Mexico: Union leader’s mining bill must be monitored

Last month, Napoleón Gómez Urrutia, one of Mexico’s most powerful union leaders and a senator for the ruling MORENA party, presented a bill to reform the federal mining law. If approved, the reform would slash the time granted for concessions from 50 years to just 15. Southern Pulse Senior Consultant Fernando Varela investigates what the bill means for the sector, why it’s been proposed, and whether it will be passed.

What is the bill’s potential impact?

Mineral extraction is a long-term investment that is often measured in decades rather than years. The duration and security of a concession is therefore key for recovering the initial investment. Gómez Urrutia’s bill, which cuts concession time from 50 years to 15 years, would pose a fundamental challenge to this precept. The reform could seriously compromise investment in the Mexican mining industry from both local and international companies.

Why has the bill been proposed?

Gómez Urrutia has said the bill is to protect workers, the environment and indigenous communities. However, while the reform would reportedly make infractions affecting these interests a concession-revoking offense, the proposal’s overarching theme is one of empowerment, making it easier for the federal government to cancel concessions and reduce the time between when they are granted or extended.??

This empowerment of the federal government to rescind concessions suggests a more personal agenda may have motivated Gómez Urrutia to launch this legislation – his 15-year grudge with Grupo México CEO, Germán Larrea, and its board, which oversees what is by far the largest mining corporation in the country.

The rivalry between Gómez Urrutia and Larrea had been latent since the late 1990s when the union led by the senator held the collective labor contracts to three key mines owned by Grupo México; Sombrerete, in the state of Zacatecas, Taxco, in the state of Guerrero and Cananea, in the state of Sonora.

The rivalry developed into an all out conflict when, in February 2006, Grupo México’s Pasta de Conchos mine, in the state of Coahuila, collapsed killing 65 workers affiliated to the union led by Gómez Urrutia. The union leader accused Larrea and Grupo México of neglecting security conditions in the mine and labeled the tragedy “an industrial homicide” before an assembled national and international media.

Later that same year, the Mexican government, under the administration of president Felipe Calderón, opened an investigation into Gómez Urrutia for allegedly embezzling USD55 million in union funds. Claiming political prosecution and death threats against him and his family from Grupo México, the union leader exiled himself to Canada until 2019 when he was cleared of all charges and returned to the country at the express invitation of the newly sworn in president, Andrés Manuel López Obrador. A tense coexistence between Gómez Urrutia and Larrea has continued since his return.

If approved, a reformed mining law that radically reduces the time of federal concessions would give Gómez Urrutia the upper hand in his lengthy standoff against Larrea. This is because of the de facto weight the Senator has in the Economy and Labor ministries, which would have a final say in the renewal of the concessions.

What stage is the bill at?

The timeline of the proposed bill is uncertain. Gómez Urrutia presented the bill before the Senate’s Mining and Regional Development Committee late last month.? At this point, the bill is considered a draft. The job of the Mining Committee is to analyze the bill. Mining Committee members may request changes before agreeing to move it to the floor of the Senate for its discussion. The Mining Committee has not released the full text of the bill or announced its preliminary discussion.?

Once the Mining Committee sends the bill to the floor, the Senate Speaker and the Speaker's Desk set a date for discussing and voting on the bill.

There is no guarantee the bill will move forward in its original form. The bill must pass through not only the Mining Committee, but also the Legislative Studies Committee. Opposition parties are represented on both and can table amendments. The likelihood of it being strongly contested and potentially adjusted before reaching the Senate floor is not insignificant.?

Is the bill a priority for the government?

At the present time the bill would not be a priority in Congress. While the proposal may pass the committee stage eventually, both chambers are heavily engaged in the preliminary lobbying of a much contested and controversial bill presented by López Obrador to reform the articles of the Constitution pertaining to federal elections. This reform would substitute the National Electoral Institute (INE) with a new, and less autonomous electoral watchdog.

The opposition parties have already announced they will oppose the bill for the electoral reform, thus the President will lack the majority necessary for a constitutional reform. López Obrador’s alternative strategy, the passing of a secondary legislation, would occupy both chambers for several weeks.

After that, one of the most pressing issues in both chambers will be the discussion and approval of the federal budget for next year. This is likely to occupy what little time remains of the year.

Will it be passed?

While the bill is unlikely to be passed soon, the impact of the reform proposed by Gómez Urrutia cannot be underestimated. It weighs directly on the dependability of long-term investments in the Mexican mining industry. This is especially true for international mining companies that can take their money elsewhere. Whether it is blocked entirely by the legislature, changed beyond recognition at the committee stage, or passed only to be contested case by case in the courts is difficult to predict. However, the proposal is a very concerning development which should be closely monitored over the coming months as it progresses slowly through the legislative system.

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