Armando Ortega
View from the Top

Fragmentation Between Administration and Congress

Wed, 10/16/2019 - 17:20

Q: How is the renegotiated USMCA expected to impact Canada’s trade relationship with Mexico upon ratification?
A: First, we need to wait to see whether the revised USMCA will be accepted by the relevant legislative bodies, particularly the US. It remains to be seen how difficult that will be. The first signs coming from the Democrats after winning the House of Representatives in the midterm elections are not necessarily very encouraging. They have expressed interest in changing clauses related to labor, environment and Canada trade.
The response from President Donald Trump has been very strong and he has said that he would be willing to revoke the deal if it is not accepted, meaning a scenario in which there is no new USMCA and no NAFTA. I think the positive aspect of this situation is that it translated into a real renewal of several areas. It included e-commerce, greater accountability and tougher labor rules.
Q: What can be done to make Canadian mining companies more secure about their investments in Mexico?
A: The first signal we received from the new government was when it released its list of 50 priority areas for the administration, which included the development of the mining industry. In itself, that is encouraging for us. Since the transfer of power, we have been in contact with the new mining authorities. It is important to note that these representatives are skillful people with knowledge of the sector.
The new Deputy Minister of Mining has a strong mining-metallurgical background, the Director General of Mining Regulation is a legal expert in mining and the Director General of Mining Promotion has a long track record as an economist and a trade negotiator. The team that is dealing with mining issues is a knowledgeable team, and that is welcome news. On the other hand, there have been some worrying developments, some arising from Morena party allies in Congress. The first initiative was presented by the late Angélica García to amend the mining law in a way that would have disruptive consequences for the sector. Together with CAMIMEX, we stated our position regarding that amendment and we were heard by Congress.
Other proposed amendments from other MORENA political players include abolishing open-pit mines, amendments to the national water law and conversion of the concession system into permitting. We have been in contact with Senator Geovanna Bañuelos, the Head of the Mining Commission in the Senate and her team, and we have been received with openness and an attitude of ensuring the sector receives the proper incentives. We have given these political stakeholders our view on which amendments would be welcome by the mining sector to modernize it.
Q: How would you evaluate the proposed amendment to the Mining Fund and the manner in which it is distributed?
A: This amendment is somewhat unwelcome. In the previous administration, the fund was managed by the Ministry of Territorial Development (SEDATU). That function has been transferred to the Ministry of Economy, which is a good development. The original mechanism meant the funds were distributed between the federal, state and municipal governments, mainly for infrastructure projects.
With the changes, we have learned that the funds will primarily be allocated via direct distribution to the people living in mining communities. Despite some shortcomings in the management of the previous scheme, the crafting of many important infrastructure projects in the municipalities was notable. The ideal scenario would be to refine the old system of creating infrastructure with the funds.