Mexico's Senate Takes on Reform of Mining Industry
Mexico's Senate has approved an extensive reform of laws related to the mining industry. The mining bill was passed alongside 17 other pieces of legislation — some controversial — in a rush on late Friday (April 28, 2023) and early Saturday (April 29, 2023). The bills’ approval was met with little resistance as the senators from President Andrés Manuel López Obrador’s party (the Morena party) and its allies were the only ones to cast votes on the proposed reforms, done so in a nearly unanimous manner. The opposition, who objected to the lack of debate, occupied the normal voting location of the Senate. To overcome this obstacle, the Morena party and its allies met in an alternate chamber.
The Mining Law
Mexico's new mining law shortens concessions in the mining sector from 50 to 30 years, restricts the issuance of permits for the extraction of water, and mandates that a portion of mining profits be distributed back to the local communities in which the mining operations take place. President Andres Manuel Lopez Obrador was a major proponent of the new law and had initially proposed reducing the length of concessions to 15 years, but the proposed reduction was removed from the final version of the law. Additionally, to penalize speculation and encourage productive use of mining concessions, the new law allows authorities to revoke concessions if there has been no work done on them within two years.
The reform package introduces regulations that mandate greater transparency from mining companies, as well as measures designed to protect natural reserves, habitats, and water sources from direct and indirect damage caused by mining operations. According to Raquel Bonilla, a Morena deputy from Veracruz, the reform package aims to ensure that companies in the mineral extraction sector are held accountable for their environmental impact.
The Canadian Ministry of Commerce has expressed concern over the recent mining legislation passed in Mexico, specifically its potential impact on Canadian investment in the sector. Such measures, according to the national mining chamber, Camimex, may cost the nation an estimated $9 billion in investments and up to 420,000 jobs.
Canadian companies have a significant presence in Mexico's mining industry. If the Canadian government believes that Canadian miners face unfair treatment in Mexico, it could potentially dispute Mexico's laws under the United States–Mexico–Canada Agreement (USMCA), the free trade pact that superseded the North American Free Trade Agreement (NAFTA) in 2020.
Numerous companies, especially smaller "minor" businesses listed in Canadian sectors, conduct exploratory work, estimate the presence of minerals, and then do nothing while they wait to sell the concession to a more powerful party. Many of the properties involve gold or silver deposits.
The Mexican government is highlighting the promise of the developing lithium industry. However, mining this valuable metal may be difficult in Mexico as the majority of reserves are thought to be in clay deposits.
More than 60% of the lithium known to exist in the world is found in the "Lithium Triangle," which includes Mexico, Argentina, Bolivia, and Chile. On February 18, 2023, Mexico's lithium sector was declared to be nationalized. The decree established a lithium mining resource zone in Sonora and created the state-run Litio para Mexico (LitioMX) firm, which will be in charge of managing the mineral's economic value chain and supervising exploration and exploitation under the direction of the Ministry of Energy.
However, nationalization issued harm to the global mining industry. Therefore, the mining modifications, which follow the nationalization scheme for lithium, bring both opportunities and threats.
Sources & Further Reading