Canadian Companies Successful In 2021 Despite ChallengesBy Pedro Alcalá | Thu, 02/03/2022 - 10:49
Q: How would you evaluate 2021 in terms of development and growth for Canadian mining companies in Mexico?
A: 2021 was a challenging year for all mining companies operating in Mexico through Canadian capital. Although the industry was declared an essential economic activity and could continue throughout the pandemic, the mining sector still experienced severe consequences despite all of the sanitary measures enforced at each mine. For instance, supply chains were very much disrupted, along with operators’ relationships with communities and workforces. The impact of all of these factors on productivity throughout 2021 cannot be ignored, even if they were more severe in other industries, such as automotive.
The industry also faced a business environment in Mexico that was not favorable for investment attraction. The political ecosystem, which played a significant role in generating this environment, also introduced a number of legislative initiatives that were not conducive to the industry’s daily operations. Thankfully, none of these passed. One of the initiatives called for the state to have exclusive access to the mining and production of lithium, as well as any other minerals that might play an important role in the energy transition. This description is vague and worrying, since any number of minerals could be considered essential to the energy transition process. The fact that the minerals in question are not explicitly mentioned or listed creates an uncertainty that results in animosity toward new investments.
Despite these challenges, it is always important to remember that Canadian mining companies operate in Mexico in a manner that is arguably independent from politics and completely dedicated to the communities they cooperate with. Major investment decisions were made throughout the year and many of projects from many Canadian companies achieved organic growth. In general, the sector was successful despite politicized media noise surrounding it. Companies, such as Alamos Gold, Torex, Endeavour Silver and Newmont, announced exciting new projects, showcasing the industry’s resilient outlook.
Q: How has the industry faced challenges posed by changing labor conditions?
A: The most important change we saw to Mexico’s labor regulations was the prohibition of outsourcing, applied to all industries. For instance, mining companies had to redefine their contracting regulations since external specialists and service providers were hired under different terms within the new legal framework. This represented a significant challenge as mining operators relied on a number of outsourced services related to their daily operations. Some companies had to absorb external contractors into their central workforce, while others had to keep them out of their operations completely. This hiring process had to be completed within a limited time frame as defined by the new law’s parameters. However, this transition was successful. There were also changing labor conditions as defined by USMCA, particularly in terms of conflict resolutions and union rights.
Q: How did the USMCA leaders’ meeting in 2021 impact the outlook for Canadian mining companies in Mexico?
A: The fact that this meeting even took place at all represents an auspicious and positive gesture for the future of this trilateral relationship. The meeting highlighted political willingness to support the conditions and standards dictated by the USMCA, creating legal certainty that is favorable for business in the industry. However, there are still disagreements that need to be worked through as part of these negotiations. We have seen these disagreements play out publicly in other industries and international disputes, such as those in the automotive and dairy industries. Other industries, such as energy, highlight disagreements that are not explicitly mentioned in these meetings but are quite prevalent in terms of disputes between the USMCA and changing regulatory frameworks of each country. There is a mutual, unspoken understanding that legislative efforts that negatively impact market competition and unduly benefit state enterprises represent an approach to political action that runs counter to the spirit of the USMCA. We expect these discussions surrounding those frictions to take place in meetings such as that which took place last year, resulting in an outlook that is arguably more positive.
Canadian Chamber of Commerce (CANCHAM) is the voice of Canadian business in Mexico. It was founded in 1982 to represent Canadian business interests in Mexico and to promote trade and investment between Canada and Mexico.