Buying Silver In Mexico

Recently, there were some interesting articles that discussed silver related issues in Mexico, like the unfolding of the "Peak Oil" scenario in Mexico and its impact on the Peso (www.gold-eagle.com/editorials_05/watson062905.html), the geopolitical picture (www.gold-eagle.com/gold_digest_05/wright072905.html), or the efforts for a remonetization of silver in Mexico (www.plata.com.mx/plata/plata/comHSP52a.htm). In this context it might be interesting to know where and how to actually buy physical silver in Mexico in an uncomplicated and unusual way.

Mexico is the world's biggest silver producer. The country produced 2.95 tons (94.7 million ounces) of the metal in 2003 which amounts to almost 14 % of world silver production. Most of that silver comes from the famous mining districts in the Western Sierra Madre mountains in the states of Zacatecas, Durango, Sonora, Sinaloa, and Chihuahua. Mexico has a long tradition of beautiful silver handcrafts and artwork. Much of it comes from the city of Taxco in Guerrero state which is widely known as Mexico's "silver city".

So one way to buy physical silver in Mexico would be to simply search out an artworks shop, where, of course, a high premium has to be paid with respect to the silver price (which, by the way, it is well worth because of the high amount of skills and handcrafts that goes into these beautiful pieces).

However, buying silver for accumulation or investment purposes means buying silver bullion at as close to market prices as possible. With respect to silver coins this can be done in most of the banks, of course, where often one has to wait a day for actual delivery. Certain money exchanges (Casas de Cambio) sometimes also offer a diversity of gold and silver coins. Since most of them are used coins they are not always in the best conditions and prices can vary significantly between one dealer and another. However, there is a little known (at least outside of Mexico) and uncomplicated way of buying silver: just walk into your local home appliance shop and buy a pound or two.

Buying bullion silver between washing machines, air conditioners, TV sets and furniture? Actually, yes. This is one of the more curious effects of Mr. Hugo Salinas Price's efforts for a remonetization of silver in Mexico (www.plata.com.mx/plata/plata/english.htm). Mr. Hugo Salinas is one of Mexico's most famous businessmen and an endorser of a silver backed currency in Mexico. In fact his idea is to get the one ounce "Libertad" silver coin (www.cmonedam.com.mx/cmm/cmm_bastidores_i.htm) into circulation as legal tender.

Part of the Salinas empire is the Elektra home appliance retailer which has several hundred outlets in Mexico and can be found in any major city. Inside every Elektra shop there is a branch of Banco Azteca, the financial services arm of Grupo Elektra.

The Aztec Bank is one brilliant idea. It was designed to serve millions of Mexicans who may not be considered creditworthy by other banks but who nevertheless have banking needs (just think of the millions who send money from the US to their families). Basically, Banco Azteca serves a specific middle to low income clientele with probably little margin but with a seemingly indefinite number of clients. Mr. Hugo Salinas uses these banks to get the "Libertad" coin into circulation. Just go into the washing machine shop, walk right through to the end where you find Banco Azteca and buy as many as they have. Right now, the "Libertad" is at about 9.50 USD, which is close to what a silver eagle or maple costs at Kitco. Interestingly, they do not ask you for your name and address like other banks do when you buy gold or silver.

So next time you are vacationing or doing business in Mexico you may want to check out the local Elektra store if you are looking for some silver. The "Libertad" is .999 pure silver and a really beautiful coin. It makes for a nice gift that occupies virtually no space or weight in your luggage. However, be sure to ask for the new "Libertad" since the old one is not quite that beautiful.

Dirk Masuch Oesterreich (dmasuch@servicioshidrogis.com)

Dr. Dirk Masuch Oesterreich is a geologist and owns a geological consulting firm in Mexico.

Website: www.servicioshidrogis.com

5 August 2005

78 percent of the yearly gold supply is made into jewelry.