Community Relationships and Effective Negotiation

Whilst the process of negotiating land access is equally important whatever the land type, negotiating with the owners of communal land can often be the biggest hurdle in beginning mining operations in Mexico. Negotiations with such communities have to take into account a number of different and more unique characteristics: the cultural peculiarities specific to each community; the greater significance that displacement or environmental degradation might have for such groups; and the need to satisfy a greater number of people with differing priorities and interests. These elements can lead to a more complicated and protracted negotiation process, though with an appropriately tailored and informed approach reaching a fair agreement is almost always possible.

Article 23 of the Agrarian Law grants ejido and communal landowners exclusive rights to the approval of contracts or agreements with third parties relating to the sale or leasing of their communally owned land. Communities have the right to refuse entry to mining companies if they find the terms of their proposal to be inadequate, so from a practical point of view it is very much in the interests of mining companies to reach an agreement with the communities. Agreements between mining companies and communities are usually accompanied by a social license, which features some compensation on behalf of the company for environmental degradation or disruption to community life. This will usually take the form of social or community benefits in areas like health, education or employment. Through a thorough understanding of the community’s wants and needs, the aim of the social license is to bring tangible positive benefits to the community, whilst often also committing to restore the environment to its original state on completion of the work.

Gabino Fraga Peña, Director General of Grupo GAP, maintains that, by taking a thoroughly well informed and transparent approach to drawing up the social license, mining companies can almost always be successful in gaining access to land. Referring to an example of best- practice the firm followed in a previous case, he says: “Before Grupo GAP got involved, the people participating in the negotiation process had no idea about how the community was organized or about the needs and expectations of that community. We analyzed how the community or ejido was organized, who the leaders were, what interests they responded to, as well as if there were any other parties involved in the conflict, such as political figures or caciques. The mining company had been trying to obtain land access to start the project for over 12 years; after Grupo GAP got involved in the negotiation process

and started providing legal support to the company, it took just six months to get permission to build the mine.”

Investing the time at the beginning of a project to build a solid relationship with the community, based on mutual understanding and transparency, will be of long term benefit for the project. Legal specialists argue that, by getting the community on side with the project from the beginning, wider support will follow naturally. Building strong and solid relationships with the community is a simple choice and a worthwhile investment because “If a company develops a good relationship with the community, the community will defend the company’s project against everybody”, says Alberto Vázquez, Partner at VSG Abogados.

Legal specialists, however, warn against the common error of overcommitting during the negotiation stage, and rushing into making promises that the company will not eventually be able to keep. In this sense, transparency is absolutely essential. “Communication with the community prior to beginning operations is vital. By being transparent about every single one of the processes that will be carried out, the community will clearly see happening what was explained to them previously, and as such will gain confidence in the project. It will also make them want to become even more involved in the project,” says Adalberto Terrazas, President of the Community Relations and Development Commission of Camimex.

The social license is not currently compulsory, but it has become common practice. Through such agreements the industry is considered by legal experts to be more than fulfilling its corporate social responsibility duties and making genuinely positive impacts on communities that would often otherwise be out of reach of the social benefits that mining can bring, such as increased employment and health services.

At the end of 2013 the government will be introducing a mining royalty, a percentage of which will go to the municipality and state authorities. Experts fear that this will have the adverse effect of directing money away from the community and over time do away with the practice of the social license. The general feeling among those who have seen the transformative impact of social licenses is that such royalties are not necessary, given the significant contribution that mining companies are already making on the local level throughout Mexico. The way that the new system will work is due to be confirmed in late 2013. Whatever that system may be, it would do well to avoid moving away from such practices, and should aim to retain this very grassroots level of impact