Alberto Vázquez
Senior Partner
VHG Abogados
View from the Top

Fair Mining Duties for Mutually Beneficial Relationship

Wed, 10/18/2017 - 12:19

Q: What role do you think mining can play in the national economy going forward?

A: Everything is in place for the mining sector to play a leading role in the national economy. We have so much geological potential, a strong group of experienced mining experts, fantastic interest from the foreign investor community and we have a good mining law. The mining industry can create jobs in isolated, rural areas that have limited options for employment, and as a country, we should focus on giving our talented workers reasons to stay in Mexico rather than look for better options abroad. The mining industry pays higher salaries than most of its competitors, and so it can be crucial in helping to develop Mexico’s poorest areas. It has the potential to overtake the oil and gas industry because there is no state-owned company monopolizing the market like PEMEX does in oil and gas. I believe the government should place it higher on its list of priorities. The largest mining companies are all transparent and they pay their taxes, which will have a huge impact on public finances going forward. We can only hope that these funds, that are generated from the hard work of thousands of Mexicans, are used in the correct manner to benefit the people.

Q: What do you make of the lottery system used to allocate concessions in Mexico?

A: It is almost impossible to find the perfect solution to the system for allocating mining concessions, because there will always be a divide between large and small companies. I am in favor of the lottery system because it does not allow the bigger companies to bribe the individuals in charge of processing the applications. It is a transparent process that gives a small miner a chance to compete against the large players, and with a bit of luck, win the allocation. Of course, the large companies have more spending power and can therefore buy more tickets to have a stronger chance of winning, and this is completely understandable and normal, but the lottery system at least evens the playing field slightly.

Q:What do you make of the claims that SGM does not make enough concessions available for allocation?

A: I believe that we are living in the worst administration of general mining regulation in Mexico. There are thousands of concessions that are in the process of cancellation. Every day we browse the public sources of information looking for publications of freedom of land, and to my knowledge there has been no publications in more than two years. This means that investors who are interested in risking their capital in Mexico do not have any new land available for investment. The government is losing money because canceled concessions are entirely redundant until they are made available again so I cannot understand why it takes so long for these concessions to be put back on the market. The only explanation I can think of is negligence.

Q: What would you like to see the public sector change in terms of the handling of mining concessions in Mexico?

A: I want to see transparent officers that fully understand the mining law and regulations and who have experience in applying it. The mining law in Mexico is good, although it could be updated but the most important thing is to have committed, experienced public officials who are passionate about the industry. Under the current administration, the process of responding to requests for concessions is extremely delayed, and for the first time in many years lawyers are being forced to initiate court procedures to get resolutions to disputes that should be easily avoided. It is incredible that we have to go to court just to get an answer from the authorities. We are hopeful that the creation of the Undersecretariat of Mining will help speed up these processes.

The mining industry only wishes that the government bear in mind its duty to treat mining concessionaires in good faith, as established in the Federal Law of Administrative Procedure. The mining industry is not the enemy.