The Critical Nature of Social Licence in the Extractive Industry in Mexico

Introduction

In Latin America, the development of the concept of social licence – the idea that the community that will be affected by a project has a say in it – is nuanced and intrinsically tied to the social and political developments of the region and each particular country.

This chapter will begin with a brief historical overview of how the concept of social licence developed in Latin America (with a focus on Mexico), to properly frame the rise of social licence in the region. It then briefly expounds on how social licence works in Mexico and its regulatory and non-regulatory foundations, outlining its importance and presenting a few public case studies of projects that failed to properly engage with their relevant stakeholders, and the resulting consequences.

Finally, Mexico being a country with a substantial indigenous population, the chapter delves into the safeguards that have been enacted to protect indigenous communities’ rights to consultation, and will conclude by exploring the results of landmark litigation cases involving the mining industry that have been brought before Mexico’s Supreme Court of Justice.

A brief history of civil society and social licence in Mexico

From autocracy to democracy

After reaching independence in the nineteenth century from colonial powers, Latin American history in the twentieth century was rife with military coups, dictatorships and other forms of autocratic government, which by definition are characterised by centralised decision-making with little room for dissent or opposition, either from established political parties or civil society (which at the time was close to non-existent).

This meant that the planning, execution and operation of projects, ranging from hydroelectric power plants to oil fields and mining endeavours, were undertaken by the central government or government-sanctioned private contractors. Any opposition by surrounding communities, if at all, was quickly dealt with and supressed, without much regard to human rights or due process.

Mexico has been no exception to this history.

After the Mexican revolution (1910–1921), Mexico was autocratically governed by a single political party for 70 years, which adopted a centralised planning system.

This meant that, until the final quarter of the twentieth century, there was no political opposition or civil society base strong enough to counter or dispute the decisions and projects that were dictated by the central government,^[2] which steamrolled any infrastructure project into development, without providing much space to opposing voices to protect their interests or express concerns.

In this context, the conditions that allow a concept such as ‘social licence’ to flourish were simply not present for the better part of the twentieth century in Mexico (or, for that matter, in most of Latin America).

The rise of civil society, 1985–2000

While explaining the reasons that made the democratic wave possible in Mexico and Latin America far exceeds the scope of this chapter, suffice it to say that, by the end of the twentieth century, conditions were ripe for a vocal civil society, emboldened enough to protest in the streets and seek structural changes to what previously had only been a formalistic democracy.

It was in the time frame spanning from 1985 to 2000 that Mexican civil society reached the critical mass and maturity required to articulate and defend societal needs, and to build the institutions required to serve as a bulwark against government overreach.

These institutions – such as a strong and independent judiciary – have served to protect citizens’ rights to participate and oppose the decisions (whether laws, policies or projects) that may unduly violate their civil liberties and constitutional guarantees.

Indeed, the currently healthy and active civil society, comprised of, among other things, indigenous communities, non-governmental organisations, associations of neighbours, entrepreneurial chambers, think tanks and universities, is very much engaged in governance and vocal in expressing their views. They do not hesitate to use the courts when the need arises.

It is in this context that social licence has come to be an essential part of project development in Mexico, with more and more cases of projects that have ground to a halt (even when all regulatory and permitting requirements have been met), because the sponsors have not been diligent enough to map out and engage with the stakeholders that they need to coexist with.

Social licence in Mexico

In the past three decades, the concept of social licence has evolved from an informal, civil society-driven movement, to being increasingly recognised in statutory laws and regulations.

Indeed, while in the period spanning from the 1930s to the 1980s social opposition to projects seldom arose and, when it did arise, was quickly shut down (either by co-option or by coercion), as civil society gained strength and momentum, Mexico witnessed the birth of the social licence movement.

From the late 1980s onwards, community-based movements started to gain traction, often snowballing into massive social opposition, particularly after the press and other media outlets picked up on the somewhat unfamiliar stories of groups of people standing up against government development plans or predatory projects, something that was heretofore unheard of.

