Uncertainty Remains a Mining Issue Despite Solid Legal Foundation
The political uncertainty created by the government has led some companies to consider whether to leave Mexico because their projects are threatened, as players have no clarity on whether new concessions and permits will be approved in the short term. Nevertheless, legal experts emphasize that Mexico already has an excellent regulatory framework for mining operations that could be the basis for further developments in the country.
For years, López Obrador has said that the Mexican mining sector has a serious corruption problem and abused mining concessions. He added that the government therefore must change regulations so that the mining sector becomes clean, responsible and transparent.
Even though the government assures that no more concessions will be granted, Enrique del Bosque, Partner, RB Abogados, said it is possible to obtain them through a legal process. “The truth is that you are technically able to apply for new concessions, but you are looking at a years-long process to see them come to fruition and have no certainty that they ever will, at least not with the stance the government has been taking. However, there is a great deal of hope that the transition into a new government in 2024 will introduce new wisdom in the matter.”
Moreover, Del Bosque highlighted that companies should focus on what they have, using this as an advantage while applying for permits with the aim to push political institutions to grant more concessions and highlight the resilience of the industry. Despite the unrest regarding the actions of regulatory bodies, mining players can gain a certain peace of mind knowing that the laws to properly nurture the industry already exist.
Genaro García de Icaza, Partner, V&A Ambiental y Social, pointed toward tools to force resolutions stemming from hostile discourse. “The negative social narrative of Mexico's mining sector has been spread one-sidedly, without mention of the social and environmental projects the industry has implemented to the benefit of many," said García de Icaza. The challenge is therefore to figure out how to involve mining experts in the creation of laws instead of leaving this crucial work to misinformed people.
Alberto Vázquez, Partner, Vázquez, Sierra & García, previously told MBN that the sector needs legislation for the rule of law to prevail. “All of the concessions that were canceled are effectively unused and there will be a day when the rights of these territories, in terms of law, will have to be published. Not expanding while also not publishing these rights says that they are above the law. We hope that in Mexico, the rule of law will prevail and not the will of one person or a group of people.”
Furthermore, Vázquez argued that uncertainty will plague the industry for the foreseeable future. In response, the sector needs to work on how it communicates the extent of its benefits and how it works to be of value to society. He agreed that Mexico is backed by sound mining legislation. However, as an industry, the mining sector must demand the correct application of the law. “As an industry, we have unconsciously accepted the discourse that we are a sector that steals, pollutes and violates human rights. We have to work hard to erase that unwarranted stereotype,” he added.
Regarding community participation, Del Bosque said communities must come to understand the work of the mine, so they need to have an expert advisor to explain the intricate workings of the mining sector to outsiders. Experts have pointed out that some legal provisions, especially regarding Indigenous consultations, are lacking and should be improved so that companies understand what is expected of them on the social front.
According to José Gutiérrez, President, CAMIMEX, over 822 projects have been delayed due to a lack of permits. Gutiérrez said that since López Obrador took office, permit granting has slowed down because of changes in key ministries. "We were at advanced stages in negotiations with the Ministries of Economy (SE) and Environment and Natural Resources (SEMARNAT). I do not doubt that if this negative to grant new concessions continues, these delays will be higher in the coming years," Gutiérrez said.
Mexico’s Ministry of Economy reported the concessioned territory for mining activities currently totals 8.59 percent of the total land, 2 percent less than the 10.64 percent registered in 2018. According to Gutiérrez exploration works have become essential since deposits are not forever and minerals are limited. Furthermore, the halt in concession granting will pressure the industry. According to CAMIMEX, just in 2022, mining companies invested over US$502 million in exploration activities, which represents a 28.2 percent increase against 2021.