Economy & Business - May 2023

MEXICO: Mining reforms to curb exploration and investment

On 28 April, Mexico’s federal senate approved a mining reform that amends several laws, including the mining law, the national waters law, the general law for environmental protection and ecological balance and the general law for the prevention and management of waste. While less restrictive than the version that was approved earlier by the lower chamber of deputies, the reform still introduced provisions that will have a significant impact on the sector.

Among the key issues included in the changes to the mining law is that mining is no longer considered a priority, which in practice means that it will no longer be permitted to have mining concessions in protected natural areas, areas with water availability problems, and where the population could be put at risk.

The reforms also reserve mining exploration for the state, through the Mexican geological service or other federal public entities. This means that if a mining company identifies mineral resources somewhere, it must request that SGM do the necessary studies to identify them formally within a five-year term. Crucially, however, the SGM has few resources of its own. Its budget for 2023 is only $193m (US$10.86m), a fraction of what mining companies spend on exploration alone.

According to Mexico’s mining chamber (Camimex), the industry’s main organisation, the key concern of mining firms is that the reform effectively legalises not awarding concessions to private entities, handing SGM the monopoly. Exploration is key to the survival of the mining sector which, despite recovery from the coronavirus (Covid-19) pandemic in 2021, has been following a deteriorating trend in recent years, as the graph below shows.

Mexico's Mining Sector's Growth 2015-2021

Source: Annual Report Camimex 2022

Another significant change is that mining concessions will no longer be awarded for 50-year periods. Instead, they will last for 30 years. The duration of the concessions may be prolonged once for no longer than 25 years. Before the reform, concessions could be extended for another 50-year period, provided the extension was requested five years before the expiration of the concession.

The new law also repeals rights that concessionaires had previously regarding the use of water for the exploitation of minerals. It is also no longer allowed to have land expropriated in order to carry out mining operations. Concessionaires are now only allowed to occupy the land temporarily. Importantly, concessions will only be provided for specific minerals or substances to be explored or exploited, rather than for areas of land.

The reform has also added several causes for cancelling mining concessions, including delays in the start of the mining work, failing to pay the relevant taxes, and failing to report any environmental damages or to have the relevant waste management programmes in place. Concessionaries and landowners must now have an agreement to obtain the relevant land use permits. It is also compulsory to carry out consultations with indigenous populations in areas where mining activities may be carried out.

Regarding the national waters law, the changes condition use of water resources to their availability for mining projects. The reform bans mining activities if the applicant plans to concentrate more than 30% of the total volume of average annual availability of the relevant basin or aquifer. They also include new grounds for revoking concessions, including when an economic, social, or environmental imbalance is caused by the mining concessionaire. New fines are also included for failing to file a report of water discharges to the national water commission (Conagua).

With regards to the environmental protection law, the main changes are the ban on granting permissions for mining activities in natural protected areas and the obligation to have a restoration, closure, and post-closure programme filed with the environment ministry (Semarnat).

Finally, the main changes to the waste management law include banning the disposal of waste in natural protected areas, wetlands, watercourses, or in places where the waste could affect communities. It also makes the disposal of waste the responsibility of the concessionaire.

Industry representatives have said that the measures will harm the mining sector, which accounts for 2.5% of national GDP, and will also reduce its share of fiscal revenue, which amounts to more than M$70bn per annum. However, anti-mining environmental and community NGOs that have welcomed the changes claim that this only amounts to 0.13% of total federal tax revenue.

What is certain is that the changes are likely to worsen Mexico’s attractiveness as an investment destination for mining. As the chart below illustrates, Mexico was the top destination for investment in exploration within Latin America, with a share of 24% of the regional total in 2021, according to Camimex’s 2022 annual report. Having said that, the level of investment in mining in 2021 was 53% below that of 2012.

Investment in Mining Exploration in Latin America 2021

Source: Annual Report Camimex 2022

According to the Fraser Institute of Canada, a think-tank that conducts an annual survey of mining and oil & gas companies, Mexico was ranked as the 34th most attractive destination for investment in 2021, out of 84 jurisdictions assessed. While this was an improvement of eight places relative to 2020, this resulted from the addition of seven new jurisdictions to the report rather than from an improvement in Mexico’s performance. Indeed, Mexico’s attractiveness has been deteriorating over the last 11 years, sliding down 14 positions since 2010.

  • Index indicators

Camimex’s 2022 annual report highlights that Mexico’s worst indicators in the index during 2021 were security (73 out of 84 jurisdictions assessed), political stability (69), and labour legislation (68). The greatest contractions between 2012 and 2020 were seen regarding political stability, environmental regulation, and tax regime.

The changes will also affect mining companies already operating in Mexico. While the largest players in the sector are Mexican firms, many of which have said that they are still assessing the impact of the reform, foreign companies have already voiced their concern. According to the economy ministry, in 2021 there were 159 foreign-owned mining companies operating in Mexico. These are mostly junior and exploration companies, of which 73% are headquartered in Canada, 10% are from the US, and 4% from Australia. The rest include companies owned by Japanese, Korean, British, Chinese, and Indian capital, among others. Canada’s International Trade Minister Mary Ng voiced concerns about the reform’s impact as soon as the lower chamber approved the initial changes on 20 April, while local press on 2 May reported that at least 40 Canadian- and US-owned companies would seek legal appeals following the approval of the reform, as well as potential arbitration panels under the US-Mexico-Canada Agreement (USMCA).


Fines for failing to comply with the provisions of the mining law have also been significantly increased under the reform. These may range from 1% of the concessionary’s total annual income, plus M$518,700, to 4% of the total annual income plus over M$1m. Similarly, the reform has added a section on crimes and penalties, including up to 15 years imprisonment and fines of up to 5% of the total annual income plus an additional fine of around a M$1.2m. These crimes include the extraction of minerals without a concession, the sale or trafficking of minerals without a concession, and using false documents to obtain a concession.

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