Young activists rewrite the rules of mining in Chile

Environmental activists like Constanza San Juan have been, at best, minor figures in Chile’s emergence as the dominant copper supplier in recent decades. Now she and others like her are rewriting the rules, with tens of billions of dollars in investments depending on the outcome.

The 35-year-old, who has been fighting mining since Barrick Gold Corp. arrived in her region two decades ago, is part of a commission that will decide how the environment and natural resources will figure in a new Constitution that will replace the dating from the dictatorship of Augusto Pinochet.

We have to completely change the extractivist model for one that is in harmony with nature, San Juan said in an interview, promising not to meet with pressure groups during the process. He added that changes must be made in the spirit of what started this entire movement to transform Chile. Mining has brought nothing but poverty, he emphasizes.

Discussions will kick off early next year, and members are likely to be emboldened by Sunday’s election of the most left-wing president since Salvador Allende.

The proposals range from setting time limits for concessions to a total ban on mines under some conditions. The copper industry is pushing hard to maintain the indefinite concessions model, which it says is critical to long-term planning that underpins investments.

The stakes are high. The Chilean government has a total of almost US $ 70,000 million in possible mining projects for this decade. Part of that amount will depend on the outcome of the new Constitution and whether it is ratified in a plebiscite. Thus, the document will help determine how much of the world’s largest copper and lithium reserves will be exploited in the coming years to meet the growing global demand in the transition away from fossil fuels.

Until the issue of legal security and any new regulations are clarified, there will not be large investments, according to Diego Hernandez, president of the National Mining Society (Sonami) From Chile.

Commission members

A quick look at the composition of the commission – and the 155 members of the constituent convention – explains the fears of the sector. In a process born out of the protests that erupted two years ago, about three-quarters are from the left or social and environmental activists of some kind. That means conservatives who advocate continued investor-friendly rules are in the clear minority.

For example, there are Juan José Martín, 26-year-old independent, co-founder of a youth sustainability organization; Camila Zárate, 29, an environmental lawyer who defends water rights; and San Juan, which considers sustainable mining to be a contradiction in terms and calls for a ban on all mines near water sources, including glaciers and salt flats that host much of the world’s lithium reserves.

The views of San Juan were forged by the frustrated attempt to Barrick to develop a gigantic open-pit mine at the top of its valley. Construction was halted in 2013 amid environmental violations that led to fines and lawsuits. “Technology allows mining companies to reach the glaciers and we are not going to allow it because 70% of the country’s water comes from there“, He said.

Electoral result

Mining companies are more at risk with the constitutional reform than with the victory of the leftist Gabriel Boric in the presidential elections, according to Hernández. Although companies probably would have fared better with their conservative opponent and supporter of lowering taxes, José Antonio Kast, an evenly divided Congress limits the likelihood of any radical politics.

The copper industry, which accounted for more than half of the exports of Chile last year and 11% of GDP, it is responding to mounting pressure to find cleaner ways to operate. Producers have also been willing to pay higher taxes for social spending, as well as adhere to stricter exploration rules. But the industry says sticking to the indefinite concession model is crucial for planning.

No company estimates its cash flow looking at four years, according to BTG analyst Pactual Cesar Perez-Novoa. He explains that, in the worst case, it is a horizon of 15 years and in the best, 30 to 50. The important thing is the Constitution, not the president, he added.

The sector is encouraged by the composition of Congress, not only because it is willing to moderate policy, but also because it suggests that the electorate might not approve a radical constitutional reform. Even activist San Juan, speaking before Sunday’s presidential election, indicated that the euphoria over change that existed when the convention was elected may have subsided somewhat.

Hernández, former president of Codelco and Antofagasta Plc., he is also betting on people recognizing that mining will have to play an important role in keeping the economy going after the shock of the pandemic stimulus wears off.

Even so, the main mining companies, such as Freeport-McMoRan Inc. Y Lundin Mining Corp., have said they will give the green light to new investments in Chile until the policy and regulatory environment is clarified.