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No Legal Barriers for Those Who Follow the Law: Grupo GAP

Gabino Fraga - Grupo GAP
Director General


Fernando Mares By Fernando Mares | Journalist & Industry Analyst - Fri, 06/02/2023 - 09:40

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Q: What experience does Grupo GAP bring to property issues and relationships with communities when dealing with a new investment or concession?
A: Over 65% of the land in Mexico is communal or socially owned land, which is treated under a different set of property rules. If a company looks to invest in or develop a project on these lands, it needs to reach an agreement with the landowners, always following a procedure determined by the Constitution and the Agrarian Law. 

The legal framework opens the possibility to privatize, occupy or associate with landowners. However, some companies arrive and, possibly with the advice of civil law firms and some public notaries, suggest that there is an easier way to do things. That is not the way to go; there is a correct federal procedure to legally use the land. That is where we can prove an advantage with over 30 years of experience in this matter. 

Q: How is Grupo GAP growing its presence in the mining sector and what are your priorities in terms of client attraction? 
A: We have many years of experience in the mining sector. Throughout that time, we have advised various Mexican companies as well as Canadian, Swiss and many other players from around the world, helping them develop projects with legal certainty in the acquisition or occupation of land. 

We worked with Torex Gold in the development of the Media Luna Project, for example. We carried out the negotiations and took care of all the social aspects. In December 2011, we completed the first stage, which involved relocating the village that was located above the deposit. 

Q: What will be the impact of the Mining Law reform on Grupo GAP and its clients’ operations?
A: The Mining Law reform is a complex and controversial issue. First, it may be unconstitutional due to the process in which it was voted on, as Congress did not comply with the protocols that the Constitution states for modifying laws and for having the legal quorum to do so.  

The law makes the operational aspect more difficult. The new reform states that if communities can demonstrate they settled before a project began, they must benefit from the project’s royalties. This will cause problems in areas where there were no human settlements. With this modification, people will settle there and say they were already there before the mining company arrived, which will complicate the development of any project. Suddenly, instead of having 50, 100 or 200 inhabitants, companies will have 1,000 to negotiate with.

Clients are concerned about the validity of their concessions. As you know, the mining industry involves long-term investments. There is an old saying that to have a mine, you must have a mine, meaning that you need a lot of resources because it takes at least five to seven years to explore and start exploiting. 

Exploration is another delicate subject, as the reform stipulates that exploration will be an exclusive activity of the Mexican Geological Survey (SGM). Even though this body has excellent engineers, they do not have the resources to conduct this activity at scale. In 2022, the private sector invested over US$3 billion in exploration, when compared to the SGM’s budget of US$60 million. Furthermore, if you do not allow mining companies to explore, you reduce the value of the market. For example, a company that has proven reserves of a certain number of ounces needs to explore to replace what it is extracting. If it cannot explore, the value of the company will decrease, which will have an impact on the financial market, as these companies are listed on the Toronto and New York stock exchanges. This will also affect the jobs market, since mining generates high-quality and high-paid jobs. 

Q: What are the main concerns of communities when starting talks with mining companies?
A: Concerns involve pollution and the idea that mining companies will steal their minerals, which is a misconception that has been brewing over the years among the general public. People believe they are the owners of the land and everything beneath it. However, article 27 of the Constitution clearly divides the subsurface into oil, gas and mining, with ejidos and communities as separate elements, along with private property, federal zones and so on. 

Communication is key and companies understand they are neighbors of every project for the duration of its lifespan. For this reason, it is fundamental to build respectful and strong relations with communities. 

We are lawyers, sociologists and economists, which allows us to directly engage with the social side to reach an understanding, to have communication channels and to try to negotiate with juridical support that can be respected by all parties involved. For example, we dealt with a consultancy that reported that a mine had a community of 3,000 people and that the mine had to negotiate with all of them, causing a huge problem and delaying the start of the mine project for eight years. When we did a diagnosis, we realized that there were 250 ejidatarios who owned the land and 3,000 residents. These consultants had confused the legal term of community with the collective entity of the community. They were told that they were going to negotiate with the landowners and considered the 3,000 people as part of the negotiation.  

Q: What are the firm’s plans for 2023? In which other industries is it planning to enter? 
A:  We must pay attention to where the mining industry is going and how it is going to change. However, we also have experience in other sectors like oil, gas, electricity, industry, ecological reserves, tourism and ports. For instance, we worked on the Tuxpan port construction project and the expansion of the Toluca airport. Wherever there is legally owned land for development and investment, we can help. Any industry can benefit from our services, which gives us wide room to maneuver. 

Photo by:   Mexico Business Publishing

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