MEXICO, SOME MINING LAW ISSUES1
| Jurisdiction | Derecho Internacional |
(Nov 1997)
MEXICO, SOME MINING LAW ISSUES1
Miranda, Estavillo y Hernandez
Mexico City, Mexico
GENERAL FOREIGN INVESTMENT CONSIDERATIONS
Foreign Capital Participation
Exchange Controls and Currency Considerations
OVERVIEW OF THE LEGAL FRAMEWORK FOR MINING
Distribution of Regulatory and Enforcement Powers
Discretionary Authority in the Granting of Mining Concessions
Legal Remedies
Legal Nature of the Titles to the Mining Property
Timing, Territorial Extension and Fees in Exploration
Timing, Territorial Extension and Fees in Exploitation
RELATION WITH THE SURFACE OWNER. EXPROPRIATION, TEMPORARY OCCUPATION OR CREATION OF EASEMENT
Private Property and Public Interest
Expropriation, Temporary Occupation, Creation of Easement
Procedure; Land Over Concession's Surface and Outside Thereof
Expropriation of Ejido and Communal Land
Administrative Remedies and Constitutional Protection
NEGATIVE ASPECTS OF OLD LAW vs CONSTRUCTIVENESS OF NEW LAW
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MEXICO, ALGUNOS ASPECTOS DE LA LEY MINERA
FAUSTO C. MIRANDA
MIRANDA, ESTAVILLO Y HERNANDEZ
MEXICO, D.F.
Septiembre 1997
CONSIDERACIONES SOBRE PARTICIPACION DE CAPITAL EXTRANJERO
Participación de Capital Extranjero
Controles de Cambio y Consideraciones Monetarias
RESUMEN DEL MARCO LEGAL DE LA MINERIA
Distribución de las Facultades de Regulación y Aplicación
Facultad Discrecional en el Otorgaminto de Concesiones Mineras
Recursos Legales
Naturaleza de los Derechos de la Concesión Minera
Duración, Extensión Superficial y Comprobaciones en Exploración
Duración, Extensión Superficial y Comprobaciones en Exploración
RELACION CON EL SUPERFICIARIO. EXPROPIACION, OCUPACION TEMPORAL O CONSTITUCION DE SERVIDUMBRES
Propiedad Privada e Interés Público
Expropiación, Ocupación Temporal, Constitución de Servidumbres
Procedimiento; Terreno Superficiario de la Concesión y Terrenos Fuera de ella
Expropiación de Terrenos Ejidales y Terrenos Comunales
Recursos Administrativos y Protección Constitucional
ASPECTOS NEGATIVOS DE LA LEY ANTERIOR vs ASPECTOS CONSTRUCTIVOS DE NUEVA LEY
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GENERAL FOREIGN INVESTMENT CONSIDERATIONS
FOREIGN CAPITAL PARTICIPATION.
The Mining Law of 1992, when referring to foreign investment, in said industry, indicates that it must comply with that provided for in the corresponding law. Foreign investment is subject to the dispositions of the Foreign Investment Law, which does not include the mining industry as an area where foreign capital is limited to a given percentage.
The Mining Law states that the exploration and the exploitation of the minerals subject matter of the law, may only be carried out by Mexican individuals, "ejidos"2 and "agrarian communities"3 as well as by companies organized under Mexican
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Laws, whose corporate purpose refers to the exploration or exploitation of mineral substances and are domiciled in the Mexican United States.
While foreign individuals and non-Mexican legal entities, as such, may not hold mining concessions, foreign investment -be it by individuals or by legal entities- may participate in 100% in the Mexican mining industry.
The above refers to foreign capital participation, which may own 100% of the capital, in the incorporation of new mining companies.
Foreigners may also acquire up to 49% of existing companies without a permit. (It is being discussed to permit direct ownership of mining concessions by foreign individuals and legal entities)
As a general rule, the acquisition from Mexicans by foreign investors of more than 49% of an existing mining company does require a permit from the Foreign investment Commission when the value of the assets of the company exceeds $394,000,000 Mex.Cy., approximately $50,600,000 U.S.Cy. (as of September, 1997).
However, under the Northamerican Free Trade Agreement (NAFTA), effective as of January 1, 1997, the opening to direct 100% foreign
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capital participation in the acquisition of existing Mexican mining companies is as follows:
Investors from Canada and the United States (Northamerican investors) will not require a permit from the National Commission of Foreign Investments in acquisitions from Mexicans of an existing mining company when the value of the assets does not exceed 1) $25 million U.S.Cy., for the three-year period beginning on the date of entry into force of NAFTA, that is 1994, 1995 and 1996; 2) $50 million U.S.Cy., for the two-year period beginning three years after the date of entry into force of NAFTA, that is 1997 and 19984 .
