Joel Gonzalez
Partner
ALN Abogados
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View from the Top

Striking Gold In Nontraditional Mining States

Mon, 10/22/2018 - 16:14

Q: In which mining segments are ALN Abogados’ services most in demand?
A: In the last year, we have seen a lot of interest from companies that are in the process of expanding their operations and investing in exploration. ALN works mainly with companies dedicated to gold and silver. Our company has a very strong presence in mining states such as Chihuahua, Zacatecas, Sonora and Durango; however, we have seen an increase in exploration work in states such as Jalisco, Oaxaca, Guerrero and other nontraditional mining states, where we have been expanding our practice in the last year. There is a great deal of potential in these regions. We are interested in finding new ways to work with them.
Q: What kind of experience has your law firm had working with projects in nontraditional mining states?
A: We are expanding toward Jalisco, in particular. Thanks to the great results we have reaped in this state we are currently in the process of opening an office in Guadalajara. This will help us affirm our presence and to further expand our practice in the central and southern states where mining exploration has been increasing in the last few years.
The main setback in nontraditional states is that the public sector is not familiar with the mining industry. Some authorities tend to confuse norms from the Energy Reform with those of the mining industry. Since the promotion of mining in their states is in the best interests of the local authorities, we collaborate hand-in-hand with them and make sure they understand the legal mining framework to provide better conditions for mining investments.
It can also be challenging to deal with communities in these areas as they usually have a negative perception of the mining industry. They may believe that the mining industry is still operating as it was 50 or 100 years ago, and that companies are environmental predators that will abuse the rights of communities. But we know that this is no longer the case. The industry generates an impressive amount of investment in infrastructure, education, environmental protection and social license projects that create alternative economies. People in these communities gain access to job opportunities that they did not previously have and that the government was not able to offer. We work hard to break these paradigms, understand each community’s necessities and show them what projects in their area can do for them.
Q: How does your firm evaluate the effectiveness of the regulatory framework in Mexico?
A: The legal framework is effective, despite the fact that it can be improved in certain areas. The real challenge lies in the lack of certainty investors feel in the country’s legal system, especially in enforcement of the legal framework. The main examples are unions and communities that organize strikes and blockades, even if there exists a perfect formal agreement duly recorded and approved by judicial authorities. In case of strikes or blockades, it can take weeks or even longer to solve these issues and delayed operations can cost companies millions of dollars. The justice system is lacking in providing an effective response to these issues and providing certainty to mining companies. They often have to pay out for these problems even if the cause is unfounded. This is why we strongly believe that close communication and understanding of the needs of the communities is fundamental to every project’s success. It is unfortunate and it is a big area of opportunity for the new administration.
Another fundamental aspect related to legal framework is that mining companies that start exploration in Mexico need to invest more time on proper due diligence. The primary failures during this process are reviews of whether the project is located in a Natural Protected Area, the kind of property regime involved in surface rights and presence of any preferential activities according to the Energy Reform. All these factors tend to slow down the development of mining projects in the country. Companies should protect themselves by verifying this information before making a purchase or engaging in any project.