This slow trickle of activists and groups opposing projects started to grow into a wave with the advent of the internet, mass communication and social media, which brought together previously disorganised and disparate groups to demand protection of their environmental rights, sacred sites or cultural heritage locations, which could be put at risk by project development.

Today, community-based organisations and grassroots groups can become de facto gatekeepers to development in some sensitive areas, and their opposition can mean that a project will be stopped at the onset, even if all regulatory and financing requirements have been met by a project sponsor.

In this context, social licence in Mexico has come to mean much more than fulfilling a legal obligation – it has come to mean taking a proactive approach to identify and engage with all relevant stakeholders, understand their concerns with regard to the specific project and address their issues of contention, in order to bring them on board or find consensus to manage and reduce social risk and opposition to the project. And rightly so, as the last 30 years have seen their fair share of projects from all sectors being shut down before they are even really started.

For instance, in 1995, a Jack Nicklaus-sponsored golf course development was stopped in Tepoztlán,^[3] a small town an hour away from Mexico City, due to strong opposition from native residents and a pervasive NIMBY (‘not in my backyard’) attitude among weekend homeowners.

In 2012, a Canadian mining company intended to extract gold from a site in the state of San Luis Potosí. The proposed location, however, was a sacred site for the Wixarika (Huichol) indigenous people, who started a grassroots movement to prevent this land from being developed. This movement soon became a national hot button issue, and the mining concessions of the company were revoked.^[4]

In the same year, a US$2 billion dollar tourism project, intended to be developed in proximity to the Cabo Pulmo natural protected area, was publicly cancelled by the Mexican president, following the outcry and pressure leveled by a federation of environmental NGOs, think tanks and universities.^[5] Different, smaller-scale iterations of this project have also been shut down.

More recently, in 2020, a public conflict between a transnational brewing company and the Mexican government meant the cancellation of a nearly finished beer factory in the city of Mexicali, Baja California.^[6] This stemmed from a community-based movement, due the alleged lack of water in a desert town.

It is worth noting that not only private projects have been halted by social movements, but also government-sponsored ones. In 2003, the La Parota dam, intended to feed a future hydroelectric power plant, was stopped by opposition from local communities in the state of Guerrero.^[7] Likewise, in 2016, the development of the Tajamar tourism project, sponsored by the Mexican government, was stopped after national opposition and successful litigation from Mexican environmental groups.^[8] More recently, Greenpeace, Mexico’s Center for Environmental Law and the Strategic Litigation Council successfully halted the current administration’s efforts to backtrack Mexico’s energy reform, which would have resulted, among other things, in an increase of fossil-based power generation.

All these examples are indicative of the need to take social licensing seriously, as this may be the difference between a successful project and an ‘also ran’.

In the authors’ opinion, the most crucial moment to engage in proper stakeholder mapping and engagement is at the site selection and project design stage, since this means identifying and addressing problems before they arise. In fact, in some cases, opposition stems from a lack of information or negative perception rather than the facts.

Considering that addressing societal concerns over a project is a fact that most sponsors (private or governmental) must face, the Mexican government has started to enact legislation intended to regulate the social impacts and societal engagement of a project, particularly in the energy sector.

Social impact assessment of project development in Mexico

Obtaining a social licence to operate in Mexico has historically been limited to the absence of stern societal opposition to a project, which is then interpreted as de facto community approval.

However, with the approval of the energy reform in 2013, the Mexican government included, as a social safeguard, the requirement to undertake a social impact assessment (EvIS) as a condition to obtain permits under the Hydrocarbons Law and the Electric Industry Law.

The EvIS is a study filed before the Ministry of Energy (SENER), which contains the identification of the communities located in the area of influence of the project, assessing probable social impacts to the population and outlining mitigation measures and social management plans to address such impacts.

