The mining industry and Chile's new constitution

By Eugenio Evans E., professor of law at Universidad Católica, partner at Grupo Evans

Since Chile took up the challenge of drafting a new constitution, the mining industry has looked, uneasily, at its future: new regulations associated with property rights, State ownership of mineral resources, potential insecurity of mining concessions granted under current legislation and through court rulings. This, in addition to observing the expectations of many political and social agents regarding taxes on mining companies, specifically, a possible increase in the mining royalty.

In Chile, the regulation of mining is certainly a matter of great importance. The country's economy and growth depend deeply on the copper industry, which has been the main export product and the largest source of income with which the State has financed its social policies for almost a century. It is, for the same reason, an industry specifically mentioned in the current constitution, with the right to property over mining concessions enshrined in it. Giving constitutional status to this right strengthens the legal certainty necessary to justify huge investments aimed at first exploring and then exploiting mineral resources.

The truth is that the development of mining in Chile, the intense and increasingly important role of foreign capital, as well as the enormous investment of these last 40 years, were possible thanks to that robust constitutional and legal statute, whose essential attribute is property rights over mining concessions. All of the above is, however, currently put at risk by discussions, decisions and agreements of the constitutional convention, among which are the weakening of property rights, the proposed nationalization of mining concessions (in itself unconstitutional as it contradicts court rulings) and the establishment of excessive taxes. This, without mentioning the absurd agreements emanating from the fifth committee on the environment, dominated by eco-constituents with extremist views on caring for nature.

It is necessary to emphasize that the current Chilean constitution firmly enshrines the rule of law and is responsible for safeguarding the supremacy of its rules. That is a first fundamental element for those who invest in an industrial sector such as mining, which requires certainty and legal security. But it is also explicit in recognizing and protecting access to ownership of goods, acquired property, equality before the law and non-discrimination in economic matters, all rights that are of substantial relevance to those who see Chile as a place in which it is possible and safe to make huge investments, whose recovery and profitability, almost always, occur a long time afterwards.

In this sense, the future constitution will have the same relevance as the current one: just as the current one has been the key framework for the existence of important economic actors – many of them global – the one being discussed can be the tool that consolidates that presence. Or it can be the one that scares them away to better host countries, those that offer them the certainty and security that the current constitutional text has given them all these years.

This content is the sole responsibility of the author and does not necessarily reflect the opinion of BNamericas. We invite those interested in participating as a guest columnist to submit an article for possible publication. To do so, contact the editor at mining@bnamericas.com