After the fifth anniversary of the effective date of NAFTA, that is beginning in 1999, Northamerican capital will be able to acquire more than 49% of existing mining companies without prior approval of the Foreign Investment Commission.
The thresholds from $25 million U.S.Cy. up to $50 million U.S.Cy., beginning in 1995 are adjusted annually for cumulative inflation, based on the implicit price deflator for U.S. Gross Domestic Product (G.D.P.)
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EXCHANGE CONTROL AND CURRENCY CONSIDERATIONS
México does not have exchange controls.
Business entities may open checking bank accounts in Mexican Currency and in United States Dollars. Likewise, business entities may open bank accounts in the countries and in the currencies they deem pertinent.
The official currency in México is the Mexican Peso, accounting records for tax purposes are kept in Pesos and taxes are quoted and paid in said currency.
OVERVIEW OF THE LEGAL FRAMEWORK
DISTRIBUTION OF REGULATORY AND ENFORCEMENT POWERS
Mining is regulated by:
1) Paragraphs fourth and sixth of Article 27 of the Constitution, which establish the direct domain of the Nation over mineral resources and, that only Mexican Nationals and Mexican legal entities (that is legal entities organized under Mexican law) may obtain concessions for their exploitation.
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Said paragraphs, fourth and sixth of Article 27 of the Constitution read:
"It corresponds to the Nation, the direct domain of all minerals or substances which in veins, layers, masses or deposits constitute deposits whose nature is different from the components of the ground, such as the minerals from which metals and metalloids used in industry are extracted; the deposits or precious stones, rock salt and the salines formed directly by marine waters; the products derived from the decomposition of the rocks, when their exploitation requires underground works; the mineral or organic deposits of materials capable of being utilized as fertilizers; combustible solid minerals; petroleum and all solid, liquid or gaseous hydrocarbons; and, of the space located over the national territory in the extension and terms fixed by international law".
...
"In the cases referred to in the two preceding paragraphs (four and five), the domain of the Nation is inalienable and imprescriptible, and the exploitation, the use or the utilization of the resources referred to, by individuals or entities constituted in accordance with Mexican laws may only be carried out by means of concessions granted by the Federal Executive in accordance with the rules and conditions set forth in the laws. The legal dispositions relative to the works or labors of exploitation of the minerals and substances, to which paragraph four refers, shall regulate the execution and proof of work carried out or to be carried out from their effective date, independently of the date of issuance of the concessions, and the non-observance thereof shall cause the cancellation of these. The Federal Government has the authority of establishing national reserves and to abolish same. The corresponding declarations shall be made by the Executive in the cases and conditions provided by the laws. With regard to oil and the solid, liquid or gaseous hydrocarbons or of radioactive minerals, neither concessions or contracts shall be granted nor shall subsist those which may
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have been granted, and the Nation shall carry out the exploitation of these products in the terms set forth in the respective regulatory law..."
2) The Mining Law which is regulatory of the above dispositions, rules the exploration, exploitation and beneficiation of the minerals or substances, that in veins, strata, masses or deposits which constitute deposits of a nature different to those of the components of the ground.
The Mining Law is of public order, of Federal application and only laws of a Federal nature may impose contributions to exploration, exploitation and beneficiation activities, Mining has preference over any other use or utilization of the land. A concession is not required for the beneficiation of minerals.
3) The Regulations to the Mining Law;
4) Other laws and Regulations as applicable to Mining.
From the text of the Mining Law, it is clear that exploitation and beneficiation are within the exclusive scope of the private sector.
The participation of the government in mining is limited to apply the legal dispositions, to foster the mining industry; as well as cooperate in the location of mineral resources.
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The only governmental entity that participates in mining is the Council of Mineral Resources CRM, whose function is limited to explore for minerals, only the private sector may go into their exploitation. The CRM, to explore, has to apply for exploration allotments following the same requirements of those for an exploration concession and prior to expiration of the allotments, which have a duration of six years and are not renewable, the CRM must call for public biddings or the allotment is cancelled. Occasionally, areas explored by the CRM, may be declared as Mineral Reserves, under very stringent requirements, exclusively by means of a decree of the Federal Executive.
The authority directly responsible of the application of the Mining Law is the Ministry of...
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