After evaluation of the EvIS, SENER will issue a resolution establishing observations and recommendations in connection with the impacts, which must be complied with by implementing certain actions or social programmes during the life of the project.

Furthermore, if the EvIS detects the presence of indigenous communities that may be affected by the project, an indigenous consultation will be required.

Indigenous consultation and prior informed consent

As is the case for many countries in Latin America, Mexico has a pluricultural composition, originally based on its indigenous communities that descend from populations that inhabited the current territory of the country prior to colonisation, and that have preserved their own social, economic, cultural and political institutions.

Paradoxically, this reality was not recognised in Mexico’s legal system until 2001, when Article 2 of the Mexican Constitution was amended to include the rights to self-determination and cultural autonomy of its indigenous population.

Pursuant to the statistics gathered by the National Institute of Statistics and Geography^[9] after the 2020 census, 23.2 million people of three or more years of age self-identified as indigenous, which is approximately 19.4 per cent of the total national population in that age range and 18.4 per cent of the total national population^[10].

The 2020 Census also identified that 7,364,645 people of three or more years of age speak the native language of an indigenous group, which is equivalent to 6.1 per cent of the total national population in that age range.

The states with the largest percentage of native indigenous speaking people are:

• Oaxaca (31.2 per cent);
• Chiapas (28.2 per cent);
• Yucatán (23.7 per cent); and
• Guerrero (15.5 per cent).

These states represent 50.5 per cent of the total native indigenous speaking population in the country.

Indigenous communities have been historically marginalised with respect to economic, political, social and cultural development in Mexico; however, a number of non-governmental organisations, civil society organisations and community-based groups have been created to defend the rights of indigenous people as well as other vulnerable social groups.

These efforts have triggered the creation of regulatory frameworks that socially participate in general, and secure the consent of indigenous communities in particular, as a mandatory requirement for the development of various types of projects in Mexico, particularly – as mentioned above – in the energy sector.

In 2021, the General Law for Sustainable Forestry Development was amended to include the obligation to consult with indigenous or Afro-Mexican people as a requirement to obtain authorisation to remove forest vegetation. If consent is not obtained then the vegetation removal may not be authorised by the Federal Environmental Ministry.

Furthermore, Mexico is party to the Indigenous and Tribal Peoples Convention (No. 169) of the International Labor Organization^[11] (the ILO Convention), which also provides the obligation to obtain the prior and informed consent of indigenous communities when a legislative, public policy or administrative decision could affect them.

As will be addressed in the section below, the ILO Convention has been a crucial instrument in judicial decisions regarding the validity of mining concessions granted without a prior indigenous consultation seeking the communities’ prior informed consent.

Case study on the importance of indigenous consultation for mining projects

A recent ruling^[12] issued by the Supreme Court of Justice of Mexico (the Supreme Court) that will serve as an important precedent for the future implementation of a regulation on matters of social licence in Mexico, is Injunction in Review 134/2021. This landmark case was decided on 16 February 2022.

The Náhua community of Tecoltemi, filed an injunction (amparo) complaint challenging some provisions of the Mining Law, and the issuance of certain mining concession titles, with respect to land located in the state of Puebla.

The plaintiffs mainly contended that the Ministry of Economy’s failure to consult their indigenous community prior to the issuance of the concession titles was a clear violation of Article 2 of the Mexican Constitution and Articles 6 and 15 of the ILO Convention, which compel the Mexican government to consult with indigenous communities whenever any administrative or legislative action may directly affect them.

The community also argued that the Mining Law was unconstitutional because it fails to recognise the right of communities to an indigenous consultation prior to the issuance of mining concessions. The argument is based on the fact that the Mining Law was enacted after Mexico had ratified the 169 ILO Convention and, therefore, contravenes this international agreement. It is worth noting that the Mexican Constitution and international agreements ratified by Mexico are considered the supreme law of the Union.

