Chile's constituent assembly, charged with drafting the country's new constitution, on Saturday approved an early proposal that opens the door to nationalizing some of the world's largest copper and lithium mines.
The environment committee motion, which met over the weekend for the first time since its establishment as the deadline for closing the proposal, received 13 votes in favour, three against and three abstentions.
The proposal, which focuses on large-scale mining of copper, lithium and gold, has yet to be approved by two-thirds of the general assembly to become part of Chile's new charter, which will be put to a national referendum later this year.
Given that the Chilean state already owns basic mining rights, analysts described the move as a direct attack on private interests and gave the government a year to nationalize the company.
The companies involved in metallic and non-metallic minerals and hydrocarbons may not be compensated for the loss of mining rights. The proposal says the auditor general would determine this based on the company's book value, with a maximum payment period of 30 years.
The text also stipulates that operations and projects started before 1993 must submit for environmental assessments within three years. Concessions in excluded areas, such as near glaciers and on indigenous land, will be withdrawn.
The Environment Council - along with young activists - voted on a first draft of the motion in early February, prompting an immediate backlash, even from the Chilean authorities themselves.
Diego Hernandez, head of the National Mining Association, which represents companies in the industry, describes the idea as "barbaric" and "clearly wrong legally".
The centre-left mining veteran said the measure targeted companies and resources, which would have major economic and legal implications for Chile.
"Given the globalization of the world, I would expect the affected companies to resort to treaties to defend their legitimate interests," Mr. Hernandez said.
Sergio Bitar, a socialist politician who was mining minister in 1973 under the deposed leftist government of Salvador Allende, called the initiative a "mad return to the past."
Chile passed a law in 1967 requiring companies to be at least 51 percent owned by citizens. Four years later, the state bought the remaining 49 percent and the company was fully nationalized.
"I remember all the problems we had trying to sell copper outside of the commercial circle, and I remember when Congress voted not to pay the company any compensation for loss of assets and profits, and that's what I'm listening to right now," Bitar said in an interview with MercoPress.
"There is one thing that is dream, wishful thinking," the veteran politician said. "The other is reality, which shows how dependent Chile is on global powers (...). For example, China now buys a third of Chile's copper, so what is our strategy for nationalised mining companies? Reduced exports?" "He pointed out.
Higher royalties
Chile, the world's biggest copper producer and host to two of its biggest lithium miners, is in the process of amending its constitution to replace the market-centred one, which dates back to the military dictatorship of General Augusto Pinochet.
The country produced 5.6 million tons of copper in 2021, about 25 percent of the world's total, and has nearly 70 billion in potential mining projects this decade, most of which will never materialize if the country nationalizes its resources.
Politicians in the world's largest copper producer are also fine-tuning a new mining royalty bill that would raise tariffs on companies based on gross sales and profitability.
In its latest report, FTI said: "We estimate that if the new tax is approved, Chilean copper miners could see their tax rate rise to 80 per cent and profit margins fall by more than 50 per cent at current copper prices."
Analysts believe that while outright nationalisation, as proposed, is unlikely, the chances of a radical new royalty regime are far greater. It could "push the Chilean tax system into pseudo expropriation territory, especially as prices are likely to remain above 4 a pound, which is a 75 per cent tax rate."
They concluded that Chile could become the country with the highest tax burden on copper mining, forcing companies to re-examine the viability of their current and future investments.
