Thursday, Jun 08, 2023

Chile’s plan for state control in lithium dismays business

Chile’s plan for state control in lithium dismays business

The Chilean government’s newly announced plan to have the state take a majority stake in the lithium industry disconcerted business leaders, though analysts cautioned that the proposal appears to try to strike a middle ground between competing interests.

President Gabriel Boric announced in a national broadcast Thursday night that private companies will have to partner with the government in exploiting Chile’s lithium, a metal used to make rechargeable batteries.

Chile's President Gabriel Boric speaks during an event to present the National Lithium Strategy in Antofagasta, Chile, on April 21, 2023.

Boric said the state would take a controlling interest in each partnership, leading some to call it a nationalization of the industry, while others disagreed.

“Phrasing it as nationalization is too strong … it’s a quasi-nationalization in that the playing field will now be leveled in favor of the state,” said Nicolás Saldías, senior analyst at the Economist Intelligence Unit for Latin America and the Caribbean. “There is no level playing field for the private sector in Chile.”

Chile is the second largest producer of lithium and holds the world’s third largest reserves of the metal. Demand for lithium is expected to soar amid the transition to renewable energy around the world and the growth in electric vehicles that are powered by lithium batteries.

The South American country has recently been losing ground to others in the race to exploit the metal so there was much anticipation over what Boric, a leftist, would announce as the country’s strategy for the industry.

“There were no great surprises, which doesn’t mean that it isn’t a very important change in the model,” said Mariano Machado, principal analyst for the
Americas at Verisk Maplecroft, a global risk intelligence firm.

Aerial view of brine ponds and processing areas of the lithium mine of the Chilean company SQM (Sociedad Quimica Minera) in the Atacama Desert, Calama, Chile.

Under the plan, all companies wanting to work in Chile’s lithium sector will have to take on the yet-to-be created National Lithium Company as a partner and the “state will have control,” Boric said Thursday. Existing contracts will be honored, but Boric expressed optimism they could find a way to boost state participation in their operations before they expire.

“It’s not a theft of the concessions, it’s a changing of the rules rather than abruptly breaking them,” said Emily Hersh, CEO of Luna Lithium, a lithium exploration company with projects in the Americas.

Two companies currently mine lithium in Chile, Albemarle Corp. of the United States and local company SQM with concessions set to expire in 2043 and 2030, respectively. Shares in the two companies plunged Friday following Boric’s announcement.

Creation of the new company would require approval from Congress, which has already shot down several of Boric’s key initiatives.

Until then, two other state-owned companies, Codelco, the world’s largest copper producer, and state mining company Enami will figure out how the private-public partnerships will operate.

Chile’s president traveled Friday to Antofagasta, some 1,300 kilometers (800 miles) from the Chilean capital to deliver more details about his proposal to local authorities.

“We’re calling for a dialogue and participation process to gather visions and knowledge regarding the new governance of lithium and salt flats,” Boric said.

Chile's President Gabriel Boric is shown lithium samples and applications while visiting Universidad de Antofagasta venue on April 21, 2023.

But Chile’s business sector expressed concern.

“We were quite disconcerted” by Boric’s announcement, said Ricardo Mewes, head of the Confederation of Production and Trade, an association that represents Chile’s business community.

Mewes said business leaders had expected there would be a “great private sector participation” in the lithium sector and now the “state will be the one that will control” the industry.

Several analysts said those concerns may go too far.

Saldías, at the Economist Intelligence Unit, said the proposal “actually provides the private sector more opportunity than the existing framework because … there would be more ability to partake in projects than currently exists.”

He cautioned, though, that environmental restrictions on the way lithium is produced and the push for more consultation with local communities could lead to “an increase in the costs of doing business” in Chile.

Machado at Verisk Maplecroft said that “Chile appears to have gone for a model that is in the middle in which the state has the upper hand, given that it’s a resource that is considered strategic.”

That is a different model from neighboring Bolivia, in which the state has full control of the sector, and Argentina, in which the state simply grants concessions for companies to operate.

An aerial view shows the brine pools and processing areas of the Soquimich (SQM) lithium mine on the Atacama salt flat in the Atacama desert of northern Chile on January 10, 2013.

Finance Minister Mario Marcel called for calm in the business community. He said that under the plan, private companies will contribute capital, technological knowledge and experience, while the state provides ”financing” and at the same time safeguards environmental conditions of the salt flats and the “relationship with the Indigenous peoples” of the affected area.

It remains unclear whether the government would contribute capital in direct proportion to its ownership stake.

Boric also said the government will go beyond just being involved in mining lithium, saying it will promote the development of lithium products with added value as it strives to become the world’s leading lithium producer.

Boric’s plan is in line with the “direction that the world is going,” said Hersh at Luna Lithium.

“The push to have more added value where minerals are produced and to have a grater share of revenues from the mining activities are understandable long term trends,” she said.

