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Q: What is Sánchez Mejorada, Velasco y Ribé’s added value to the mining industry and what areas do you specialize in?
A: Our law firm specializes in the mining industry and was founded in the city of Pachuca in 1884. The city is an important mining center and was a silver producer in the 19th and 20th centuries. My great grandfather founded the law firm and now I am in charge of the firm specializing in mining law. We handle all kinds of corporate matters, from mergers and acquisitions to project finance and mining concessions, among others. Sánchez Mejorada, Velasco y Ribé offers a great deal of experience to our clients. I have worked with the law firm since 1970 and have been involved in legal issues in the mining industry for the past 50 years.
Q: What are the benefits that mining companies can obtain from working with a national firm versus an international firm?
A: International law firms that have an office in Mexico are also considered Mexican law firms. They are incorporated in Mexico and have a worldwide system of partnerships. I believe there is no difference. These international law firms are like a giant referral system in which they refer clients to their local offices and obtain businesses from international referrals. However, that has nothing to do with the quality of the firm’s work. Usually, they are full-service firms that do not specialize in mining only. Therefore, the difference is not between foreign firms and Mexican firms, it is between full-service firms that offer you all kinds of legal services or more specialized firms that have competence and experience in the mining industry. Clients will find that the specialists in mining tend to be smaller Mexican firms such as ours.
Q: Who are some of your main clients in Mexico and what are their most common questions?
A: We have worked with Agnico Eagle Mines, Freeport-McMoRan and Premier Gold Mines, among other large mining companies. Their main concern is related to the security of their assets and if they have the correct paperwork for their mining activities. Access to land has always been an issue that concerns our mining clients, especially in how they can obtain secure access to land. What worries most mining companies is the lack of rule of law, not only regarding access to land but anyone who has a complaint or blocks the mine. Therefore, it is not only problems that mining companies could have with the ejidos but also with the truckers and suppliers who want to have exclusivity. The concept of free markets has not been properly addressed in Mexico. People need to understand that free markets mean that anyone can have the same opportunity when providing a service and no one can create monopolies. Extortion has become a common practice in Mexico and this includes the mining industry.
Q: What can foreign mining companies do to protect their investments in Mexico?
A: First, get a good lawyer. Second, do things by the book and comply with environmental regulations. A company needs to be a good corporate citizen to protect its assets. The company needs to comply with Mexican laws and ensure that everything is done correctly and by the book. How can companies protect themselves from nonlegal issues, such as a blockade? All mining companies know that a good relationship with communities is crucial for the success of their mining operation. Therefore, companies need to develop a good community relations program from the beginning and highlight the benefits mining can bring to the community. Moreover, companies can protect themselves against expropriation risks and similar matters by incorporating the Overseas Private Insurance Corporation and other measures that companies can use as insurance to protect their investments.
Q: What advise do you give your clients when there are problems with ejidos or communities?
A: Unfortunately, you need to make them aware that the government will most likely not intervene. Therefore, there are different things that need to be done. First, companies have to be conscious of the line they will not cross because once they do, there is going to be a problem. Companies should try to reach a solution without accepting everything that is involved because that could lead to future extortions. Second, companies must act in accordance with the law. In other words, if someone blocks a mine, the company must file the corresponding complaint against the person who is breaking the law. Generally, when companies ask the government for help, the first thing the government asks is if the company has filed a complaint. If it has not, the government will respond by saying it cannot help them. Third, companies need negotiators who understand Mexico and its business culture in order to participate in these discussions that can sometimes be unreasonable.
Q: What is your opinion on the Supreme Court’s decision supporting the Mining Law?
A: I think the Supreme Court made the right decision by saying that the Mining Law is not unconstitutional just because it does not address issues related to indigenous people. International law states that indigenous people must be previously consulted but Mexico does not have an indigenous consultation law. Therefore, how can companies carry out these consultations? If there are rules deriving from an international treaty that in Mexico has the same force as a constitutional norm, then you must make sure that laws are going to be consistent. Therefore, what Mexico needs is a law that will be enforced, whether a company is going to build a mine or develop a project. The fact that the Mining Law does not have rules for consultants does not make it unconstitutional; all they need to do is get a labor consultant and solve it. In fact, the Mining Law has introduced several efforts that seek to incorporate obligations regarding indigenous people.
Q: When is the right moment to carry out an indigenous consultation for a mining project?
A: I agree with CAMIMEX when it says that the consultation should be done exactly when project developers are ready to apply for the MIA. Some radical groups say that the first thing companies should do is to ask the community, which is a mistake. The first step companies need to take is to ensure they have the right to keep that mineral. People do not understand that a concession does not give companies the right to build the mine; it gives them the right to appropriate the minerals that belong to the nation. The fact that companies have the right to extract those minerals as a concessionaire does not mean that they can do anything they want. Companies still need to obtain an exclusive permit, an environmental impact statement and will probably need the approval of an indigenous community. Therefore, to carry out an efficient consultation, companies need to disclose their entire plan and what the impacts will be.
Q: What is your overall opinion on the performance of the Mexican mining industry and what are your expectations for the future?
A: I am disappointed because the mining industry was not considered an essential activity during the COVID-19 pandemic. Mining is clearly essential and, fortunately, the government later corrected its decision regarding this matter. I believe mining companies have done a good job during the pandemic but there has been a huge decrease in exploration activities. We have cases where people are interested in mining but they cannot get new concessions. This is discouraging because mining companies are forced to look to other jurisdictions, like Chile, Argentina and Peru. The pandemic has affected every country but if you add insecurity issues in Mexico and the difficulty operating in certain areas of the country, then you have a perfect storm that makes mining less attractive. For 2021, I do not see any relevant changes other than the discouraging news about the possibility of additional taxes for mining. However, mining is the only industry in Mexico that has survived the good and the bad times. Mining is always creating jobs and wealth. I am confident that we will get through these difficulties.
Sánchez Mejorada, Velasco y Ribé offers its Mexican and foreign clients a general corporate practice, including reorganizations, mergers and acquisitions, with emphasis on natural resources. As adviser to the Mexican government, the firm has participated in the drafting of federal legislation, including the current Mining Law.