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News Article

NAFTA’s Impact on Mexico’s Environmental Regulations

Wed, 10/21/2015 - 08:27

Mining projects come with an inherent need to alter the environment. While a certain level impact is inevitable, environmental laws and regulations aim to define acceptable levels of impact to allow the industry to operate, while also mitigating widespread pollution risks. According to the United States-Mexico Chamber of Commerce, it was only in 1993 that Mexico began to support its environmental laws with the implementation and institutional infrastructure needed to make them effective. Moreover, when NAFTA was ratified in 1994, it was among the first international trade agreements to address the need to standardize environmental regulations, and became a primordial driver of improved environmental standards in Mexico.

The concerns that arose during the drafting of NAFTA revolved around the inherent commercial advantages that Mexico’s poor environmental laws and regulation gave the southernmost country. It was thought that lenient environmental laws and regulations could potentially encourage US and Canadian companies to establish operations in Mexico and avoid the strict environmental standards in their home countries. “Not complying with such standards would mean a country could attract more foreign investment due to lower operating costs. Environmental standards were thus imposed on Mexico to ensure fair competition,” states Héctor Herrera Ordoñez, Partner at Haynes and Boone. After intense negotiations in 1991 and 1992, the agreement was signed and led to the creation of a tripartite Commission on Environmental Cooperation (CEC), based in Montreal, and the US-Mexico Border Environment Cooperation Commission (BECC) in Ciudad Juarez.

At that point, the Mexican government, under the administration of Ernesto Zedillo, was obliged to create decentralized environmental authorities such as SEMARNAT, CONAGUA, and PROFEPA to meet the stringent environmental standards imposed by NAFTA. “During the first years after NAFTA became effective, the inspection programs of SEMARNAT and PROFEPA turned up a series of irregularities across the country,” Herrera Ordoñez expresses. “Nowadays, the results of such inspections show a clear difference in the environmental practice of companies, with a high level of compliance.” Herrera Ordoñez claims that there is a large difference in the levels of air, soil, and water pollution during the 1970s and 1980s and the levels now seen in Mexico. This is partly due to the fear companies have of being shut down due to noncompliance and improvements made to Mexico’s General Law of Ecological Balance and Environmental Protection. After negotiations that spanned decades, Mexico created the General Law of Ecological Balance and Environmental Protection and the Law of National Waters. To this day, these laws are the most relevant federal environmental laws by which mining companies have to abide. The General Law of Ecological Balance and Environmental Protection was submitted to a revision in 1996 to include increased sanctions, improved citizen participation, and dissemination of information on governmental initiatives and programs. Now, after more than 25 years since its implementation in 1988, the government upholds the law by implementing sanctions and obliging mining companies to pay for damages caused by their operations. On par, the Law of National Waters, which was created in 1992 and last modified in 2004, regulates the use and distribution of water across the country. Without the necessary permits outlined by this law and granted by CONAGUA, the National Water Commission, companies cannot make use of the water they need to operate a mine.

While the Mexican government was criticized for a lack of environmental regulation prior to the late 1980s and for insufficient enforcement of said laws thereafter, Herrera Ordoñez believes that PROFEPA has done an outstanding job at upholding the law and that mining companies are largely compliant with Mexico’s environmental standards. “Mexico has not solved all the environmental challenges in the country, but it did start to tackle them. Companies are now at least trying to meet these standards, particularly in the mining industry,” Herrera Ordoñez states. “Before NAFTA, there was no legislation that regulated such issues. Since mining activity was carried out far away from urban areas, there was limited public knowledge as to the impact of these activities on the environment. This is no longer the case, given the rise of the Internet and social media.”

The advent of recent spills has shown, however, that much still remains to be done in order to mitigate environmental pollution. Although companies claim that not every disaster can be prevented, response levels after recent environmental disasters show that the risk management structures of mining companies can still improve. Moreover, the current lack of water in Mexico’s northern states, where most mining operations are concentrated, are forcing companies to increase their water re-use or hindering the construction of new projects altogether. The general public has also been subjected to an anti-mining sentiment, as newspapers and government representatives claim that negligence is the main reason for recent mine waste spills. AIMMGM has responded by claiming that the mining industry is a responsible industry which has provided jobs and has helped Mexico developed into the country it is now.