Royalty and social legitimacy in Chilean mining

During the last two months, we have participated in interesting debating expositions in favor and against a new royalty for Chilean mining along with the Mining and Energy Commission at the Chilean Senate. We have witnessed a wider debate about mining, apart from royalty.

I would like to mention two topics which were continuously mentioned during the discussion.

The first is that the way of development implies adding value to our raw materials in order to get out from “extractivism”.

I agree with the idea of economic complexity of César Hidalgo which states that the most productive economical successions move backwards in the value chain rather than forwards. We need to examine the consequences from our industry structure and possibly, deal with the need of local foundry and refining infrastructure which enables us to be part of  a circular and greener economy. There is not only the need to produce wire in Chile, we need to be focused on technological solutions for mining in the next three decades. Obviously for solutions related to a more sustainable activity, related to renewable non conventional energy; electric mobility of task equipment, solutions based in nature, apply circular economical knowledge for residuals produced by mining, just to mention a few examples. The size and scale of these challenges provide a competitive advantage and a market so that we are effective when adding value to our activity.

The second point I want to mention is social legitimacy in mining and how a new royalty would contribute to improve it.

I think that a good tributary regime allows stability to a sector which very much requires it. Transparency and access to information generated by the sector move towards that idea.

Nevertheless, not everything is the mining sector’s responsibility. The Chilean state is also responsible for social legitimacy of its main economic activity.

On these days Mining Policy 2050 was launched, a state policy which has a strong emphasis  on economic, environmental and social  sustainability in the sector that is a commitment not only for the mining companies but the Chilean state as well. On the same basis, we will soon present a proposal which has the same direction as the above mentioned policy, in order to transform Chile into a powerful green mining. Thereafter, the need of financing some of the goals not only by the private sector but by the public one as well.

Mining economies such as Australia, Canada, Sweden or Finland have implicated billions of dollars in developing policies for green mining and expanded local content. For example, the Canadian government allocated CA$3,000 millions in order to accelerate the projects of decarbonization with great transmitters, expand clean technologies and accelerate the industrial transformation in all the areas in Canada. On the other hand, Australia, commited a AU$1,300 millions fund for scaling, internationalizing, technological transference, and supplier connection with strategic industries that include mining.

I feel that Chile is not moving towards that direction, furthermore, resources have been restrained for those purposes.

On the other hand, in the mining regions it is imperative to adapt coordination mechanisms for the development of sharing water infrastructure, which cannot only be handled by the private sector. As well as an integrated basin management which involves participation, measurement resources, management and information transparency. We need to move on towards a governance which enables mining operational provisions in accordance with human consumption. In this area, it is essential to establish incentives and protect the necessary rights to promote desalination and efficient use of the resource. In accordance with it, mining can be a great ally of the state in difficult hydric areas if the regulation is the correct one. Let us picture Chile; supporting its mining, innovating in public/private alliances, facing one of  the most sensitive threats for humanity,  water as an essential good for human life and ecosystem function.

In addition, adapting to climate change in mining operations is required to face the effects and expand future resilience. Likewise, due to the fact that the strong physical consequences of climate change affect vulnerable regions, the mining and metallurgical industry have the possibility to support host communities to adapt to new scenarios. Mining can be a partner for Chile to develop and reinforce the records of meteorological information and potential impact, supporting the climate scenarios in mining regions.

In such a situation, as described, there is no doubt that social legitimacy of our main economic activity will be larger.