Gabino Fraga
Director General
Grupo GAP
View from the Top

Developing a Social Base for Mining Projects

By Alejandro Ehrenberg | Tue, 01/28/2020 - 10:38

Q: How would you describe the state of Mexico’s mining industry and what services are most in demand among Grupo GAP’s clients?

A: The global mining market is starting to pick up pace again after many tough years. Precious metals’ prices have gone up, and even if global growth is slow, demand for metals like copper is projected to increase. Miners have a great deal of interest in doing business, but Mexico’s government has sent negative signals that are discouraging investment. The state has been hesitant to enforce the rule of law in many social conflicts. This has resulted in companies exploring with less intensity than they could have. This has occurred because they do not have the necessary safeguards to protect their investments. If the government decides to withhold new concessions, its policy should then be to optimize those that have already been allocated. Mining is one of the pillars of the Mexican economy and the state has to protect and stimulate the industry.

The federal government has been slashing budgets and this has generated vacuums within the mining industry’s normal legal processes. For example, when private parties involved in a land deal reach an agreement, the government has to publish these terms. But the departments in charge of publicizing legal acts are unable to process the information efficiently due to lack of resources. This creates confusion and uncertainty. Also, empowered by the negative comments about mining from the authorities, some social groups increasingly feel they are entitled to ask for more than their due. They attempt to disclaim past agreements and pressure miners to provide them with more benefits. Blockades and other illegal actions are hindering the normal operations of mining projects. Grupo GAP’s clients are increasingly seeking counsel for these types of situations. Overall, our portfolio’s structure is well-suited to the reality of today’s industry. Around half of our work is devoted to land access procedures, a 10th is focused on consulting services and the rest is related to lawsuits.

Q: When crafting a community relations strategy, what is the ideal balance between social matters and strictly legal considerations?

A: A study must be conducted to understand the community’s circumstances and needs. From these needs, the company has to choose those that match its community relations policy. Then, hand in hand with the community, it has to define a socio-economic policy to address these needs. Finally, it is essential to formalize these policies with agreements amounting to legal contracts. It is also paramount that information is transparently shared with all parties. Everybody has to understand the project’s characteristics as much as possible. If the community understands the project, it will harbor good feelings toward the company. And if the company understands the community, it will be able to offer the necessary benefits. Each party’s rights and obligations must be clearly understood. Ground for interpretation must be reduced to a minimum.

Based on extensive fieldwork, Grupo GAP carries out a socio-economic study of the populations in the project’s area of influence. The study has three main elements. First, fleshing out the occupations of the community members. Second, pinpointing their education levels. Third, assessing the level of female empowerment. This third point is important. Despite Mexico’s patriarchal character, women have a vast amount of power on the domestic front. In many projects, if you have the support of women, more than half of the work is done. In parallel to this analysis, we undertake a legal study of the land: who owns it and on what terms.

When the analyses are completed, the task is to generate a good fit between the community’s needs and the company’s resources and philosophy. One of the keys is to avoid creating internal conflicts between community members. Every human society is made up of an intricate and fragile network of relationships. There are balances of power and authority that have taken generations to develop. When a mining project suddenly moves in next to these communities, the windfall it generates can have negative consequences if not properly managed.

Moreover, the nature of the mining business tends to complicate all of this. Often, a project is started by a junior company with the intention of subsequently selling it to a major company. Sometimes too much is promised, and when the project changes hands, the new owner realizes that promises were made that are very difficult to keep.

Q: What are the key legal elements needed to access land for a mining project in Mexico?

A: Practically all land in rural Mexico is communal, so the importance of clearly identifying the actual owner of the land where the mining project will be developed cannot be overstated. In far-flung areas of Mexico, land ownership is often de facto, but there is no supporting documentation. The task then becomes certifying the ownership of whoever claims to own the land. Many times, different families live on a single piece of land: the company must negotiate with one of them without aggravating the others. It is fundamental that whoever receives the payment for leasing or selling the land is entitled to actually receive the payment. To sum up, establishing land ownership in unequivocal terms is the key element for undertaking successful land negotiations in Mexico.

Q: What is the best way to incorporate an indigenous consultation into Mexico’s legal framework?

A: In 2011, Mexico changed its constitution, making it pro homine. This is a legal principle that says that juridical interpretation should always benefit the human individual. That is, when assessing a case, the judge should apply the law that brings the greatest protection to the individual. Moreover, all international treaties that Mexico signs and ratifies have constitutional status. Therefore, if a judge is considering whether to apply an article in the Mexican penal code or an international treaty signed at the Hague, he will choose the latter if it protects an individual’s human rights. In 1991, Mexico signed OIT Convention 169. Hence, it is important that we implement it through clear protocols. Otherwise, Mexico exposes itself to being judged at an international court for human rights violations, which would be terrible for the country’s international standing. Furthermore, investors need the certainty to be able to carry out consultations to access land in an orderly manner. A project consists of many parts — water, land, and so on — and investors must be sure that by carrying out just one consultation they will be able to move on with the project as a whole.

Alejandro Ehrenberg Alejandro Ehrenberg Journalist and Industry Analyst