Mexico must adjust mining legislation before modifying the USMCA

Mexico would have to amend its legislation and prioritize a binding agreement with the United States on critical minerals rather than trying to add new chapters to the USMCA, due to the legal and political complexities that reopening the trilateral trade agreement would entail, Santiago Suárez, partner at Servicios Legales Mineros (SLM), told BNamericas, at a time when both countries are seeking to strengthen supply chains for the energy transition.

The specialist pointed out that there are currently “three paradigms” regarding critical minerals in Mexico, starting with the 2022 reform that made lithium a mineral reserved exclusively for the State and left open the possibility of extending that category to other minerals considered strategic.

"They also left a path open there so that other minerals – not critical, but strategic – could become exclusive to the State. So they left the list open," Suárez explained.

To this is added the growing international drive to secure mineral supply chains for the energy transition through memorandums of understanding (MOUs), instruments that, as the SLM partner recalled, are not legally binding under public international law.

"A memorandum, an MOU, is not actually binding on the parties. It does not have the characteristics of an international obligation, much less of a rule of public international law," he indicated.

However, Suárez believes that these instruments are indeed outlining a political and commercial roadmap that could have significant implications for Mexico. Among them, he highlighted that the current international context reduces the likelihood that more critical minerals will become the exclusive domain of the Mexican state.

"For me, the most important thing is that, immediately and implicitly, the possibility that critical minerals could become exclusive to the State as strategic minerals would be ruled out, as a result of everything that is happening," he stated.

The expert maintained that the memorandums signed by the United States with various countries – including the United Kingdom, Australia, Argentina, and Mexico – are part of a global strategy to strengthen critical mineral supply chains and attract investments related to the energy transition.

In his view, to avoid conflicts with the USMCA, the next logical step would be to transform those memorandums into binding bilateral agreements.

"From my perspective, in order to avoid any conflict with the USMCA, it should indeed be turned into a mandatory bilateral agreement. An international bilateral treaty could be signed solely for the corresponding purposes," he stated.

Suárez agreed with the view previously expressed by Mexico’s former technical negotiator for the USMCA, Kenneth Smith, who suggested that these issues would probably move forward along a path parallel to the regional treaty.

"Exactly. And that is probably what Ken Smith was referring to when he said: 'I don't want to get tangled up with the USMCA; better that we consolidate a bilateral international agreement'," he commented.

Legislation requires adjustment

However, he warned that to consolidate an agreement of this kind, Mexico would first have to adapt its domestic legislation, especially regarding lithium.

"As a basic rule of public international law, it cannot be set against your domestic law. So, if under your domestic law lithium is reserved exclusively to the State, then you have to define which minerals are strategic," he explained.

In that regard, he outlined a possible legal and political sequence: first modify Mexican mining legislation, then sign a binding bilateral agreement with the United States, and finally incorporate into the USMCA complementary provisions related, for example, to tariffs or supply chains.

"For me, what has to happen is: first the law is reformed, where that lithium is removed; then a bilateral international agreement is signed in which everything established in the MOU is consolidated in a binding way; and from there, whatever can be included in the USMCA to help consolidate this bilateral treaty is put into the USMCA," he stated.

SLM's partner added that any discussion within the USMCA would also have to consider the role of Canada, given the relevance of its mining industry and its integration into North American supply chains.

"They are different agreements. One thing is the agreement you want to make as a country, Mexico-United States, and another thing is Mexico-United States-Canada," he indicated.

Beyond the legal framework, Suárez warned that Mexico needs to speed up its institutional and regulatory coordination if it wants to align itself with the US strategy for critical minerals.

"The United States today is acting with a great sense of urgency on issues of supply chains, deployment of capital, and permitting. And I see that Mexico is still not matching that speed," he said.

For this reason, he considered it a priority to standardize a common list of critical minerals between both countries and to strengthen inter-institutional coordination.

"The first thing is to align the laws, to have that inter-institutional coordination and then define how the agreements are actually consolidated," he concluded.

(The original version of this content was written in Spanish)