Copper price rises: reject taxes or approve investment

Javier Álvarez, President

Days ago, the BBC News published “How the enormous increase in the price of copper ignited the debate in Chile about the contribution of private mining companies to the public coffers”. In the note explains that the current discussion takes place in a politically exceptional year, where the emphasis has been placed on immediacy instead of the long term.

The recent increase in the price of the red metal will benefit all Chileans, since companies pay a large amount of taxes, which reconstructs the fallacy that mining companies only take wealth. In this sense, we are all partners in this activity, because to the extent that companies earn more, they contribute more to the treasury. In fact, only the 27% additional Specific Corporate Tax, also known as royalty, has a progressive rate ranging from 5% to 14% of Operating Profits.

This increase is an opportunity to develop policies that favour dynamism in the sector, which attract more investment, encourage competition, and promote productivity. Contrary to this, today we see a short-term populism in some legislators, who intend to change the tax rules, which would imply a disincentive to investments, affecting, for example, the possibility of making profitable the large lithium reserves we have, which could give annual sales of between US$3 and US$5 billion and over US$1,500 million in taxes with a good exploitation policy.

A Cochilco cadastre detected initiatives valued at US$74 billion for the next decade, while a Fraser study on the ease of doing business in mining revealed that Chile fell thirteen places compared to 2019, because of the current political uncertainty. Thus, it is worth asking whether raising the tax burden – already higher than several developed and mining countries – helps these investments to materialize. If we consider that the discussion on new taxes generates greater uncertainty and misses the opportunity to debate long-term policies, it is a bad idea. What if we focused instead on creating new businesses so that taxes and royalties grow instead of just increasing them?

After the Foreign Investment Statute, Chile attracted investment in mining. This was based on two key principles: non-discrimination between national and foreign investors and giving security to foreign investments of being able to benefit from a regime of tax invariability. Studying alternatives like this, which at the time elevated us as a world pole of mining development and especially considering the current situation of unemployment, is a duty of public, political and private responsibility.

We have a solid economy because, in the past, the stability and certainty allowed investments to materialize. We must learn from that successful experience in light of the present challenges, establishing good policies so that Chile is the capital of sustainable mining and not kill the “goose that lays the copper eggs” when it has exceptional results that could improve the quality of life of future generations.