If polls are to be trusted, Mexico will elect leftist candidate Andrés Manuel López Obrador president today. With some polls putting López Obrador at 54 points, and opposing candidates Ricardo Anaya (PAN) and José Antonio Meade (PRI) trailing behind 30 points, López Obrador will likely win in a landslide. As Latin America´s first liberal candidate to likely take an election in the last 10 years and Mexico’s first likely liberal president since Lazaro Cardenas, many fear that nationalist policies could jeopardize investments. Nevertheless, we believe that investors should be wary of alarmist stories. In this post, we outline what we believe mining operations should expect from a Lopez Obrador Presidency.
Although Lopez Obrador is considered a leftist candidate with socialist ideology, we believe he will adopt a more moderate or centrist government. His campaign has focused on Mexico’s corruption problem. And even though he has rejected investment projects such as Mexico City’s new airport, his concerns seem to be directed towards the project’s viability, its costs and how contracts were awarded, not the airport itself. In a recent press conference, Lopez Obrador’s pick for cabinet chief, Alfonso Romo, stressed that if elected, the candidate would respect all contracts awarded but would review them for irregularities. A similar position was previously stated regarding oil and gas contracts.
Alfonso Romo, who is one of Lopez Obrador’s closest advisors and operator of Latin America’s largest fund manager (Vector Casa de Bolsa), recognized that the MORENA Party has members from both the far right and the far left. And in a recent interview, he stated that “[the party] stands with the right stance, the one that reconciles both points of view”, and that they were “no longer taking radical stances”. In an attempt to appease investors, he recognized that Lopez Obrador’s economic team has met with 450 investment funds during the last 18 months and that the team has taken criticisms and recommendations seriously.
López Obrador’s Proyecto 18 (Project 18), a 400-page document which outlines his campaigns main proposals contains hints suggesting an increase in scrutiny. This is especially true of labor and environmental issues. Among others, the project suggests promoting collective bargaining and regulating unions as means of protecting employees from unlawful business practices. A proposal that is inspired in Uruguay’s experience between 2005 and 2013.
The project also suggests reviving workplace inspections, which have been reduced to a minimum in recent years. The use of industry-specific inspection protocols, as well as the use of technology and coordination with other government agencies such as Social Security (IMSS) and the Mexican Tax Administration (SAT), have been suggested. All of these policies would require investment in personnel and infrastructure, so changes will likely take some time to come into effect.
The project also seems to place a high priority on the conservation of natural resources and land. Among others, the project proposes changes to current law to meet international standards. Additionally, it suggests increasing the country’s protected areas and budget increases to enforce protection. Mining and exploration of protected areas will likely be restricted. A proposal for a national program for the management of residual waste is suggested.
López Obrador has referred to mining operations sparingly. References to mining are few and far between in Proyecto 18 as well. The press recently covered the candidate’s quarrels with Grupo Mexico’s German Larrea. Yet, the war of words seems to be of a political nature, not from disagreements in policy issues that would affect the mining industry in general. It is unclear from the campaign or the project, what the candidate’s stance on the matter is.
Proyecto 18 touches mining briefly, suggesting general changes to the country’s mining law. Two action points stand out: the inclusion of social and environmental impact studies on mining projects, and the protection of indigenous communities’ rights over their lands. The latter touches a subject that has been on the radar of NGO’s for some time now, and that has spurred a series of legal actions on behalf of unrecognized indigenous communities claims to land. In a previous post, we recalled that Mexico recognizes 68 different indigenous groups and about 3 thousand different communities, yet many more are still unrecognized. The suggested legal reform might mean the duty to consult and accommodate with aboriginal people, as international treaties require, may become part of the law.
Although considered a liberal candidate, Lopez Obrador’s team has embraced people and groups from both conservative and liberal backgrounds. During his campaign, he has expressed his interest in working together with all groups of people. Additionally, his team has gone out of the way to show investors that they want to work with them, not against them. This leads us to believe that Lopez Obrador will adopt a more moderate or centrist government.
It is unclear from the candidate’s proposals what his stance is on the multiple issues that affect mining operations. Nonetheless, from his interviews, speeches, and proposals, we expect an increase in scrutiny, especially regarding employees and the environment. In a recent visit to the state of Chihuahua, Lopez Obrador touched the subject of a mining accident that left 3 dead and several missing. “If elected”, he said, he would “keep a close eye on mining operations”. And added that “mines must do four things: protect the environment, pay fair wages, pay taxes, and benefit local communities.” These four statements, if fairly vague, sum up his policy.