The narrative of national sovereignty of the Executive has reached the mining sector. The president of Mexico, Andrés Manuel López Obrador, has lashed out this week against the concessions to exploit mineral deposits held by mining companies. “Our territory has 200 million hectares and 120 million hectares were concessioned in the neoliberal period for mining exploitation. When are 120 million hectares finished to be exploited? Well, why did they hand over 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 concessioned to mining, however, the figures from the Mining Development Directorate reveal that there are just over 25,000 current titles, rights that cover just over 20 million hectares in the country. “We have not granted any concession for mining exploitation in the time that I have been in government, because it is not necessary either,” said the president in early March. The position of the current Administration contrasts with the mining tradition of the country, which is one of the main producers of silver, gold and copper in the world.
Like the permits for the importation of gasoline and electricity generation contracts granted to private parties, 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 a criticism from the president about two Canadian mining companies with projects in Mexico: First Majestic, whom he said “does not want to pay taxes” and Americas Gold and Silver, which is currently going through union conflict.
The mining company Americas Gold and Silver described the president’s statements as “worrying”, but assured that he will continue working together with the Mexican government to solve the problems. On the contrary, the fight between the Government and First Majestic has already reached the international arbitration stage. The mining company argues that the Executive has issued tax revaluations for the years 2010 to 2013, without considering the tax agreements that are still in force. The tax revaluations that the Tax Administration Service demands from 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 challenge all tax reassessments through all available national and international means.”
The validity of a concession, according to the Mining Law, is 50 years, with the possibility of extending it for another 50 years. The representatives of the sector indicate that this is a period that makes an industry that requires money and time feasible, only the exploration phase can take around 20 years. At the end of last year, 179 foreign-owned mining companies operated in Mexico – 70% of the firms come from Canada – and they managed a portfolio of 1,190 projects. However, the Mining Development Directorate acknowledged that 63% of these projects have 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 shine’ to attract new mining investments
The blows by the Executive coupled with legal uncertainty have called into question 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 can scare away investment capital. “Foreign and national mining investors risk their investments where there is a 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 its shine, we are becoming less competitive and this has been reflected in recent years, where investment in mineral exploration has fallen from $ 856 million in 2014 to $ 435 million in 2019 ″, he mentioned.
In 2020, mining investment in the country registered the worst fall in 13 years, according to figures from the Mexican Mining Chamber (Camimex). Mining companies injected only $ 2.5 billion last year, a decrease of 46% compared to the $ 4.657 million spent the previous year. In addition, in its most recent survey by the Fraser Institute of Canada on the attractiveness of countries to invest in mining capital, it placed Mexico in 42nd position out of 77 countries evaluated, behind other nations such as Colombia, Peru, Brazil or Chile.
José Martínez, mining engineer and director of Grupo Jomargo, added that the sector is experiencing 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 (miners), or the juniors Canadians who came to explore this country, that source of work has given jobs to Mexicans, that money generated money in our country, “he added.
The mining sector generates 379,000 direct jobs and more than two million indirect jobs, according to industry figures. Despite the figures for job creation and investment, López Obrador remains firm in his decision not to grant a new concession for the remainder of his term.
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Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.