Modifications to Energy Reform to Eliminate Greater Risk

Mexico’s government has made modifications to its controversial constitutional energy reform proposal, currently under discussion in Congress. The main change is that the government no longer seeks to have exclusive control of minerals by removing previously granted concessions, said Minister of Energy, Rocío Nahle.

Nahle explained that the electrical reform has undergone modifications, to ensure its congressional approval and its ability to boost the country’s development. She announced that the government still aims to modify Art. 25 and 28 of the Mexican Constitution to establish lithium as a nationalized resource. However, the proposal will not rule its exploitation as exclusive to the state.

The reform’s new draft remains firm in not granting new lithium concessions to private companies. However, current permit holders will keep their concessions regardless of how developed their projects are. In addition, the government assured that the conditions for other minerals such as gold, silver and copper will not change, meaning that miners and investors have no reason to panic. Previously, the government said that it would also have exclusive control of strategic minerals, but it did not elaborate further, which unsettled the private mining sector.

The government said that the new modifications seek to promote the development of the mining industry, with a particular focus on lithium as a strategic mineral for the country’s present time and future. Nahle said that the rare mineral is only found in 12 countries, including Mexico. As such, the country’s population could benefit greatly. 

Although these modifications improve the outlook for the mining sector, some experts say that the government's initiative to nationalize lithium still makes little sense from a legal perspective. “What is being proposed is an aberration. The mineral belongs to the Mexican nation; you cannot nationalize what is already nationalized in some way,” Alberto Vazquez, Partner, VHG Servicios Legales, told MBN.

Legal experts at Mexico Mining Forum 2022 anticipated the government's decision to not expropriate private lithium developments. Enrique Rodríguez del Bosque, Partner, RB Abogados said that although expropriation has become a “fashionable topic”, its risks are absent because of Mexico’s many international treaties that protect private company interests. In addition, Mariano Calderón, Partner, Santamarina y Steta, stressed that the government cannot expropriate whatever it wants as there are limitations to this instrument. “Expropriation has always been an available tool for the government, but it is not absolute nor without its limits; it must meet certain requirements and it must be properly justified,” said Calderón.

Despite the uncertainty caused by current circumstances, experts said Mexico remains a legally stable country. However, the sector needs stronger mechanisms that ensure that rule of law prevails. “The legal framework has gaps, so we need more efficient mechanisms that allow companies and citizens to enforce this framework,” said Rodríguez.