16 Apr Cesco Week Stgo 2021: seminar brought together national and international experts to discuss mining institutions in Chile
More than 470 spectators attended the online seminar “Institutionality of the Chilean mining in the international context”, which included the presentation of the lawyer and expert in mineral economics James Otto, who pointed out that the constitutional process presents Chile an opportunity to review and improve mining legislation that is now 40 years old.
The last activity of Cesco Week Stgo 2021 was successful. The seminar “Institutionality of the Chilean mining in the international context” – which had the support of Anglo American, Antofagasta Minerals, BHP, and Freeport McMoRan-, convened more than 470 attendees from different countries, who witnessed the presentation of the lawyer and expert in mineral economics, James Otto.
After his presentation, there was an exciting debate on the matter moderated by the Executive Director of Cesco, Alejandra Wood, with the participation of the academic and former Minister of Finance Rodrigo Valdés; the lawyer and Coordinator of the Legislative Program for Libertad y Desarrollo, Pilar Hazbun; CRU’s economist and Consulting Manager, Ben Jones; the economist and Director of the Center for Economic and Social Policies of the Universidad Mayor, Claudia Sanhueza; and the economist, academic and consultant, Juan Ignacio Guzmán, who is also a Cesco member.
The expert in the matter, James Otto, analyzed the constitutional process that Chile has initiated, noting that it is an opportunity to review and update the national mining legislation, which is already 40 years old.
In this sense, the expert highlighted the need to improve the concession system that it currently has, towards a “use it or lose it” type to give sustainability to mining through more exploration.
Otto also pointed out the need for greater transparency about the effective contribution of mining taxes, highlighting the value of adhering to the Extractive Industries Transparency Initiative (EITI) and also evaluating the convenience of increasing the effective tax rate of mining in Chile, not ruling out an ad valorem royalty as a complement to the Specific Tax on Mining Activity, and that the possible higher taxation is used to finance measures that increase intergenerational equity.
Finally, he made a call not to rush to change what there is without first evaluating it rigorously.
The view of the experts
The presentation made by James Otto gave way to a conversation panel opened by Pilar Hazbun, lawyer and Coordinator of the Legislative Program for Libertad y Desarrollo, who focused her presentation on the importance of legal certainty and of a set of norms and principles that have allowed foreign investment, such as the patent protection regime, the protection of the property rights of the holders over their mining concessions and the granting of concessions through the courts.
On the other hand, Rodrigo Valdés gave his diagnosis on possible changes in mining matters in a new constitution, noting that these would most likely not be radical, considering how mining regulations have developed over time in Chile.
Valdés also analyzed the processing of the Mining Royalty project that is currently being processed in Congress and said that it is necessary to build a shared diagnosis and the need for more transparency on this issue, highlighting the initiative of the Mining Council with its tax platform, but pointing out that the state is still at the debit in this.
Ben Jones, the Managing Consultant at CRU, focused his presentation on specific considerations that must be taken when discussing tax reform and broader measures of participation in your economic contribution. Likewise, he stressed that Chile had been a pioneer in guiding its regimes towards creating investment incentives and highlighted the importance of raising awareness regarding tax regimes’ performance, which are affected by price fluctuations.
Claudia Sanhueza, director of the Center for Economic and Social Policies of the Universidad Mayor, addressed how much the state has benefited from the mining activity. Sanhueza agreed with Valdés that there should be no significant modifications in mining matters in the new Constitution, but more significant environmental regulations could be expected.
Finally, Juan Ignacio Guzmán, academic and general manager of GEM, Gestión y Economía Minera, and member of Cesco pointed out the importance of analyzing mining’s contribution to the country in the last 20 years, not only in tax collection but in other components of social welfare. The expert examined the effect of taxes and royalties on investments and competitiveness in mining.
Later, James Otto joined the conversation panel to deepen the group’s discussion, which ended with questions from the audience.