LitioMX: The Public Entity in Charge of Lithium Exploitation

On Aug. 23, 2022, the Federal Executive Branch published a decree in the Official Gazette of the Federation by means of which a public body called “Litio para Mexico,” also known as “LitioMx” was created. The creation of this agency is a consequence of several amendments made to the mining legislation in April of this year, by means of which the exploration, exploitation, and all related benefits of lithium were reserved for the Mexican government.

As you may remember, the amendments (i) provide an impediment to grant new lithium mining concessions in favor of individuals or private entities; (ii) grant the Mexican state the exclusive right to explore, exploit, and benefit from lithium; (iii) create new mining reserve zones where lithium deposits may exist, and; (iv) ordered the creation of a decentralized public agency that  would be oversee the  exploration and exploitation of lithium and its related benefits.

As you may know, the amendments published in April were proposed by the federal executive branch, as a consequence of the so-called counter-reform in electricity matters, also proposed by the executive branch and rejected by the Chamber of Deputies on April 17, 2022.

Thus, according to the published decree, the main purpose of LitioMx is precisely the exploration, exploitation, and all related benefits of lithium, as well as the management and control of the economic value chains of the mineral. Up to this point, these attributions match the amendments published in April; however, the decree grants several faculties to LitioMx not initially considered by the earlier amendments.

Firstly, the decree entrusts LitioMx with the research and development of new technologies related to the lithium industry, which moves away from the main purpose set out in the April amendments, since such amendments only entrust LitioMx with the exploration, exploitation, and related benefits of lithium. Therefore, we shall closely analyze the knowledge and technologies that this new agency will eventually generate regarding the lithium industry, as well as the possibility of incurring administrative liabilities in case it does not achieve this objective, since so far, no clear parameters have been established to determine when it will be considered that LitioMx is duly accomplishing this attribution.

As part of the attribution of research and development of lithium-related technologies, the decree creating LitioMx also entrusts this agency with fostering and maintaining relationships with other national or international entities, a circumstance that opens the possibility of eventually private capital investments for LitioMx to reach the objectives for which it was created and to achieve the exploitation of this mineral; however, requirements for private capital investment have neither been confirmed nor established.

On the other hand, this decree foresees that the Mexican Geological Service of the Ministry of Economy shall support LitioMx to locate and recognize the geological areas where lithium reserves may exist,despite reports that have stated that there is not enough concrete and reliable evidence regarding  existing lithium reserves in Mexico.

Furthermore, the administration of LitioMx will be under the charge of a governing board, whose chairman will be the Minister of Energy, and whose director will be proposed by the ministry and appointed by the president of the republic. For this reason, during the last week of August, the Mexican president announced the designation of Pablo Daniel Taddei Arriola as director of LitioMx, in cooperation with  Governor of the State of Sonora Alfonso Durazo, who was appointed as the supervisor of the installation of LitioMx.

Likewise, the Mexican Geological Service will be involved as a permanent guest of the governing board of LitioMx; however, it will not be entitled to vote on any of the resolutions therein agreed. The Ministry of Economy, among other public entities, is also considered to be part of this governing board.

The fact that the Ministry of Energy, and not the Ministry of Economy, is in charge of LitioMx has given rise to questions related to the displacement of the Ministry of Economy, since it is the ministry, through the General Mining Bureau, that controls the mining industry regulations and serves as the main Mexican mining authority; furthermore, it ascertains that lithium is actually considered by the Mexican government as a strategic and fundamental mineral to its policy of energy transition.

Even though LitioMx was recently created, and it has not yet started operations, the political context in which it was created has led to several considerations within the private sector, including that LitioMx will be another failed governmental agency that will never be able to exploit and benefit from lithium, but rather only be operating at the Mexican government’s expense without profit. 

Because these provisions are new for an industry that has always entrusted mining activities to private investors and companies, there is no certainty regarding the results and the challenges that can be expected.  Only time will confirm whether these amendments will transform our country into a global lithium producing power.