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News Article

Communities Remain at Heart of Mining Industry’s Rule of Law

By Miriam Bello | Wed, 07/06/2022 - 15:01

Environmental and social best practices have become a priority for mining executives around the world. In Mexico, this is no exception. However, the companies looking to meet these high standards must overcome hurdles like a lack of new mining concessions, higher scrutiny on tax payments and the industry reforms of President López Obrador, which aim to develop the deficient regulation on social matters in a way that is still unclear for operating companies. Nevertheless, communities will remain key to this shifting regulation, providing companies with a cornerstone for their operations.

If mining companies aim to be competitive in Mexico, they must be competitive while remaining respectful of the rule of law. “Mexico has a vast legal framework for mining processes, meaning that permit holders need to work under permits, as well as be respectful of human rights, the environment, Indigenous communities and Mexican culture in general,” explained Ruben Cano, Founding Partner, CR Legal Partners Mexico.

Prior to their operation and to avoid future challenges, every company must first carry out a detailed project feasibility analysis. During this research, Rubén Alvidrez, Board Member and Independent Director, Altaley Mining, explained that companies will find that there have been no new concessions granted. Among other barriers, there are various security concerns, tax payment scrutiny and long analysis processes required to determine whether concessions were granted within the boundaries of the law.

Land rights are some of the most significant challenges companies could encounter. Therefore, “companies need to fully understand the legal, social and geographic challenges of the land and its established communities,” said Manuel Sainz de La Hidalga, Partner, O'Gorman & Hagerman. He furthermore stressed it is essential to identify land owners and distinguish between private, social and public property. Each of these schemes features different standards to be complied with if a company is to procure land rights and social licenses. Knowing how to move ahead will provide certainty and foster positive relationships with land owners, ejido communities and the government itself.

In 2021, mining companies encountered yet another subject of concern for their investments. The first Chamber of the Supreme Court of Justice of the Nation (SCJN) delivered its ruling for amparo trial 134/2021, put forward by the Nahua Tecoltemi Indigenous community, located in Ixtacamaxtitlan, Puebla. With the ruling, SCJN revoked two mining concession titles that had been granted in 2003 and 2009 to the company Minera Gorrión, the Mexican subsidiary of Almaden Minerals. According to the court’s ministers, the Mexican authorities were obliged to facilitate the right to prior, free and informed consultation of Indigenous peoples, but failed to do so. The court furthermore argued the state had violated articles 6 and 15 of the International Labor Organization (ILO) ILO Convention 169.

In the ILO Convention 169, Indigenous consultation is defined as the procedure by which initiatives, proposals for plans and programs, models of public policies and institutional reforms that directly affect Indigenous communities are presented to them with the purpose of obtaining their consent or agreement.

The Supreme Court’s new decision, while it is still not binding, established that mining concessions granted after Convention 169 which entered into force in 2014, could be canceled due to the absence of an Indigenous consultation process. “However, there are no guidelines, legal frameworks or clarity on how could companies in Mexico should comply with these obligations,” said Alfredo Phillips, Independent Director and Board Member, Almaden Minerals. As SCJN recognized, establishing consultation procedures is the responsibility of the government. Nevertheless, companies like Almaden Minerals could suffer the consequences of this process is not carried out correctly, even though no blame falls on them.

Phillips explained that there are now two crucial moments where Indigenous communities must be involved, “when the concession permit is granted and when you present the Environmental Impact Assessment (EIA).” However, he said that these moments should be clearly established in the law before any operations occur. “We already carry out social assessment for our operations, but if new rules are not clear, we cannot proceed with certainty,” Phillips added.

The government’s rule of law and companies’ compliance will create the desired level of transparency that both parties are working toward. Cano explained that there are still misconceptions that permits can only be acquired through corrupt practices. “This is completely false. Doing everything the right way, being prepared and organized and consult experts to have complete compliance during a concession is always the right route for mining companies to follow,” he stated.

“The mining industry in Mexico is the second-safest industry, according to data from the Mexican Social Security Institute (IMSS). Mining is important and part of the solution for safety issues, not the problem. By working together with the government, we would be able to create better projects, solutions and development for the communities we are in,” said Christopher Avila Mier, President of the Legislative Liaison, CAMIMEX.

Through each company’s social compliance, the authorities can be certain that the mining industry shares their interests. “Both new entrants and existing companies are changing their mindsets to have a socially-centered vision for their operations. While this might take a while to fully establish for every single mining company, the process is already happening. We could benefit greatly by working alongside the government to achieve this,” Phillips said.

There are a number of government areas toward which companies should focus their compliance. Sainz broke them down to four primary entities: the Ministry of Agrarian, Territorial and Urban Development (SEDATU), The National Agrarian Registry, which controls ejidal and communal land, The Agrarians Attorney’s Office, which protects the rights of agrarian workers and Agrarian Courts. “Through these areas, companies can ensure they are approaching the right entities and guarantee they set the same goals moving forward,” he said.

Alvidrez shared the primary points to consider when developing a strategy to approach the government. “Align the company’s objectives with those of the government, identify the economic benefits that help the community and prove how the project spurs job creation, meet the tax requirements, interact with communities, help where the Mining Fund would have supported, try to select local contractors so that the money stays in the community and approach the three levels of government to work together.”

Cano emphasizes that communities must be the center of the operation: “mining companies must include them in their long-term visions. Operators have been working for centuries and they will continue to do so. Government rules change every six years, but their focus on these communities remain the same.”

Miriam Bello Miriam Bello Senior Journalist and Industry Analyst