/
Insight

Critical Success Factors in the Mexican Mining Industry

Mon, 10/21/2013 - 14:03

Díaz, Bouchot y Raya Abogados (DBRA) was founded 13 years ago, though its partners have been working in the mining and energy industries for decades. Most of DBRA’s clients are foreign mining companies that wish to operate in Mexico and are seeking legal help, due to the complexity of the local mining industry. According to Laura Díaz, Partner at DBRA, companies must bear in mind that to understand the industry context one needs to take into account the economic, social, security, health and legal aspects of mining. “Unfortunately, the lack of awareness of these aspects, particularly the social side, can bring a lot of problems for companies,” she highlights. In order for a foreign company to be successful in its land negotiation process Díaz recommends gaining an in-depth understanding of the history of the mining industry. “Given that Mexico was a colony of Spain many foreigners came to the country to loot its gold, which resulted in a negative stereotype towards foreign mining companies,” she says. Even though the local industry has evolved dramatically since its colonial days, many landowners are not familiar with the importance of the mining industry for the Mexican economy. “This is why the knowledge and social experience of Mexican law firms that specialize in mining is essential for the success of foreign companies. Knowing how to approach people plays a very important role in the value proposition we offer to our clients,” Díaz adds.

In DBRA’s experience it takes approximately four years for a mine to start production. This includes the time needed for permitting processes and purchasing the necessary exploration equipment and technology. “This is a process that, if taken step by step and with the correct legal counsel, will allow companies to start production as quickly as possible,” says Luis Bouchot, Partner at DBRA. Both Díaz and Bouchot emphasize that mining companies should follow every single legal requirement carefully from the beginning, to avoid the legal hurdles and problems that arise from taking shortcuts. “For example, many companies that have skipped steps in order to go more quickly have eventually come back to us and had to start the process from scratch, which holds up the whole process, making it even longer than it was first expected to be,” Díaz says. She believes that the first step companies should take is to seek legal counsel to go through every stage of the legal process. The second step is understanding the social context of the Mexican mining industry: “The Mexican revolution started in the mines more than 100 years ago; what better proof is there of how important the social aspect is in the Mexican mining sector?” she points out.

Regarding new regulation for the mining industry, Díaz explains that Congress can formulate a proposal at any time. “A good thing is that any regulation concerning the Mining Law only requires approval from the President. Any new regulation does not have to go through Congress, which avoids the problem of going through a long restructuring process. However, we do not foresee further mining regulation, at least in the short-term,” she concludes.