“In addition, the process of assigning new concessions would be more uncertain, could increase the operational risks of the companies and discourage investment in Mexico in this industry,” Moody’s said.
The report referred to the reform that López Obrador proposed on March 28 to the Mining Law, which would now only grant mining concessions through public tender and with prior consultation with indigenous peoples, in addition to shortening its duration from the current 50 years to 15 with the possibility of only one extension.
Moody’s warned of another reform that would allow the government to unilaterally withdraw concessions or permits in mining and any sector only on the grounds that they affect the “public interest.”
“This is particularly negative for any future investment looking to take advantage of nearshoring trends,” the agency said.
Moody’s trusted the government to discuss the reforms before approving them, since mining represents 2.5% of the Gross Domestic Product (GDP) in Mexico.
Mining, the report added, generated about $3.1 billion in tax benefits in 2021 and companies invested a combined $5 billion in 2022.
“The proposed conditions could discourage mining companies from making future investments in Mexico and looking the other way. We expect mining producers, whose operations contribute substantially to Mexico’s economy, to discuss the proposals with the government,” Moody’s said. .
During the Government of López Obrador, the territory granted to mining companies has decreased from 10.64% to 8.59% of the country, which implies about 24,000 concessions, according to the Ministry of Environment and Natural Resources (Semarnat).
With information from EFE and Reuters