Chile: Sebastián Piñera Mining Program 2018 – 2022

Last Updated: 20 December 2017
Article by Cody Mcfarlane

The Chilean elections wrapped up Sunday with the former president, Sebastian Pinera, easily winning Chile's presidential runoff vote. Piñera got 54.6 percent of the votes to 45.4 percent for center-left Sen. Alejandro Guillier, with nearly all the ballots counted.

The Chilean economy, although more diversified in recent years, is highly dependent on the mining industry. Piñera has stated that he will position the mining sector as an economic engine that will recover growth and generate employment.

MINERÍA CHILENA recently published an article that outlines the upcoming Presidents programs for the mining sector between 2018 and 2022. Below we have provided a summary in English based on MINERÍA CHILENA´s interview with the former undersecretary of mining. Francisco Orrego.

As part of the "roadmap for the future", Piñera's mining team established the need to create a Presidential Advisory Commission that will prepare a National Mining Policy for the years 2018-2050, in conjunction with the academic, public, private and civil sectors.

Within this framework, there is also the proposal to establish an Office of Investment Project Management that attracts, coordinates and expedites new investments in the mining sector, which according to the analysis carried out by the President-elect is based on "A growing delay in the review and lack of certainty, which negatively affects the perception that international investors have for our country¨ stated Francisco Orrego.

The creation of the said office is based on the experience of the MPMO (Major Project Management Office) in Canada. However, "the dependence and operation of this body is something that must be defined among the different actors, considering that it would have a broad sectoral application", explains Orrego.

Another of the measures proposed in the context of positioning the mining sector is to evaluate the creation of specific instruments for attracting and protecting investments. The idea is not to make a new DL 600, but "to think about a new statute that guarantees the regulatory stability, tax, non-discrimination, access to dispute resolution mechanisms, among others, " says the former deputy secretary.

Small and Medium Mining

The Presidents proposals for small-scale mining aims to create a special statute for this sector, with a single legal body, whose purpose is to gather all the regulations related to small and medium mining, which would include safety issues, project reviews, closing plans, and training, among others.

For medium size miners, the goal is to review regulations related to the closure of mines and their related installations in order to make the guarantee instruments more flexible, modify the calculation of useful life and correct legal and interpretative gaps. In this context, Francisco Orrego points out that "the Law for the closure of work, which was enacted under our first government, signified a great advance in environmental matters for the sector, placing our country as one of the most advanced in the world. But we are aware that, after some years of operating, it is necessary to introduce some improvements to this important legal body¨.

Royalty and Innovation

In terms of future challenges related to the development, innovation, and competitiveness, the mining program of Pinera considers "increasing the share of mining royalties assigned to regional governments for activities related to innovation and the regional investment and diversification fund". Faced with this measure, Orrego clarifies that "our program does not seek to increase the specific tax on mining activities or mining royalties, neither for this purpose, nor for any other (...), what we want is to increase the proportion of the mining royalty that is destined to innovation projects of the corresponding region, with a traceable procedure that allows us to measure and give continuity in a transparent way to said projects. We want to promote and promote innovation at the local or regional level, " explains the lawyer.

Modernization Institutions and Codelco

Modernize the corporate governance of Enami, strengthen the audit and audit role of Cochilco, evaluate the creation of the Geological Service of Chile and a National Mining Service, together with the strengthening of the Ministry of Mining, are some of the measures proposed.

In the case of Enami, the new corporate governance "must comply with the highest standards in terms of appointments, transparency, quality, among others." The idea that Enami is headed by "a highly qualified Board of Directors independent of political authorities that is transparent, professional, able to implement control methods, procedures, and adheres fully to the organizations' objectives, " says Orrego.

In the case of Codelco, Sebastián Piñera's program raises the idea of providing more autonomy to the state copper company, giving greater independence to its corporate governance regarding changes in government and providing it with greater tools to efficiently manage its current corporate diversity and complexity.

It also points out the need to define a stable long-term dividend policy and replace the Reserved Law. In this context, Francisco Orrego details that the idea is that "Codelco capitalizes an important part of its profits, and on the other hand, ensures its dividend policy is aligned with other comparable major mining companies. The point of eliminating the Reserved Law is so that the base amount of profits in which the proposed dividend policy is applied, is more representative of the company's actual profits. This would involve defining a different financing rule for the Armed Forces, which guarantees the country a stable resource and the ability to maintain an adequate level of national security protection. "

There is also mention of defining a realistic investment program for Codelco that is within the scope of available resources, accompanied by a strong priority in obtaining a maximum return on existing assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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