delegates of different entities of Mexico, to whom he delineated the Mining Policy of the present Administration. The official from the Federal Government, demanded the participation of all parties in the difficult task of the resurgance of the mining-metallurgical industry of Mexico and cited concepts of great signifi-cance which are presented during his speech which is published com-pletely as follows: VERBAL TEXT OF ING. LUIS DE LA PEA PORTH'S INAUGURAL ADDRESS TO THE NINTH NATIONAL CONVENTION OF THE "ASOCIACION DE INGENIEROS DE MINAS, METALURGISTAS Y-GEOLOGOS DE MEXICO" October 25, 1971 - Hermosillo, Sonora Mr. Governor of the State of Sonora; Mr. President of the Board of Directors of the National Association of Mining, Metallurgical and Geological Engineers of Mexico; Honorable Members of the Presidium; Ladies and gentlemen. It is a great honor for me and one of the greatest satisfactions of my professional life to be present in this ceremony with the most ho-norable representation of Mr. Lic. Luis Echeverra, Constitutional President of the Mexican United States, as well as to transmit to you, on his behalf, a warm greeting and his best wishes for the suc- cess of this Ninth National Convention. Considering the foregoing and knowing that the Asociacin de Ingenie-ros de Minas, Metalurgistas y Gelogos de Mxico, to which I'm proud to belong, includes the majority of Mexican mining technicians and that one of their main objectives is to collaborate with the Govern-ment in the development of the mining activities of the country, I feel it is very appropriate to take advantage of this opportunity to present to you some of the main components of the present mining policy of the Mexican Government. An adequate mining policy, aside from purely technical and economic factors, must consider, very specially, social, cultural, political factors and in some cases aspects of national sovereignity. It is not acceptable, under any circumstance, to believe the thesis that the exploitation of mineral resources with which the Country has been endowed should be developed with exclusively economic objectives, no - 2 - matter how justifiable and apparently favorable they may be. It is indispensable, in our opinion, that this exploitation be developed in such a way that a maximum contribution be made toward the achieve- ment of the highest national objectives. Undoubtedly, one of the fundamental aspects of the mining policy of the Mexican Government during the last years, has been the so-called "mexicanization of mining". This process, consisting in the majority participation in Mexican mining enterprises by Mexican capital, be it state or private, is backed in the precepts of Article 27 of the 1917 Constitution, which clearly states that the exploitation and use of the mineral resources will only be able to be developed in the Coun-try, under the protection of concessions given by the Mexican state and that these concessions will be given only to Mexican citizens or Mexican enterprises. I consider it very important to clarify that "mexicanization" is not equivalent to nationalization, nor does it constitute in itself, a first step in this direction. On the contrary, we understand mexica-nization to be an alternative between a mining industry in Mexico controlled by foreign interests, separated from the economic life of the country, and a nationalized mining industry, separated from its natural markets and from its most accessible sources of capital and tecnology. Considered in this manner, mexicanization of mining may not be a so-lution thoretically ideal for the difficult dilemma with which we are faced, but we sincerely believe that, within the general frame-work of realities of our national circumstances, as well as interna-tional, it is the best practical solution that, at the moment, we can find for this dilemma. The basic objectives of mexicanization are: a) To ensure that the private interests of mining enterprises be kept, in all cases, subordinate to national interests; b) To achieve a true integration of mining activities with the e-conomic life of the country, and c) To avoid, as much as possible, and without resort to coercive measures, the exit of economic resources from the country, ge-nerated by the exploitation of our mineral resources. It is undoubtable that in the first stages of the mexicanization of mining enterprises that were already in operation, this process, which the President of the Republic himself has claimed a "national conquest of great importance", has been successful. Nevertheless, it is necessary to recognize also that, unfortunately, there still exist doubtful "mexicanizations" that only obey the let-ter of the Law but not its spirit. Also, facts and negative tenden-cies in mining are occuring which require corrective measures which will perfect and make more real and effective the mexicanization of mining. Among the negative aspects of the present disposition of Mexican mi-ning, we are particularly concerned about the following: 3 a) The insufficient investments presently being made both by the State as well as by private enterprise, in mining exploration and in the development of new mining ventures. b) The weakness of the small and medium mining entities, and the dan-gerous concentration of the national mining production by a small number of large companies. c) The vulnerability of the Mexican mining industry to international prices, to the extent that when prices are unfavorable they not only affect present production, but they have a large impact on future production and impede taking adequate advantage of periods of good prices. d) The abuse in the incorporation of enterprises that, with purely promotional or speculative ends, obtain mineral concessions over large surfaces of land. e) The existance of many inactive mining properties or on which only the minimum legal work is carried out, even though some of them are located in zones with no other natural resources, and in which. zones mining is vital for employment. f) The disequilibrium which exists between the degree of mexicaniza-tion achieved in the productive phase of mining and the scarse progress obtained in other phases, such as the commercial (market- ing) phase and with reference to the utilization of mineral pro-duction, and g) Finally, the precarious situation due to international factors be-yond our control, which affect mining in general, and which ef-fects we are just beginning to feel. The first phase of mexicanization, namely the mexicanization of enter-prises that were already in operation, was almost completed with the mexicanization of Cananea, which event was announced by the President of the Republic on August 27 of this year. With pride we can state that at the present, more than 98% of mining production in Mexico is generated by enterprises in which the majority of share capital is Mexican. Nevertheless, it is appropriate to note that the foregoing fact also implies a great challenge for the future. In other words, we can say that the simple phase, relatively certain and inexpensive to attain, of buying operating enterprises, has ended, and we now enter a much more difficult and expensive stage; namely, to create and organize new enterprises and new mining/metallurgical ventures. This is a phase that requires great technical and administrative know-how and in which there is no room for improvisations or lack of preparation. With reference to mining, the Mexican Government considers that the small, medium, and large enterprises are the parties who are responsa-ble for the principal tasks and work