In an excerpt from her exclusive interview with Mexico Mining Review 2016, Laura Díaz, Partner at mining-focused law firm Díaz, Bouchot & Raya (DBR) explains the long-term vision of the mining industry and offers advice for attracting FDI to Mexico.
Q: One of the observations within the industry is that once foreign investors enter the market, they are not provided with support from the authorities. What remains to be done in order to truly support investors, and how can you help them in this process?
A: Mexico is in a difficult position at the moment due to its fiscal structure, and it is not only mining companies that are suffering from this. It also goes further than this, certain issues need addressed and certain structures must be reevaluated. I have a client that recently closed a mine in Guerrero, with no option to reopen it due to the significant security issues in the state. Companies must invest a considerable amount in security in any region in order to protect their staff and products. This is dictated by a balance in the quality of the project and the level of security that is required.
Q: In times of crisis, true innovation is developed, and companies begin to focus more on optimizing processes and implementing automation. How do you help your clients to weather the storm and effectively modify financial practices?
A: At DBR Abogados, we see ourselves as friends of the industry, and if our client is experiencing financial difficulties we have a clear responsibility to help as much as possible. We offer several solutions, and we have been known to reduce our rates to align with the industry, as well as offering a fixed dollar rate, which is a great help to companies at the moment that are trying to negotiate the waters. We have also offered increased leniency in terms of billing dates, since typically there is a 30 day statement period, whereas now this has extended to 45 days, and even 60 days in some cases. Essentially, I prefer to collect a reduced bill than exacerbate the company’s troubles, and as part of the industry, we want to help clients to be able to continue with the business.
Q: What projects have you been involved in that reflected the conditions of the Mexican mining market and the ingenuity of the firm in addressing these legal concerns?
A: Over the last few years, we were involved in a major transaction, and we have seen an increasing number of M&As within the environment. Previously, large companies acquired smaller companies, but in the current landscape there is a growing trend of major players of equal size engaging in mergers and joint ventures. There are a substantial amount of international law firms in Mexico, but our competitive advantage lies in the fact that we are specialists in mining due to the country’s long mining history. These competitors cannot boast the same expertise.
Q: To what extent should the Coordinación de Minas fall under the jurisdiction of Ministry of Energy rather than the Ministry of Economy, and why should it be elevated to the ranks of Subsecretary rather than coordinación?
A: This is more of an administrative question, and the real issue lies in implementation. We need, at least at the General Mining Board, more qualified people who are willing to put significant effort into understanding and promoting the industry. At the moment, the organization is three years old and, as yet, there have not been any major developments.
Q: In this industry, players must adopt a long-term vision. With this in mind, what do you expect for the next year within the industry?
A: I agree with the hypothesis that this market requires a long-term outlook, but unfortunately each governmental term lasts six years, meaning that every six years the view of the industry is renewed. As a result, that is the crucial factor that seems to have the most detrimental effect on our operations, and directly contradicts our ethos of fostering a long-term vision. With every administrative term, the rules, regulations, and staff change, and it is impossible to adopt a strategy of foresight when the environment remains so unstable. Under this government, there is not enough importance attributed to this industry, and we feel overlooked in terms of the reforms and the new benefits given to other sectors. Despite the emphasis placed on the energy industry, this has not generated any real return for the country after three years, meaning that it may be time for the government to reevaluate its strategy and its priorities.
Q: Exploration activities have seen a drop in recent years. What are the main concerns your clients share regarding the issue, and what are you doing to ease the process?
A: With exploration projects, the problem lies in the fact that there is no money in the international commodity market, rather than it being a governmental problem. Even if the government were to invest in promoting Mexico on a global scale, there would be no significant investment due to the market as a whole, since international players do not have the funds to invest. An interesting phenomenon that we are seeing at the moment is the expansion and progress of small Mexican groups, and right now is the most viable time for these companies to invest since the projects are relatively inexpensive.
Exclusive interview with Laura Díaz, Partner at DBR Abogados.
This is an exclusive preview of the 2016 edition of Mexico Mining Review. If you want to get all the information, plus other relevant insights regarding this industry, get your copy here.