Comment
Author: Admin | 2025-04-28
Demand. According to the United States Geological Survey (USGS), Chile — the world’s largest copper producer — produced 5.39 MMt in 2022 and has the largest reserves, estimated at 190 MMt, or 21.3% of the world’s total. Peru, the second-largest producer, at 2.2 MMt in 2022, has the third-largest reserves behind Australia, with 81 MMt, or 9% globally. The USGS estimated that both countries, alongside Ecuador, could contain approximately 750 MMt of undiscovered copper resources.Reframing global supply chainsChile and Peru are likely to play a key role in reframing commodity supply chains as the US and European countries intensify their efforts to secure critical minerals and diversify sources. The US Inflation Reduction Act of August 2022 increases requirements for critical minerals to be sourced from countries with a free trade agreement with the US. Although the Inflation Reduction Act does not class copper as a “critical mineral” — the definition varies across jurisdictions — Chile and Peru have free trade agreements with the US, increasing the likelihood of them being favored by US investors. Latin America also has huge lithium potential, with 60% of global reserves; see "Critical minerals: Illuminating the path to an electric future."Despite the increased need for copper and the two countries’ well-established mining industries, there are multiple challenges to expanding output in Chile and Peru.Challenge 1: Regulatory uncertainty in ChilePlanned changes to Chile’s constitution are likely to slightly increase the state's role in the development of natural resources, although conservative dominance will guarantee property rights and limit state intervention. A new process to write a new constitution started March 6 with the installation of a 24-member expert committee, after a previous draft was rejected in 2022 in a referendum. The committee is preparing a blueprint for use by an elected 50-member constitutional council, which will write a final draft. Elections for the council members took place May 7 ahead of the council's installation June 7. A final draft will be submitted to a referendum Dec. 17. The conservative Republican Party (Partido Republicano) obtained 23 seats in the council while the government block Unity for Chile (Unidad para Chile) got 16. As conservative parties will dominate the council, they will be able to pass policy, enshrining property rights and private investment in the mining sector under a potential new constitution. However, the council will be bound by set principles, including respecting nature and establishing a “social” state that is likely to slightly expand the state's role in the economy, including in natural resources.Companies investing in Chile’s copper will face higher taxes, including a new royalty. After Congress rejected in March a tax package proposed by President Gabriel Boric’s administration, the government is preparing a new proposal, which
Add Comment