Chile takes first step towards nationalizing copper industry

A proposal that opens the door to the nationalization of some of the largest mines in the world was approved on Tuesday by a committee as part of the drafting of a new constitution in Chile.

The 13-to-6 vote by members of an environmental committee is a first step down the road for the controversial proposal’s approval, which would ultimately require support from two thirds of the full assembly to become part of the draft constitution that will be presented to Chilean voters later this year.

The vote appears to fall in line with newly elected President Gabriel Boric’s campaign promise to “bury” the neoliberal economic model and increase taxes on the “super rich” in order to improve social services, fight inequality and enhance environmental protections.

Yet while the risk of such a measure passing appears relatively low in the copper-rich Andean nation known for its respect for market rules, it would, if implemented, disrupt Chile’s economy, metal markets and the global transition to clean energy, Bloomberg reported.

Already, shares in some companies with mines in Chile – including Albemarle Corp. and Anglo American Plc – fell in value while the peso also dropped after the vote.

But investors aren’t the only ones to show “extreme concern” on Tuesday ahead of the threat of a further nationalization of Chile’s state-dominated copper industry.

Diego Hernández, president of the National Mining Society, said in a statement that the recent vote does not consider the impact that such a measure would have on Chilean society.

"It is an outrageous decision, with clear and evident legal errors. It has been approved to nationalize copper, but copper currently belongs to the Chilean State. Thus, this measure only means nationalizing the companies, not the natural resources, which is what we want to protect," he said.

Copper was first nationalized by the government of Salvador Allende in 1971 – and although the government opened the industry to private companies in the 1990s -- the majority of copper mines in Chile are still controlled by the Corporación Nacional del Cobre de Chile (Codelco).

"A nationalization would have serious consequences for our economy in a context of globalization, since the affected companies will resort to treaties to defend their legitimate interests," he added.

But members of the Constitutional Convention have assured voters that the working constitution could still undergo adjustments, additions or even deletions and that all measures should be considered within the bigger picture of the referendum vote.

Debates on the content of the new Constitution will begin on Feb. 15 – but the decisions of the body, dominated by independents and left-wing policy makers, have generated uncertainty in many sectors.

In recent weeks, the mining industry has called for the government to signal to the markets that Chile will continue to preserve the laws that have allowed the world’s largest copper producer – and second largest lithium producer – to thrive and dominate global markets.

The alternative, they warn, could negatively affect the industry for years to come.