Chile's lithium industry at risk of creeping corruption – experts

With the increasing importance of income generated by lithium exports, Chile's industry is facing corruption risks that should be tackled with greater transparency in the awarding processes of contracts, tenders and mining concessions, NGOs and others say.

“Despite the progress and efforts of companies and the State, there are gaps that must be filled to contribute to the generation of trust among interested parties and transmit a pattern of responsibility and accountability,” a report focused on lithium tax revenue and published by NGO Natural Resources Governance Institute (NRGI) said.

See the report in the Documents box in the top right corner.

Last year, Chile's lithium exports generated US$7.82bn, 8% of total exports. In 2022, the share was 8.1% and 1.1% in 2021, according to the international economic relations department.

Transparency would be even more important in processes of expressions of interest in which private actors interested in entering the lithium business participate and which are overseen by the mining ministry.

Flavia Liberona, director of environmental and development NGO Terram, told a seminar hosted by NRGI that technical foundations of tenders for special lithium contracts, so-called Ceoles, should be published in order to end favoritism. She also said the foundations for added value, extraction quotas and areas, deadlines, participating companies, and others should be made public.

Chinese electric vehicle producer BYD recently blamed a delay related to its planned US$290mn lithium cathode plant in Antofagasta region on a lack of information, local media reported. The plant is part of value-added initiatives development agency Corfo is promoting.

It is also considered key to expose the contracts signed between Corfo and lithium producers SQM and Albemarle, pertaining to the Salar de Atacama, to avoid corruption linked to tax collection or political influence.

The Corfo-SQM contracts, which were updated in 2018 to increase the extraction quota and add tax benefits, and to include a US$17.5mn payment to the State, should be made transparent.

The negotiations raised doubts, because Corfo was pursuing arbitration against SQM between 2013 and 2018, accusing breach of the initial contract.

On the other hand, SQM's mining properties surrounding the concessions it leases to Corfo are blocking areas the State could put out to tender.

“SQM owns the largest number of properties with 16.2% of the total mining concessions in Chile, approximately 2.7Mha, while Codelco, the largest copper company in the world, has 6% and BHP 3%”, Liberona said, questioning SQM's alleged hoarding.

Pamela Goicovich, president of the International Lithium Chamber, told BNamericas that it is "vital to advance traceability with artificial intelligence so that everyone can upload information simultaneously and see what is happening. Today there is an internal process between the internal revenue service, comptroller, customs and companies that only works within a small margin."

Investors are monitoring ongoing talks between SQM and Codelco to form a public-private partnership that will enable extraction in the Salar de Atacama between 2025 and 2060, but the process has been criticized for its secrecy.

Benjamín García, director of public policy think tank Espacio Público, said at the seminar that a lobby bill in congress, which establishes a public registry of authorities' schedules, could help prevent political capture or a revolving door related to lithium matters.