Adrián Juárez
Founder & CEO
CTA Consultoría y Tecnología Ambiental
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Expert Contributor

Mexico Wants Metals but Does Not Want Mines. What’s Wrong Here?

By Adrián Juárez | Thu, 12/30/2021 - 10:17

The world wants to advance to an economy that is based on renewable energy and electric mobility. This requires the supply of metals for the equipment that takes energy from the sun or the wind, as well as the metals that are required for electric mobility; therefore, the world wants lithium, copper, nickel, cobalt and steel, mainly. Where will these metals come from if not from mines that can operate in a regulatory and socially favorable environment, one that provides certainty to investors about the rules that will apply to the business? Remember that a mine does not develop overnight; it requires considerable time and investment we are talking about seven to 14 years, between exploration (three to six years), feasibility studies (two to four years), permits (one to two years) and construction (one to two years).

In North America, a mining-oriented country like Canada wants to position its mining industry at the forefront to generate the metals that will supply the world[1]. Canada sees this opportunity for its industry to take the lead knowing that it will bring benefits to the country, jobs, technology, a better standard of living, and of course, more taxes will be collected[2]. Canada does not need to have a state monopoly to achieve its goal, in contrast to the plans of President Andrés Manuel López Obrador, also known as AMLO.

Other relevant countries in America are Chile, Brazil, and Peru, which understand that they do not need a state monopoly; they know that having a state company does not limit the generation of private investment in parallel, and on the contrary, is beneficial for the industry. The newly elected president of Chile, Gabriel Boric, has indicated that he wants to develop a state-owned lithium company, raise royalties for mining companies operating in Chile, and encourage green investments[3]. It seems to me that his idea is not to drive away capital but to improve the income of the state. In Chile, the state copper company (Codelco) is a source of pride for the country, and if the government handles lithium in the same way, it will be positive.

My father had great admiration for AMLO and saw him as a man of integrity and with good intentions; however, in my opinion, that is not enough. You need to be well informed and understand how the market works, how financial flows move, and what is the preference of investors. Currently, a significant group of investors are seeking to invest in companies that intrinsically incorporate socio-environmental aspects into their operations rather than doing so independently. These aspects are linked in all their decisions, because they want to reduce risks and manage a good reputation. If AMLO only let the market work and directed his intervention to generate stability, clear rules, and improve security, the future would be more favorable for Mexico because mining is the industry that can generate well-paid employment in rural areas.

I have read the statements from María Luisa Albores, head of SEMARNAT, that 10.64 percent of the Mexican territory has been delivered through mining concessions and of her "achievement" of reducing that to 8.59 percent[4]. When I have heard AMLO talk about this, it gives the impression that he understands that the entire concession area is being intervened by mining, when in reality the intervened area is always very small in relation to the total area, and that it can only be intervened if the owners of the land accept the deal offered by the miners. The concession does not generate a superior right over the rights that the owners of the land have. If the landowner agrees to have his land explored, he will have an opportunity to generate extra income, and later, a higher income, if that effort turns into a potential mine. And let's not forget the thousands of jobs that this opportunity can generate, meaning that our countrymen will not have to emigrate from their land to get a decent job. The more concessions are delivered, the more opportunities there will be to generate mines and not the other way around. What does AMLO want? He says he wants more jobs, so why does he go in the opposite direction? An area under a mining concession only prevents another miner from exploring minerals on the same surface but does not prevent other industrial activity.

I heard Albores speaking about mining concessions in 68 of the country’s 142 protected natural areas. She called this a great threat; there are 1.5 million hectares under concession in those areas, which corresponds to 7.7 percent of the protected land area. Where will the money come from for the management activities related to these natural areas? Donations or the federal budget? The money to carry out these management activities can come out of the mining concessions, if a good framework is established. It would also be the perfect opportunity for the miners to direct financial resources in that direction, given that they would attract those investors who are looking for this type of activity to put their investment in. So why seek to eliminate the concessions that may be the source of the financing that is required? Waiting for donations is not a good long-term financing strategy. If jobs are generated in protected natural areas, it is in turn a measure to avoid degradation generated by hunting and logging and to prevent natural areas from becoming agricultural subsistence areas.

I also heard Albores speak of promoting the appropriate use of water by mining companies. There could not be a more appropriate time to develop this topic and generate a reasonable framework. Normally, mining companies have the financial resources to achieve responsible water management, both in terms of returning it in good, quality condition to the environment and in terms of paying for the privilege of using it. Water is an indispensable resource for the processing of minerals and a key resource for neighboring communities. Won't the mining concessions also be an opportunity to provide water to the communities?

What Albores perceives as a threat can be an opportunity if she cares about the well-being of Mexicans. Isn't it better for Mexico to adopt a concept like that which Canada is adopting? Do you want to scare away the goose that lays the golden eggs and replace it with an entity that will deny Mexicans the benefits they deserve?

 

[1] The globe and Mail, December 16, 2021: Trudeau presses for Canada to become a critical mineral powerhouse.

[2] Times Colonist, December 16, 2021: Mining the future: Canada's high hopes to become a global critical mineral powerhouse

[3] Mining.com, December 20, 2021: Chilean miners ask leftist president-elect to foster industry

[4] El siglo de Torreon; diciembre 3, 2021: Gobierno de AMLO reduce territorio concesionado a minería en México.

Photo by:   Adrián Juárez