Mexico's Union Head Turned Senator Thinks Mining Firms Should Pay More Tax

(Bloomberg) -- Mexican mining-union leader and newly installed Senator Napoleon Gomez Urrutia is ready to take on companies that he says don’t pay enough taxes, pollute the environment and enjoy concessions he deems are too long. Mining shares tumbled.

An old foe of Grupo Mexico SAB, Gomez Urrutia is reviewing mining concessions in the country and thinks companies in the industry should contribute more to the government income, he said in an interview with Bloomberg News in Mexico City. He expects proposals for the industry to be discussed in the next regular Senate session, which begins in February, and doesn’t have a particular tax rate in mind for the companies.

"Mexico’s mining law was made too flexible, and we’re looking to regulate in accordance with the country’s interests, not those of companies who have benefited for years," Gomez Urrutia said. "We’re looking into terms to cancel a concession, and their lengths, because 50, 100 years is too long."

Gomez Urrutia became a Senator despite controversy around his decision to move to Canada more than a decade ago after being accused of embezzlement. He has denied all allegations against him. At one point, Mexico sought to extradite him from Canada to face trial for allegedly embezzling $55 million from a union trust, but the charges were later thrown out.

AMLO’s Landslide

He was picked for a senate seat as a result of the landslide election victory by President Andres Manuel Lopez Obrador’s Morena party in July and is now the head of the labor committee and a member of the mining committee. His nomination caused some head-scratching and a stir, especially for mining giant German Larrea, the billionaire controller of Grupo Mexico, who spoke out against his candidacy in statements.

Mining shares led declines on Mexico’s benchmark stock index. Grupo Mexico shares fell as much as 2.4 percent to 44 pesos in afternoon trading in Mexico City. Industrias Penoles SAB, another mining company with a large presence in Mexico, tumbled 4.1 percent to 252.06 pesos.

Gomez Urrutia called on the owners of mining companies to "give the government an opportunity to rule, instead of looking to sabotage it, or to create obstacles. If in the end it doesn’t work, then the majority of Mexicans will decide what happens next."

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