Chile’s world-leading copper industry will see investment lag for at least two years as the country rewrites a constitution that underpinned nearly three decades of mining growth in the South American nation.
“Hardly a project of a very large magnitude will be carried out in the next two years until there is clarity around the new constitution,” Diego Hernández, president of Chile’s National Mining Society (Sonami), said. “And I don’t think it is necessary given supply-demand and the market at the moment.”
Chileans last month voted overwhelmingly in favor of scrapping the country’s dictatorship-era constitution, but the process of drafting a new one is expected to extend through 2022.
Several issues on the table could impact mining, from indigenous and collective bargaining rights to baseline rules that govern mining rights, environmental protections and worker benefits.
But Hernández, a former top mining executive, said the process was not “open season” for changes. Sonami, a trade group, represents mining firms including BHP, Anglo-American and Antofagasta.
“Any arbitrary decision that Chile makes against foreign investment, against any (standing) commitment, will be very expensive decisions,” he said, adding that extreme amendments to the new charter should be avoided because a two-thirds vote by the 155-member constitutional convention would be needed to approve it.
“If two-thirds wanted a radical change, it would have to be respected, but I do not think that is the case.”
The timing of the constitutional rewrite coincides with a global lag in demand brought on by the coronavirus pandemic that will also weigh on investors’ decisions, Hernández said, a one-two punch that is likely to put the brakes on new projects and proposals in Chile for an extended period.
Hernandez said clear rules around mining property and rights - seen as critical to the development of Chile’s metals industry - must be maintained in the new constitution if the country is to maintain its world-leading position.
He added that top miners recognized that some changes were necessary to meet the demands of the people, but mining itself - the country’s top economic driver and a major source of government tax income - must be protected.