Mining Bureau in Need of Modernization

Sánchez-Mejorada, Velasco y Ribé, the oldest Mexican law firm still practicing today, has always had a strong focus on the management of natural resources and acted as an advisor to the federal government during the drafting of the current Mining Law. Rodrigo Sánchez-Mejorada, one of the firm’s partners, believes that the bureau has failed to evolve at the same rate as the industry that it represents putting a handbrake on the sector’s development in Mexico. “While the Mexican mining industry is world class and has grown significantly, the regulatory department has remained static with no technological improvements,” he comments.

Sánchez-Mejorada does not place the blame squarely on the shoulders of the bureau itself as he acknowledges the institution lacks the necessary manpower, training, and resources to adequately resolve the pressing challenges. Nevertheless, he suggests some internal structural changes that would help update the aging concession handling process. According to Sánchez-Mejorada, a priority for the Mining Bureau should be the transition to an online processing system where interested parties can file everything online, and obtain instant responses. “The Mining Bureau continues to work extremely slowly in releasing available territory and awarding concessions,” he explains. “This is a complicated endeavor because the authorities have to be careful with the cartography. However, if a grid system were to be implemented in which the mining deposits coincided with geographical grids, a concession could be granted by reference to a specific square, so there would be no questions as to the size and boundaries of the mining lot covered by such a concession.” This would not only save a great deal of time by allowing the bureau to issue concessions online directly but it would also give companies that own concessions the right to carry out mining operations without the need to go through the laborious process of gaining consent from the authorities.

As an alternative, Sánchez-Mejorada proposes the Mining Bureau adopt the gradicula system, a state-of-the-art grid concept that takes into consideration the curvature of the earth, thus providing a precise position of the lot. This system would eliminate a large portion of the bureaucratic processes that mining companies currently have to negotiate when acquiring a concession, and could help boost foreign investment into the sector, particularly when it comes to exploration. Of course, the falling investment in exploration is due to a glut of other factors, not least the mining royalty tax, which according to SánchezMejorada is excessive and impractical. “It makes no sense to implement a mining tax based on the companies’ income and profit for extracting a natural resource that belongs to the Mexican nation,” he argues. “The amount of money an operator is making out of the concession is irrelevant because an inefficient producer would not pay, whereas, an efficient one will. The authorities are penalizing efficiency and rewarding mediocrity.” A more pragmatic solution for Sánchez-Mejorada would be for all mineral production to be taxed at a rate depending on the current price of the commodity, making it adjustable and reflective of the market conditions.