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AMLO fast-tracks lithium nationalization proposal

Bnamericas Published: Tuesday, April 19, 2022
AMLO fast-tracks lithium nationalization proposal

Mexico’s lower house passed legislation to potentially nationalize lithium, while the opposition largely abstained.

In the 500-seat chamber, 289 lawmakers voted in favor and 193 abstained. The main opposition parties sat out the vote after failing to delay debate, many claiming lack of familiarity with the proposal.

The bill now goes to the senate, which also seems likely to pass the legislation.

President Andrés Manuel López Obrador (AMLO) introduced the proposal as fast-track legislation, using a presidential prerogative to send a limited number of bills directly to the floor, bypassing the normal process involving analysis by committees.

At a press conference Monday, AMLO said, “we are going to protect our lithium, the lithium of Mexico, the lithium of our generation and of future generations, of our children and our grandchildren.” 

He added, “I make a respectful call to the legislators so that ... we protect lithium and lay out the structure for a company, like [state-owned power company] CFE, that will handle everything related to lithium, backed by the support of research facilities in the country and the experience learned from other countries.”

The proposal comes after the lower house rejected Sunday controversial reforms to the electric power sector after more than 15 hours of debate.

In the lower house, 275 representatives voted in favor and 223 against the package, with supporters unable to achieve the two-thirds majority needed to change the constitution.

That proposal contained similar aspects related to lithium as those proposed in the bill.

AMLO said the opposition committed treason by rejecting the reform, adding the parties will not succeed in halting the lithium bill. 

“Now that the two-thirds is no longer required … they won’t be able to put our backs to the wall,” he said. 

THE PROPOSAL 

AMLO approved the draft bill changing Mexico’s mining law on lithium matters last week, with the executive sending the proposal to the lower house Sunday.

In general, the proposal outlaws direct private investment and production in the lithium sector and creates a state-owned entity (SOE) to extract, process, and sell lithium. In the past, this proposed entity was called Litiomex

Specifically, the proposal modifies articles 1, 5, 9 and 10 which have promoted “an economic orientation in favor of large mining companies, both national and transnational corporations, to the detriment of the fundamental rights of Mexicans,” according to the statement of purpose.

Modifications to article 1 mention “the exploration, exploitation and use of lithium will be done by a decentralized public body.”

According to article 5, “the exploration, exploitation and use of lithium is declared to be of public utility, for which no concessions, licenses, contracts, permits, assignments or authorizations will be granted.” 

Lithium deposits would be considered mining reserve areas and lithium be part of the national heritage. 

Lithium value chains will be publicly controlled through the SOE, with the state guaranteeing several rights related to lithium exploitation, including living in a healthy environment and indigenous rights. 

According to reforms to article 9, the national geological service (SGM) would help the SEO with exploration and article 10 would specify that the SEO would operate in line with the president’s preferences.

A separate transitory article establishes that the president must establish a mechanism to create the SEO within 90 business days after the decree takes effect.

TRADE CONCERNS

But the nationalization drive could violate the USMCA treaty with the US and Canada, according to Kenneth Smith Ramos, who headed technical negotiations for the treaty’s predecessor, Nafta.

Smith said declaring lithium a strategic mineral, like certain radioactive minerals, either directly or indirectly as part of the process, would violate the USMCA commitments.

“Lithium cannot be reserved as a strategic mineral exclusively for the state if this particular sector was not already embodied in the treaty as a specific reserve. And it is not,” Smith said earlier this year at a panel on lithium nationalization that was part of the open debate on the electric power reforms.

THE BIGGER PICTURE

Mexico's aspirations to become a global power in the lithium and EV battery industry have hit a number of roadblocks that Monday's win do nothing to resolve.

SGM director Flor de Maria Harp, for example, recently warned that exploring potential deposits will take many years, with no guarantee any will be economically viable.

And hopes of a swift start to lithium production suffered a setback after Bacanora Lithium confirmed a 12-month delay to its US$420mn Sonora project, a JV with China-based Ganfeng Lithium.

Sonora is Mexico’s only large advanced lithium asset. The country is not currently producing the metal.

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