Image credits: Gobierno de México
News Article

Suspension for Concessions Expected to Continue

By Paloma Duran | Wed, 06/23/2021 - 09:56

While certain industry stakeholders consider the midterm election results as a sign that the mining sector landscape will eventually improve, some experts believe the government is unlikely to change its position regarding concessions.

Jorge Ruiz, Lawyer at Baker McKenzie, told BNamericas that the government will continue its stance of not granting mining concessions, despite MORENA, López Obrador’s party, losing seats in the lower chamber during June 6 mid-term elections. "We believe that the granting of new mining concessions will be kept to a minimum, as it is happening at the moment." Ruiz explained that although the Mexican legal framework allows the granting of concessions, there will be no concessions unless the government believes it has greater control over the extracted mineral.

In an environment where the government seeks greater control over resources and has been seen as an opponent of the private sector, it is necessary for companies to comply with all Mexican laws and regulations to reduce the risk of suspension or revocation of concessions, said Ruiz.

Francisco Quiroga, former Undersecretary of Mining, said that proper preparations could help companies overcome the obstruction and move forward with their projects. “If a foreign company has a project that meets the standards from an economic, social and environmental point of view, I am sure there will be a good reception and the government will admit new concessions,” he explained.

Some industry experts say election results are apt to contribute to a more beneficial environment for mining companies, while others say that uncertainty will continue because MORENA still has the power to pursue nationalist ideas because it has a majority in the Senate.

Ana Muñoz, Secretary of Women in Mining in Mexico, told MBN that the results have increased confidence in the government’s decisions. “It will no longer be so easy to make decisions without analyzing all the factors and actors involved. I think this will give investors more confidence.” She added that there is also a new opportunity for better dialogue with the authorities.

Christian Wagner, Senior Analyst for the Americas at Control Risks, said that a more diverse distribution in the lower house will force MORENA to further negotiate its legislative agenda with other parties, prompting more spaces for dialogue.

However, Senator Miguel Ángel Lucero Olivas, President of the Mining and Regional Development Commission of the Senate of the Republic, told MBN that the election results will not affect the party or its plans, since there were no serious composition changes in the Chamber of Deputies, which is relevant for the federal budget.

Karla Schiaffino, Senior Analyst for Mexico at British consultancy Verisk Maplecroft, told BNamericas that the president still has the power to modify important factors within mining that could negatively affect the entire sector. "Some changes in the mining code or any tax reform are within the reach of López Obrador, who maintains an uncertainty for investors seeking to expand projects or concessions."

The data used in this article was sourced from:  
BNamericas, MBN
Photo by:   Gobierno de México
Paloma Duran Paloma Duran Junior Journalist and Industry Analyst