Mexico’s Mining Law Reform: The Ricardo Monreal Factor

The initiative to reform Mexico‘s Mining Law proposed on March 28 by the administration of President Andres Manuel Lopez Obrador has a key player: Senator Ricardo Monreal, according to an analysis by S&P Global Market Intelligence.

Overall, analyst Jose Sevilla-Macip highlights that the proposed changes to the mining law would impose more restrictive conditions for investors, including expanding the list of grounds for project cancellation.

The most relevant provisions included in the draft mining law are the reduction of the duration of concessions from 50 to 15 years, with the possibility of a single renewal for another 15 years; making obtaining a water concession for industrial use a precondition for obtaining a mining concession; basing the awarding of concessions on public bids; and obliging companies to pay at least 10% of a mine’s revenues to indigenous communities if they are present in the concession area.

In addition, the bill would more than double the list of reasons for which the State would have the right to cancel mining concessions.

So far, Camimex has stated that it expects Congress to engage private sector stakeholders to review and refine the bill, although it has warned of «serious repercussions» for the industry if it is passed in its current form.

Under Mexico’s current laws, mineral resources belong to the state and government concessions are required to explore or exploit mineral reserves.

Mining rights are derived from concessions granted on a discretionary basis by the Ministry of Economy in accordance with Mexican mining law and its regulations.

Mining Law

This Thursday, José Jaime Gutiérrez, president of the Camimex, said that companies in the sector could stop investing some 4 billion dollars annually if the mining reform is approved as originally presented.

Gutiérrez questioned the viability of several of the changes included in the bill and called for an open forum of debate in Congress to discuss the legal changes in the industry.

If no adjustments are made to the mining reform presented by López Obrador, Gutiérrez warned that companies will resort to amparos, other legal remedies and dispute resolution panels within the framework of the Treaty between Mexico, the United States and Canada (USMCA).

Approval only requires absolute majorities, which López Obrador’s National Regeneration Movement (MORENA) party has in both chambers.

However, MORENA’s majority in the Senate shows less cohesion, and MORENA’s unity depends on Majority Leader Ricardo Monreal’s willingness to support government-sponsored bills.