- No more concessions to exploit lithium will be granted to private parties in Mexico.
- The exploitation of lithium and its use in Mexico will be exclusively in the hands of the Federal Government though a public instrumentality.
- It is possible that existing concessions and lithium projects are subject to expropriation actions.
On April 20, 2022, Mexico’s Ministry of Economy published in the Federal Register the Decree amending and adding various precepts of the Mining Law (the “Decree”). The official content of the Decree can be consulted here.
Following the dismissal of the Constitutional energy reform that did not reach the required votes on April 17, president López Obrador submitted to Congress a bill that included the Decree.
The Decree was approved by the Chamber of Representatives on April 18 and by the Mexican Senate on April 19 of this year.
Through the Decree, articles 1; 9, first paragraph; 10, first paragraph, were amended and an article 5 Bis and a third paragraph were added, moving the current third and fourth paragraphs to article 10 of the Mining Law.
At is core, the amendments to the Mining Law establish a restriction to the granting of concessions to exploit lithium and potentially other minerals that the Federal Government deems strategic. However, technically, it is not a “nationalization” since mineral resources were already owned by the Mexican State and its exploitation is carried out through concessions.
As described in a previous publication, which we make available for you here, the amendments to the Mining Law consist of the following:
(i)Exploration, exploitation, benefit and use of lithium will be the responsibility of a decentralized public instrumentality (the “Instrumentality”) which will be created by the Federal Branch within a period no to exceed 90 days following to the publication of the Decree.
-Pursuant to article 14 of the Federal Law on Public Entities, the public instrumentalities are created with the purposes of, among others, carrying
out the activities considered strategic o a priority. However, the exploitation of minerals (including lithium) is not within the list of activities considered strategic for the Mexican State under the fourth paragraph of article 28 of the Mexican Constitution.
(ii)Activities of lithium exploration, exploitation and use are declared to be in the public interest, and therefore no concessions, permits, authorizations or contracts will be granted for such mineral.
-It is likely that the declaration of public interest is the first step toward an expropriation/taking actions of existing lithium concessions and exploitation projects.
(iii)“Mining reserve areas” are considered to be those in which lithium deposits are located.
(iv)The economic value chains of lithium will be managed and controlled by the Mexican State, through the Instrumentality.
(v)The Mexican Geological Service will assist the Instrumentality in the location and reconnaissance of the geological areas in which there are probable reserves of lithium.
(vi)The federal government is empowered to determine the minerals that will be considered strategic and that therefore can only be exploited by the new Instrumentality.
-It is questionable whether the Federal Branch may determine that a certain mineral is deemed “strategic” notwithstanding these are not listed in article 28 of the Mexican Constitution. However, Congress has the ability to determine which activities shall be considered to be strategic through secondary legislation.
Finally, and as we mentioned in our previous publication, we emphasize that the transitory provisions of the Decree neither establish nor stipulate that the mining concessions previously granted for the exploration and exploitation of lithium will be respected in their terms.
If you have any questions or comments on the matter, please contact us.
This document does not constitute legal advice.
