Alberto Vázquez
Senior Partner at VHG Servicios Legales
View from the Top

Lack of Government Commitment Holding Back Industry

Mon, 10/22/2018 - 16:08

Q: From a legal point of view, what is keeping the Mexican mining industry from leaping to the forefront of the national economy?
A: I think the Mexican mining legislation is among the best in the world but the industry is often overlooked by the government. The main problem we have faced for many years is the lack of commitment by the authorities to provide the solutions companies are demanding. I have personally noticed that every time a new administration enters or there is a new initiative, the mining industry suffers. One example of this was the Energy Reform. While of course it is important to open the landscape to foreign investment, the authorities placed the mining industry in third place after oil and energy. Conversely, private investment in mining has flowed into the country for years.
I also believe the mining sector should not be part of the Ministry of Economy, as it is essentially part of the energy sector. I believe that if the mining authorities came from the Ministry of Energy, communication would be much more fluid. It would be helpful if, when a new administration enters, it could appoint officers to the Mining Undersecretariat that at least understand the mining industry.
Q: Why do you think the government is overlooking an industry that is so important for the economy?
A: I have no answer for that. I still believe this has been the worst administration in terms of mining regulation. Perhaps it is unfair to say that the whole administration is bad, since there are people within the government fighting for mining. The first reason why I believe the government is overlooking the mining industry is apathy and lack of knowledge of the industry. Also, a government that makes decisions in favor of the mining industry can face attacks from the international community, environmental agencies and NGOs. It is a controversial topic but it should not be, provided we comply with the well-established law.
The most important international treaties that are in conflict with Mexican federal mining laws are those on human rights. These treaties clash with the process of granting mining concessions, and I deal with these issues almost every day. While an international treaty is a document that all governments agree to, it is not possible to have the same criteria for developed, developing and impoverished countries. That is why I think the laws of each country should remain valid over those of the treaties in the cases where there is the possibility of conflict. I am not against international treaties; I think they are a necessary tool to improve the world. But I also think that NGOs and other agencies are using these tools for other interests that do not represent the needs of the groups they claim to represent.
Q: To what extent do you think the lottery process for mining concessions is successful in fostering competition and opportunities for smaller operators?
A: The main problem is that we have not experienced many lotteries for land allocation processes, which is necessary to improve how a system works. And although this administration has shown transparency in the lottery processes that have taken place, the chances are that a big operator that can afford to buy 100 tickets has a much greater probability of winning than a small exploration company that can only buy one ticket. Nevertheless, this is a huge improvement on the previous system, whereby the huge company was certain it would be awarded the concession; at least now the smaller companies have a chance of winning. Since we are now almost at the end of the administration, it is unlikely that we will see more lottery processes or land liberation in the next few months.