Adapting to a Changing Legal Environment

Q: How would you describe the current environment for mining in Mexico, and how have recent legal developments impacted mining companies that work in the country?

A: Mining has been one of the most significant industries in the geographical and cultural formation of modern day Mexico. Despite the fact that in the last 30 years it has lost relative importance at the national level, we should not forget that many of the country’s most important cities, such as Guadalajara, Zacatecas, Pachuca, Durango, and Chihuahua, were founded as a direct result of mining activities, which in some of these cities have continued to the present day. Mexico’s business environment, from a legal perspective, is positive. Despite the fact that mining is a highly regulated activity, the legislation that applies directly to mining does not generally constitute a barrier to entry. It is widely known that mining is cyclical and that it responds to market conditions that go beyond the borders of our country. It is possible to carry out mining work in Mexico because of the great mineral potential, the qualified work force, and the regulatory framework, which together contribute to the general development of mining.

Q: What role does PS&RM Abogados play in the preparation, negotiation and execution of contracts at both the exploration and exploitation level?

A: The most important asset for a mining company is not its machinery, or its systems, but its mining concession - you have to remember that without a concession there is no mine. The mining company is obliged to comply with all requirements relevant to the concession. During the surveying and exploration phase we work on reviewing the options available for acquiring a concession, gaining access to the land, and securing environmental permits. During the mine construction phase more permits of different types are needed so we work on service contracts, labor contracts, and the acquisition of land. During the production stage a law firm’s involvement becomes a daily thing, because we work together with the client on communal contracts, we work with the service providers, and we work on the upkeep and fulfillment of permits, contracts and any other obligations that relate to the environment, explosives, water or general infrastructure.

The philosophy of PS&RM Abogados is that legal specialists in this area should really understand everything about mining operations. The perception of the lawyer as a professional who must intervene only when there are problems needs to change, and lawyers should instead be considered as part of the team that plans the negotiations, and helps to prevent problems that could come up during the process. It is better to take preventative measures than to fix problems further down the line. It is our view that the lawyer should be integrated within the business and seen as a constructive team player rather than an obstacle to a company’s work.

Q: What are PS&RM Abogados’ ambitions regarding the mining industry in the coming years?

A: We are certain of the need to strengthen the current mining authorities. Together with other lawyers we have proposed the creation of a Federal Mining Commission, which would be an independent body under the authority of the Energy Ministry. This commission would be the regulatory body for the mining industry; it would be independent and responsible for administering its own resources, and it would also have greater political weight. Within the commission the structure of the entire General Coordination of Mining would remain the same – that is to say that the General Directorate for Mining Regulation, and the General Directorate for Mining Development, the Mexican Geological Survey (SGM) and the Government Trust for Mining Development (FIFOMI) would remain intact, and each one would be run by the commissioner, who would be named either by the academic, industrial or government sector. Essentially it would be a more democratic body, with more resources and more political power, much like the other commissions that exist in our country.

Under the current structure, the mining authority cannot respond with the efficiency and effectiveness that the mining industry needs. The mining authority needs to be restructured in a way that allows it to respond to the needs of the growing mining sector, while at the same time having the necessary political weight that allows the mining sector to be recognized as strategic to national development, thus stimulating the mining sector that for centuries has contributed to the formation of modern day Mexico.