Adrián Juarez
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CTA Consultoría y Tecnología Ambiental
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Expert Contributor

What Is AMLO's Strategic Position in Mining?

By Adrián Juárez | Wed, 02/16/2022 - 11:00

In America, political leaders direct their speech and actions according to the commitments they made during the campaign and the pressure exerted by related groups. In the mining sector, it is the same: the ecological or eco-hysterical groups are present and almost always, they prefer to support the leaders of the left or those with socialist and collectivist tendencies, although they can also incorporate some right-wing leaders when they allow themselves to be convinced that doing so could favor them politically. On the other side are the business groups that also want to defend their businesses. By submitting to these pressures, the population is ignored and the workforce is at the mercy of how the balance tips. When environmental groups or trade unionists gain the upper hand, the working class usually loses because the result discourages private investment. I recently heard President Andrés Manuel López Obrador (AMLO) say that the secretary of the interior should meet with Napoleón Gómez Urrutia and Germán Larrea to find a solution to the problem at the Cananea mine (Sonora, Mexico). AMLO says he is in favor of working class Mexicans and the poor; therefore, letting himself be carried away by pressure groups (business, eco-hysterics and unions) ignores his great promise to act in favor of Mexicans.

AMLO wants to nationalize Lithium (li) as a strategic mineral[1], thereby preventing any national or foreign private entity from investing in exploring and exploiting this mineral in Mexico, and hinting that he may cancel the permit given to Bacanora Lithium Plc, which was recently acquired by the company Genfeng (China)[2]. In addition, the administration has also been holding back/blocking permits so that only the mines that are currently operating and generating jobs and economic activity can continue. These decisions by AMLO affect Mexicans, who see their opportunity to get a job disappear. There are few exceptions in the world where a state company has managed to generate benefits for the country; the rule is corruption and inefficiency. Could it be that AMLO is the only enlightened one in America with these ideas?

In the US, President Joe Biden recently canceled the federal permits for the company Twin Metals Minnesota[3], a subsidiary of Antofagasta plc, of Chilean origin, which had already been investing in the project for several years and which could become a large copper and nickel mine. This project had already been interrupted by the administration of President Barack Obama in 2016, was reactivated during the administration of President Donald Trump in 2017 and now stopped again by Biden.  Some consider this action a gut punch to US Steel workers and a gift to China[4]. Fortunately, Biden has not yet decided to nationalize any mineral. There are talks of reviving rare earth mining so as not to have to depend on Chinese supply.

In Guatemala, the government is advancing on consultations with Indigenous peoples to comply with ILO Convention 169, ratified by the national Congress, that had paralyzed the mining industry. In 2022, the nickel mine that had been suspended by order of the justice system, which ordered the consultation, was reactivated[5].  This situation was also generated by pressure from environmental groups. When the consultation took place, the employment of some 1,500 people who work for that mine in a rural and poor area of ​​Guatemala was secured.

In Panama, the “Cobre Panamá” mine, owned by First Quantum Minerals, had to accept this year an increase in royalties, from 2 percent to 12 percent and not less than US$375 million per year, to continue its operation[6]. To put this mine into operation, an investment of around US$6 billion was needed, equivalent to the cost of expanding the Panama Canal. I imagine that this increase in royalties is a blow to investors and that they saw this arrangement as the only way to recover their investment. This action by the Panamanian government, despite an apparent profit (US$375 million a year), is actually a blow to the country's credibility, which invited investment under attractive rules and, when there was no turning back for the company, changed the rules.  In the end, Panamanians will lose future opportunities for growth and development. Even environmentalists are not happy and have protested the agreement, with the slogan that Panama would be better off without mining[7].

In Peru, the recently inaugurated President Pedro Castillo is also doing his thing, but he was already stopped by the mining association when he wanted to suspend the operations of Hochschild Mining’s mines. The company's shares fell 27 percent with the announcement in November 2021[8].  The "Las Bambas" copper mine, responsible for 2 percent of the world's copper production, has been suffering from blockades by "dissatisfied" neighbors who have forced it to suspend operations twice, once in 2021 and now in 2022. The actions of President Castillo may have been predicated on defending workers but it damages the credibility of the country and delays mining investment[9]. His actions also go against the working class.

In Chile, President-elect Gabriel Boric also opposes the recent (October 2021) tender carried out by President Piñera, which awarded 2 lithium extraction contracts to the companies BYD Chile (China) and another Chilean company (Errázuriz group)[10], who join the two existing lithium producers, SQM (Chile) and Albemarle (US). Boric wants to create a national lithium company, like CODELCO, which is not a monopoly but one of the largest copper producers in the world[11].  It is not clear why he is opposed to the tender, if the idea is not to create a lithium monopoly as AMLO wants to do in Mexico.

It is clear that socialist political leaders forget their campaign promises; they forget the working class that is harmed by actions that favor interest groups, environmentalists, businessmen or trade unionists. In Mexico, the government recently did not want to extend the term of operation of a mine in the state of Oaxaca and the mayor of the community that hosts the mine intervened with AMLO. The permit was then extended for 12 more years, showing the strength of AMLO's electoral base[12].  A few weeks later, the environmental authority indicated that it had made a mistake in the extension resolution and that it was only for two more years.  AMLO is not the only leader who makes wrong decisions. It is a sign that the system does not work in favor of the electoral base that gives the victory but is permeable to groups that with deceit and corruption, reach leaders and deliver convincing stories.

 

[1] Aljazeera, December 21, 2021: Mexico’s lithium and the global race to lock in White Gold: https://www.aljazeera.com/economy/2021/12/21/mexicos-lithium-and-the-global-race-to-lock-in-white

[2] ABC News, February 2, 2022: Mexico plans state lithium company, questions Chinese mine.

[3] MPRNews, January 27, 2022: Biden administration cancels Twin Metals' leases to mine near BWCA. https://www.mprnews.org/story/2022/01/26/biden-administration-cancels-twin-metals-leases

[4] The Hill, February 5, 2022: Twin Metals mine cancellation is a gut punch to US steelworkers, gift to China.

[5] Bnamericas: Diciembre 13, 2021: Podría la consulta sobre mina Fénix estimular el reinicio de la minería en Guatemala?

[6] Mining.com; January 23, 2022: Panama’s industry chamber warns First Quantum against using royalty increase for political gain.

[7] Mining Watch Canada, February 2, 2022: First Quantum Minerals Deal with Panama Sparks Major Environmental and Cultural Concerns.

[8] Financial Times, November 22, 2021: Hochshild shares drop by 27% after Peru seeks to shut mines.

[9] Seeking Alpha, Sept 27, 2021: Peru's New Government Promises Changes To Mining Sector: Here's What That Could Mean For Your Stocks

[10] T13 en vivo; Febrero 8, 2022: Litio: se estanca la licitación que desato la primera pugna Boric-Pinera.  https://www.t13.cl/noticia/ex-ante/politica/litio-se-estanca-licitacion-desato-primera-pugna-boric-pinera

[11] France 24; Enero 13, 2022: Licitación de Litio en Chile enfrenta a gobierno y presidente electo Boric. https://www.france24.com/es/minuto-a-minuto/20220112-licitación-de-litio-en-chile-enfrenta-a-gobierno-y-presidente-electo-boric

[12] El economista; noviembre 29, 2021: AMLO ofrece attender el caso de Compania Minera Cuzcatlán.

Photo by:   Adrián Juarez