Fabian Cambero

SANTIAGO (Reuters) – Chile’s mining sector is looking for certainty amid political fog in the world’s top producer, which is redrafting its constitution and on Sunday is headed for a polarized vote led by outsider candidates on the far left and right.

The front-runners have kept their powder dry on copper in the campaign https://www.reuters.com/world/americas/chiles-campaign-trail-goes-virtual-all-two-candidates-forced-into-covid-lockdown-2021-11-04 so far, hinting at hikes to royalties on mining profits. There has also been vague talk from far-right poll leader José Antonio Kast to allow more private investment in state miner Codelco.

The Nov. 21 presidential vote, the first since months of angry protests over inequality https://www.reuters.com/article/us-chile-protests-explainer/explainer-chiles-inequality-challenge-what-went-wrong-and-can-it-be-fixed-idUSKBN1X22RK rocked Chile in 2019, has become a polarized battle between a leftist coalition led by 35-year-old protest leader Gabriel Boric https://www.reuters.com/world/americas/chile-leftist-presidential-candidate-boric-tests-positive-covid-19-2021-11-03 and ultraconservative Kast https://www.reuters.com/world/americas/chile-conservative-kast-maintains-lead-final-pre-election-opinion-polls-2021-11-06.

It will be crucial to the survival of the mining sector. This has become a key focus for governments in the region, who are trying to boost their economy after the impacts of the coronavirus epidemic.

Kast and Boric are from outside Chile’s mainstream political parties, with voter anger over pensions, healthcare, education and costs driving demand for change – similar to the abrupt rise of former teacher President Pedro Castillo https://www.reuters.com/world/americas/perus-castillo-mulls-cabinet-reshuffle-under-pressure-opposition-2021-08-24 in neighboring Peru.

Alejandra Wood (CESCO) Santiago, executive director said that there are two extremes to candidacies. “Polarization is a factor that could make any government complex.”

“The presidential campaign adds uncertainties,” she said.

The country is already debating a new constitution https://www.reuters.com/world/americas/chile-begins-down-uncertain-road-writing-new-constitution-2021-05-17 and a controversial mining royalty bill https://www.reuters.com/article/chile-copper/royalty-bill-will-put-chiles-private-miners-out-of-business-trade-group-says-idUSL1N2PW1QR, which could sharply hike tariffs on the sector. Still needs to be determined a new legislation protecting glaciers. This could have a significant impact on key mines.

Chile is No. The No. 1 copper producer and the largest supplier of lithium battery metal, which is seeing increased demand as a result of the global switch to electric cars.

Boric and Kast have the odds of making it through to the second round. The top two candidates will be competing in a head to head ballot Dec. 19, if no one candidate wins a simple majority. There are many regional and legislative office positions up for grabs during Sunday’s elections.

‘INVESTMENT DROUGHT’

Francisco Acuña, analyst at industry consultancy CRU, said most candidates were aligned on plans to improve sustainability and lower emissions from mining, though there was little clarity on specific measures to achieve it.

Boric, Senator Yasna provoste and other left-leaning candidates have been discussing royalties. Kast however has suggested vague amendments to the mining property law in an effort to revive the sector. This includes opening Codelco up to private investment.

“The risk is the uncertainty because there is no clear idea yet of what changes would look like,” Acuña said.

Diego Hernández, president of the National Mining Society (Sonami), which represents firms in the sector, told Reuters that whoever won the presidential race would need more investment in mining to propel growth, so they would need to sit down and negotiate terms.

Hernández said Kast, Provoste and center-right Sebastián Sichel appeared to recognize the importance of mining in different forms, though they criticized Boric’s talks of a more productive role for the State as “confusing.”

With all the resources needed by the country, it is clear that large investments from the state aren’t possible. He said that deep down, there was a lack in maturity and reality.

Hernández said the elections would spark legal uncertainty, which could lead to a period of “investment drought” that could delay the availability of new copper and lithium to meet the expected increase in demand.

Through the end, the government projects that mining investments will total $70 trillion. Most of these are from private investors.

Wood, CESCO’s director of communications and marketing said that the sector needs clarity fast to ensure development moves forward.

She said, “I believe the industry is waiting on signals of greater certainty to make investment decision.”