The government of Gabriel Boric, which is seeking funds for its ambitious social programs in Chile, has formulated a new mining policy that generates special interest in the future of lithium, also called white gold, vital in the transition to clean energy.
Chile has increased taxes on copper exploration, the metal of which it is the world’s largest producer, and wants the State to play a leading role in the extraction of lithium, of which it is the second largest global producer.
– What does the new mining policy foresee? –
In late April, Boric announced the National Lithium Strategy, as the world seeks to move away from fossil fuels due to the climate crisis. This metal is essential for the manufacture of electric vehicle batteries.
The relevant feature of the new policy “is a more important role for the state,” the executive director of the consultancy Plusmining, Juan Carlos Guajardo, told AFP.
The plan provides for a public-private alliance, with the State present throughout the production chain, through a future National Lithium Company.
Currently, two private companies, the Chilean SQM and the American Albemarle, extract the mineral from the Atacama salt flat, 1,700 km north of Santiago, under concessions that expire in 2030 and 2043, respectively.
The government has not yet defined the terms of the next contracts.
However, “many companies and international investors have already expressed their interest in working with us”, said Boric.
– Why the interest in lithium? –
In the face of voracious demand, the price of this metal soared 400% in 2022. Chilean exports went from 1.233 billion dollars (about R$ 6 billion, at current exchange rates) in 2021 to 8 billion (R$ 39 billion) in 2022, according to the Central Bank.
Last year, lithium accounted for 3% of GDP and was the second product that most provided foreign currency to the economy after copper derivatives.
Although it has strayed from the path of nationalization, the government’s new strategy is greeted with caution.
“This change of direction has a strong ideological conception, and this, unfortunately, affected the pragmatism that is necessary for some decisions in this matter”, comments the analyst Guajardo.
Chile, which under the dictatorship of Augusto Pinochet declared lithium of “nuclear interest” for its use in the manufacture of hydrogen bombs, produces 34% of the “white gold” in the world, surpassed only by Australia. It is estimated that the South American country has 36% of the world’s reserves.
In the middle of the commercial race for lithium, an industry that demands billionaire investments, Chile could opt for “much more diligent and faster paths” than those of the State, adds the expert.
– What about copper? –
Boric got the approval of a specific tax increase for large-scale mining, which seeks to raise almost 1.5 billion dollars (R$ 7.3 billion, at current prices).
The government turned to the red metal to fund social programs after its plan to make the rich pay more taxes failed in Congress.
Since the nationalization of the large copper mines in 1971, the extraction and export of the metal has been considered “Chile’s salary”.
With an annual production of 5.3 million tons in 2022, equivalent to 26% of global supply, Chile is the world’s leading copper producer.
In the country, the state-owned Codelco and giants such as the Anglo-Australian BHP and the British Anglo American operate. The production of the red metal represents almost 13% of the national GDP.
– What does the private sector say? –
According to the government, later on, large mining companies (which extract more than 50,000 tons of minerals per year) will have an effective tax burden of 40.1%.
But the private sector calculates that it will be 44.7%, higher than that of direct competitors, such as Canada, Peru, Australia and the United States.
“The obvious effect is a loss of competitiveness,” Joaquín Villarino, president of the Mining Council, which brings together the sector’s large companies, told AFP.
Villarino questions whether this, by any chance, “will have serious effects on the materialization of investments, since the country has a portfolio of projects that exceeds 50 billion dollars [R$ 245,5 bilhões]”.
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