The Supreme Court held that the Mining Law’s failure to establish the obligation to consult the indigenous communities did not violate the plaintiff’s rights, because such obligation is already foreseen by the Mexican Constitution and the ILO Convention. Thus, the Mexican authorities are compelled to undertake a consultation whenever the interests and rights of the indigenous communities may be affected regardless of the ommission from the Mining Law of a specific reference to such obligation. The issue that was not resolved is whether the Mining Law itself should be subject to consultation with indigenous communities before enactment.

Consequently, the Supreme Court held that both the Mexican Constitution and the ILO Convention enshrine the indigenous communities’ right to a prior, free and informed consultation, as well as the government’s obligation to guarantee and enforce such right whenever legislative or administrative measures may affect such communities. The ruling grants the injunction to the community and orders that the concession titles be deemed void, ordering the Ministry of Economy to conduct an indigenous consultation. Once the consultation is completed, the Ministry of Economy must analyse if new mining concessions can be granted.

The Supreme Court ruled that the consultation must:

• be performed before the issuance of the mining concession titles;
• be prior, free, informed, culturally adequate and in good faith, pursuant to the requirements set forth in the Mexican Constitution and applicable international conventions ratified by Mexico; and
• be performed with the economic resources that the Ministry of Economy allocates for that purpose.

Pursuant to constitutional and federal statutory law, cases decided by a majority vote of at least four ministers of the Supreme Court are binding on all of the jurisdictional bodies (i.e., courts of law exercising judiciary duties) in Mexico, which applies to this ruling.

Consequently, the core holding and legal reasoning of the ruling is binding and applicable to all analogous factual disputes that may be brought before a court in Mexico. Yet, this binding precedent is not legally binding for administrative authorities and, therefore, the ruling will not directly (and automatically) obligate the Ministry of Economy to undertake a consultation with indigenous communities prior to the issuance of a mining concession title.

However, any mining concessions issued prior to or without indigenous consultation will be vulnerable to being challenged by any member of the affected community, knowing that the final ruling that is dictated by the judiciary will need to follow this Supreme Court ruling and thus oblige the Ministry of Economy to abide by the ILO Convention.

The practical effect could be that a court of law may declare a mining concession title issued by the Ministry of Economy void and null, in the absence of an indigenous consultation if it is determined one should have been undertaken.

Lastly, the Supreme Court’s ruling sets a landmark precedent on this matter because it compels the government to undertake and guarantee consultation with indigenous communities prior to the issuance of mining concession titles, notwithstanding the Mining Law’s absence of an express regulation to that effect, through the creation of binding case law.

Conclusions

Due to the ruling issued by the Supreme Court regarding the need to perform indigenous community consultation for mining projects, and new regulatory frameworks that involve social participation mechanisms for the development of projects in Mexico, we believe that the government will move, in the near future, to regulate ‘social licence’ in some form of statutory law.

In addition to this, the constant opposition to projects in certain industry sectors has created great political pressure for the government to continue with this process of secondary regulation. In the context of social and indigenous consultations, it is only a matter of time for the engagement with affected groups to be mandatory for the development of most projects in Mexico.

For example, at a local level, public consultations are now mandatory for projects that may impact the urban setting where they will be developed. These consultations seek to obtain the opinion of and consent from the neighbours that will be affected by the projects, albeit (to date) obtaining such consent is not a prerequisite for the project in question to move forward.

At a federal level, on 21 April 2021, the House of Representatives (the lower house in Mexico’s Congress) approved a bill regulating the consultation of indigenous and Afro-Mexican peoples and communities. This bill is still under discussion at the Senate, with no clear date on when it will be discussed and voted.

If passed, this law will regulate the prior, free, informed, culturally adequate and good faith consultation process of indigenous peoples and communities, for those administrative and legislative acts that may have an impact on them.

In any case, engaging with the communities that will be affected by a project and having them on board, is not only a good corporate citizen practice, but also a material issue in the business plan of any company, since having the best project on paper serves no one if it cannot be developed due to deficient social rapport.

Footnotes