For Hersh the real concern isn’t necessarily Chile, a country with a robust mining industry and existing lithium production. She worries about what message this sends to others in the region that are trying to build up nascent industries, considering Mexico already nationalized its lithium sector.

“You kind of have a rush to the party, you can’t be seen as the uncool president who isn’t doing it,” Hersh said.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.

Related Articles

US and European Intelligence Agencies Uncover Evidence of Ukrainian Role in Terror Attack on Nord Stream Pipeline
Nvidia Joins Tech Giants as First Chipmaker to Reach $1 Trillion Valuation
Drone Attack on Moscow's Wealthiest Neighborhoods Suspected to be Launched by Ukraine
UK Prime Minister Rishi Sunak to Hold Power Talks with President Biden in Washington
AI ‘extinction’ should be same priority as nuclear war – experts
Prominent Hacker Forum RaidForums Suffers Substantial Data Breach
Nvidia CEO Huang says firms, individuals without AI expertise will be left behind
WPP Revolutionizes Advertising with NVIDIA's AI Powerhouse
Two US Employees Fired For Chasing Robbers Out Of Store As They Broke ''Company Policy''
If you donated to BLM, you got played
Pfizer, the EU, and disappearing ink - Smoke, Mirrors, and the Billion-Dose Pfizer Vaccine Deal: EU's 'Open Secret
Actor Tom Hanks told Harvard University graduates to be superheroes in their defense of truth and American ideals, and to resist those who twist the truth for their own gain
The Sussexes' Royal Rebound: Could Harry and Meghan Markle Return to the UK?
A provocative study suggests: Left-Wing Extremism and its Unsettling Connection to Psychopathy and Narcissism
France Arrests 10 on Suspicion of Failing to Respond in Time to Migrant Drowning
Neuralink Receives FDA Approval for First-in-Human Clinical Study
Saudi Arabia and Canada Restore Diplomatic Relations
Bernard Arnault Loses $11.2 Billion in One Day as Investors Fear Slowdown in US Growth Will Reduce Demand for Luxury Products
Russian’s Wagner Group leader: “I am not a chef, I am a butcher. Russia is in danger of a revolution like in 1917.”
TikTok Sues Montana Over Law Banning the App
Ron DeSantis Jumps Into 2024 Presidential Race, Setting Up Showdown With Trump
Last Walmart in North Portland Closing Down
Florida's DeSantis seeks to disqualify judge in Disney case
Talks between US House Republicans and President Biden's Democratic administration on raising the federal government's $31.4tn debt ceiling have paused
Disney has canceled plans to build a new campus in Florida worth almost $1 billion
Biden Administration Eyeing High-Profile Visits to China: The Biden Administration is heating things up by looking into setting up a series of top-level visits to Beijing by top officials in the coming months
New evidence in special counsel probe may undercut Trump’s claim documents he took were automatically declassified
A French court of appeals confirmed former President Nicolas Sarkozy's three-year jail term for corruption and influence peddling
Debt Ceiling Crises Have Unleashed Political Chaos
Weibao Wang, a former software engineer at Apple, was charged with stealing trade secrets related to autonomous systems, including self-driving cars
Mobile phone giant Vodafone to cut 11,000 jobs globally over three years as new boss says its performance not good enough
Elon Musk compares George Soros to Magneto, the supervillain from the Marvel Comics series.
Warren Buffett Sells TSMC Shares Over Concerns About Taiwan's Stability
New Study Finds That Secondary Bacterial Pneumonia Is a Major Cause of Death in COVID-19 Patients Who Require Ventilator Assistance
King Charles III being crowned.
'Godfather Of AI' Geoffrey Hinton Quits Google To Warn Of The Tech's Dangers
A Real woman
Vermont Man Charged with Stalking After Secretly Tracking Woman with Apple AirTag
Elon Musk Statements About Tesla Autopilot Could Be 'Deepfakes,' Lawyers Claim. Judge Evette Pennypacker Does Not Understand How Far and Advanced This Technology Became
Ukraine More Prepared for Counterattack as Reinforcements Arrive
UK Prime Minister Rishi Sunak and Italian Prime Minister Giorgia Meloni Discuss Migration, Defence, and Ukraine
Tucker Carlson is back, soon!
AT&T's Successful Test of Satellite-Based Phone Call Raises Possibility of Widespread Coverage
CNN: "Joe Biden is asking for four more years — when 74% of Americans think the country is heading the wrong way“
Turkish President Recep Tayyip Erdogan Cuts Short Live TV Interview Due to Health Issue
US Congresswoman threaten Twitter Files journalist with arrest
Pulitzer Prize-winning journalist Seymour Hersh slams New York Times' pro-government stance and treatment of sources
Enough is enough: it's time to end the war in Ukraine. While Russia may be to blame for starting it, Russia is not the one refusing to stop it
Fox News Settles their case with Dominion Voting Systems for a staggering $787.5 MILLION
The land of the free violence