"The Trap and the Temptation: Government Financing to Mexican Mining"

This paper studies the provision of finance to the Mexican mining industry by the government during the period 1940-1990. It aims to answer the questions of what explains an increasing participation of the state in an industry and why that participation might persist over time. It argues that the government had both, development and political goals, and mining was an activity prone to receive government financing. When lending or funding equity to mining firms, the State absorbed the sunk costs and risks of this activity. In bad times for mining, due to the characteristics of mining, the State maintained its support and sometimes became an owner to rescue troubled firms. In thriving times, the State had the temptation to finance more firms and/or increase its ownership. As a result, the Mexican government ended up with a large complex of state owned mining enterprises. A divestiture process followed in the eighties.