RIO DE JANEIRO, BRAZIL – The Executive’s narrative of national sovereignty has reached the mining sector. This week, the President of Mexico, Andrés Manuel López Obrador, lashed out against concessions to exploit mineral deposits held by mining companies.
“Our territory has 200 million hectares, and during the neoliberal period, they granted 120 million hectares for mining exploitation. When will they finish exploiting 120 million hectares? Well, why did they hand out so many mining concession titles?”, said the President this Monday in his morning conference.
Since the beginning of his government, López Obrador has criticized the amount of land granted in mining concessions. However, figures from the Mining Development Directorate reveal that there are just over 25,000 titles in force covering a little over 20 million hectares in the country. “We have not delivered any concession for mining exploitation in the time I have been in the Government because it is not necessary either,” said the President at the beginning of March.
The current Administration’s stance contrasts with the mining tradition of the country, which is one of the main producers of silver, gold, and copper in the world.
As well as the permits for gasoline imports and electricity generation contracts granted to private companies, now the rights to explore and exploit deposits are in the Executive’s sights. The warning that no more concessions will be authorized was preceded by the President’s criticism of two Canadian mining companies with projects in Mexico: First Majestic, which he pointed out “does not want to pay taxes,” and Americas Gold and Silver, which is currently going through a union conflict.
Americas Gold and Silver described the President’s statements as “worrying”, but assured that it would continue to work together with the Mexican government to solve them. On the contrary, the fight between the government and First Majestic has already reached international arbitration.
The mining company argues that the Executive has issued tax reassessments for the years 2010 to 2013 without considering the tax agreements in force. The tax reassessments claimed by the Tax Administration Service to the company exceed 392 million dollars. In a statement to investors, First Majestic assured that the Mexican authorities have refused to negotiate and defended that “they will continue to vigorously contest all tax reassessments through all available national and international means.”
According to the Mining Law, the term of a concession is 50 years, with the possibility of extending it for an additional 50 years. Representatives of the sector indicate that this is a period that makes feasible an industry that requires money and time. Only the exploration phase can take around 20 years.
At the end of last year, 179 foreign-owned mining companies were operating in Mexico -70% of the firms from Canada- and managed a portfolio of 1,190 projects. However, the Mining Development Directorate acknowledged that 63% of these projects had been postponed by the companies “for their subsequent reactivation in a financially reasonable time,” according to its latest report published at the end of last December.
Mexico ‘loses luster’ to attract new mining investments
The executive branch’s loud shouting and the legal uncertainty have questioned the viability of mining projects in the country. Sergio Almazán, president of the Association of Mining Engineers, Metallurgists, and Geologists of Mexico, warned that suspending the granting of mining concessions could scare away investment capital. “Foreign and domestic mining investors risk their investments where there is proven geological mining potential, but above all where there are public policies that provide them with legal certainty. Unfortunately, investment in mining exploration in Mexico has lost luster, we are becoming less competitive, and this has been reflected in recent years, where investment in mining exploration has fallen from US$856 million in 2014 to US$435 million in 2019″, he stated.
According to figures from the Mining Chamber of Mexico, in 2020, mining investment in the country registered the worst drop in 13 years. Mining companies injected only US$2.5 billion last year, a 46% drop from the US$4.657 billion disbursed the previous year.
Furthermore, in its most recent survey by Canada’s Fraser Institute on the attractiveness of countries to invest mining capital, Mexico was ranked 42nd out of 77 countries evaluated, behind other nations such as Colombia, Peru, Brazil, and Chile.
José Martínez, a mining engineer and director of Grupo Jomargo, added that the sector is going through a paradoxical moment: mineral prices are recovering, but there is no legal certainty for companies to reactivate their plans after the pandemic. “Talking about the Canadian (mining companies), or the Canadian juniors that came to explore in this country, that source of work has given jobs to Mexicans, that money generated a circulation in our country,” he added.
According to industry figures, the mining sector generates 379,000 direct jobs and more than two million indirect jobs. Despite the employment and investment generation figures, López Obrador remains firm in his decision not to grant a new concession for the remainder of his term.
Source: El Pais