How the constitutional convention is spooking Chile's mining industry

Chile’s mining industry is seriously concerned about measures approved at the commission stage of the constitutional convention tasked with drawing up the country’s new Magna Carta. 

The measures approved, which are due to be voted on in the full convention next week, include:

• “The state has the absolute, exclusive, inalienable and imprescriptible domain of all mines and mineral substances, metallic, non-metallic, deposits of fossil substances and hydrocarbons existing in the national territory, without prejudice to the ownership of the land. The exploration, exploitation and use of these substances will be subject to a regulation that considers their finite, non-renewable nature.”
• “It will correspond to the state to guide the national policy of all mining activity and its productive chain.”
• "Those areas that are defined as protected such as glaciers, permafrost, the Antarctic, anthropogenic peatlands, wetlands and those areas of origin of hydrographic basins where the activity requires the forced relocation of the population or villages, shall be excluded."
• “The state will regulate the impacts and synergistic effects generated in the different stages of mining and its productive chain.”
• “Mining authorizations will be granted on a temporary basis and do not imply ownership. The state and its companies may exploit by themselves the substances… whose resources are considered of national interest. These substances will not be subject to administrative authorizations and must be exploited by state companies.”

One red flag refers to mining property, through which the right of exploration or exploitation of mineral resources would be granted by a state body, leaving out the current model of concessions awarded by courts. 

Furthermore, the proposals that open the door to the nationalization of cooper and lithium is considered a threat to the development and future of Chilean mining, being an activity that requires large sums of investment and whose financial capacity could not be provided by the state. 

According to several experts, the proposals not only put at risk the mining industry, but also mining property, since the current mining concessions would be annulled if the measures are approved.

Sergio Hernández, executive director of mining suppliers association Aprimin, expressed on its website his rejection of what was agreed and questioned the role of the state as the body responsible to supervise mining production. Additionally, he disagreed with some concepts, such as "authorizations” for not being a legal term and which does not guarantee ownership. "No one will want to invest in something that does not even give security to ownership of a mining concession," he said.

The president of Chile’s chamber of mines, Manuel Viera, also expressed concern and made a call to the plenary of the convention through a press release to warn about the negative effects of the initiatives which “could affect not only the future development of mining, but also those who are operating mining today.”

BNamericas spoke with Juanita Galaz, director of consultancy Minería y Medio Ambiente (MYMA). “What was approved is worrying and risky. The members of the convention don’t know about mining,” she said. Galaz recalled that the latest changes to the Chilean mining code were made in February, under President Sebastián Piñera’s government, when mining concession time limits were extended. Those changes were on the right track and modernized the regulatory framework, she said. Instead, today mining projects are “paralyzed.” 

Verónica Baraona del Pedregal, lawyer and former undersecretary of mining and partner of trade association Voces Mineras, posted a video to raise awareness about the issue as well. “The success of mining development in Chile has been due to the concession system we have, which provides legal certainty to investors. Changing the current ownership system and putting everything in the public domain or expropriating the substances could lead to a stagnation of investments. The state is not capable of developing mining alone," she said.

Following the release of a documentary about the nationalization of copper in Chile in the 1960s and 1970s, which premiered on Tuesday, Leopoldo Reyes, chairman of copper study group Cesco, commented that legitimacy in mining must be through a public-private alliance.

ANALYSIS

The mining industry continues to witness regulatory proposals that leave the sustainability of the sector and long-term investments uncertain. The threat of expropriations or the nationalization of mining are growing although the commission’s proposals need a two-thirds majority in the plenary, with a vote scheduled for April 21. After the new constitution is drafted, it will be subject to an exit referendum scheduled for September 4, when voting will be obligatory.

Meanwhile, the mining industry received some relief, as according to a Cadem poll, published last week, mistrust in the constitutional convention is over 50% and among the main reasons are the limited credibility and lack of knowledge of the convention members on the subjects under discussions.

Chile is the world’s largest copper producer and state company Codelco the biggest miner of the red metal.

Photo credit: https://www.mineriachile.cl/