involved, but the Government is also conscious that its promoting function must be intensified by means of its direct participation in enterprises dedicated to the ex-ploration, exploitation, and refining of minerals, as well as to the transformation and marketing of mineral products. It is undoubtable. -4- in our opinion, that the association of the State with private enter-prise has already demonstrated to be a positive factor in the develop-ment of the Mexican mining industry, and that it can be much more so in the future. Another very important aspect of the mining policy of the Government is that which consists in achieving the maximum transformation or in-dustrialization economically possible of the mining products of the country. We consider that, except for some cases in which special circumstances have resulted in unfortunate and prejudicial consequen-ces, Mexico has had considerable success in its objective of reducing the exportation of its raw minerals or concentrates with a low degree of refining. To conciliate and stimulate, as much as possible, the development and the modernization of foundries, refineries and metal industries in Me-xico, is (and we are sure that it will continue to be) a fundamental tenet of the mining policy of the Mexican Government. Another of the basic aspects of the Mexican mining policy is the de-cisive support and encouragement of the existence and development of the small and medium mining enterprise, which has been emphatically ratified on numerous occasions by the President of the Republic him-self. "We conceive the development of mining in Mexico", the Presi-dent has said, "basing it not only on large enterprises, but especially on thousands and thousands of small and medium size mining enterprises and producers". In addition to the aspects of a social nature, which in themselves would suffice to justify this policy, we consider that there exist also in this respect solid justifications both technical and economic. The particular characteristics which are found in many of our mineral deposits; the low unit value of some of these minerals or great varia-tions in their prices, make their exploitation marginally attractive, or frankly uneconomic for large enterprises. We believe that Mexico, under no circumstances, can afford to waste or "freeze" for an indefi-nite period of time, resources that, even without large profits, can be exploited which permit the generation of productive employment to our fellow citizens. Whichever the state of development of a country, it is undoubtable, that one of its most important resources is constituted by the existence and availability of technical and administrative personnel well trained Therefore, another of the important aspects of the Mexican mining policy is to achieve the objective that in these activities, the services of Mexican personnel be used and developed at maximum levels in all fields of mining. Adapting to our case an old Chinese proverb, we could affirm that if we want to have mining for a few years, mexicanization of these mining enterprises actually existent is sufficient, but if we wish to achieve the development of a prosperous mining industry of unlimited duration, we will have to be able, with our own technical and administrative skills to discover new mineral deposits, to develop those which are being discovered, and to create and organize new enterprises and enti-ties to exploit them, new industries that use the minerals that are thusly obtained, and to establish marketing enterprises able to -5- place our mineral products In international markets. During the last few years, and as a result of the combined work of the Government, the Universities, and mining enterprises, the number of students that have enrolled and graduated in the field of Mining Engineering, Metallurgy and Geology in Mexico, has increased notably. It would be sad indeed if, due to conditions, which are undoubtedly of a transitory nature, the Mexican mining industry did not take advantage of the work developed to date and left without employment some of the technicians who egress from our universities. I consider it my duty to specifically mention this, problem, which may become a serious situa-tion next year and for the adequate solution of which I consider indis-pensable, the cooperation and good-will of all mining enterprises working in Mexico, and which will require the decisive intervention of the Asociacin de Ingenieros de Minas, Metalurgistas y Gelogos de Mxico. Another of the basic functions of the Mexican Government with regard to mining, is the colaboration and the publication of basic information such as topographic and geologic maps, statistics, economic studies, etc., and that, within these efforts, attention should be given to the study and the evaluation, not only of large mineral deposits, ame-nable to exploitation on a large scale, but also, particularly to the very numerous small deposits that, within our special circumstances, can give employment and economic independence to many Mexican citizens. Mexico should not, and must not, continue to be a country of great eco-nomic contrasts. The adequate distribution of wealth implies as a first step, a more homogeneous development of the different regions of the Country. Mining, one of whose special characteristics is that it cannot choose its location, as this is predetermined by the loca- tion of mineral deposits, can be an important factor in the develop-ment of zones which do not contain other resources; a great help to di-minish economic regional differences, which in some cases are so drastic and so unjust, similar to economic differences between the di-verse sectors of the population. Due to their nature, minerals are non-renewable resources; in other words, they tend to necessarily diminish. In some cases, and above all, when the mine exploiter lacks the necessary social conscience, and does nothing to aleviate and facilitate the transition when mi-neral reserves are exhausted, serious social problems develop that re-quire solutions, even though they may only be temporary solutions, based on operations subsidized by the State. These operations cause the inefficient use of available capital resources, employment and technology, without, in most cases, adequate solutions being found to the problem. It is also undoubtable that the safety in the workings of the mines and the metallurgic instalations are an important part of our mining policy. The life and health of our miners are factors to which top priority must be given. Honorable Mining Engineers, Metallurgists and Geologists of Mexico: When the directors of the Association invited the President of the -6- Republic to attend the Inauguration of your Ninth Convention, Lic. Echeverra emphasized that economic development always implies the combination of natural resources and human resources and that with regard to raining, Mexico is willing to continue making large invest-ments of patience and money to consolidate and perfect the mexicani-zation of mining in Mexico. It is certain that the ideas that I have taken the liberty to explain regarding the mining policy of the Mexican Government do not include all the various important aspects that one might consider within the scope of this topic. Nevertheless, gentlemen, the dialogue has been initiated on the highest level and it only remains for me to request that you continue it, always having as the fundamental objective, the benefit and the progress of our Country and of our profession. Thank you very much. Ing. Luis de la Pea Porth October 25, 1971 Translation FMGS/ebh