Santiago — The government of Chilean President Gabriel Boric announced its lithium policy last week, which consists of positioning the state as majority shareholder in all new contracts for the development of the lithium industry, and which is key to the transition to clean energy.
Chile’s Mining Minister Marcela Hernando spoke to Bloomberg Línea about the policy, which, she says, could be “key to augmenting the country’s wealth”, and responds to “all the demands” of Chileans.
“We need tools, and this could be one of them,” she said.
Hernando said that the lithium strategy will serve to reinforce the economic model of future development, based on sustainable energy.
The following interview has been edited for length and clarity:
Bloomberg Línea: Is Chile a late arrival to the lithium boom?
Marcela Hernando: As a country we should have taken many actions before now. The theme began to be studied, but timidly, during the second term of the government of former president Michelle Bachelet, and a commission was created. But then it lost traction.
We could have taken more advantage of this [opportunity]. We also lost time in investigation and scientific and technological development in the country.
A report by JPMorgan estimates that Chile could be surpassed by Argentina in lithium production by 2028. What is your opinion on that?
Australia has moved into first place, but it is a position from which we do not feel so far away, and we could recover again. That is a challenge. However, I don’t think this is just competition for first or second place in lithium production, because the demand expected in the coming years is so high that, even if we all produced as projected, we would not be able to meet that demand.
Even if we increase production, whatever number we occupy as a producing country for a couple of decades, it will mean significant increases in wealth for our country.
Chilean mining company SQM’s shares plummeted on the Santiago Stock Exchange after the announcement of the national lithium strategy. How can this model you are proposing be attractive to investors?
We still have to wait, more details are just becoming known, and more detailed analyses are being made.
The reactions at an international level are mostly in favor and, in that sense, we feel very calm because we are proposing a public-private alliance in which we understand that we are all going to win.
Is this a nationalization of lithium?
No. Lithium is Chilean, it is enshrined in the Constitution and, therefore, it is not a nationalization. There will also be respect for the contracts in force, nobody is forcing or coercing by force on those contracts. Chilean institutionality, its adherence to the law, will continue to be present.
Will SQM and Albemarle eventually lose the Atacama salt flats?
Control of the Atacama salt flats is supposed to belong to the state through Corfo [Chile’s state-owned corporation for fostering development]. They have a contract with an expiration date, and we are not going to act on those contracts, we are not forcibly imposing anything.
From 2030 onwards, in SQM’s area, and from 2043 onwards, in Albemarle’s area, the form of exploitation [of lithium] will be through a public-private partnership. Both companies have to accept that, those will be the conditions from now on.
Now, we have not been trying to enter the Atacama salt flat before, because we understand that we cannot touch it while these contracts are in place. It is a conversation that the president [Boric] has mandated that Corfo have with [state copper producer] Codelco, and they will initiate those conversations.
There are many doubts regarding how Codelco will operate in this whole strategy.
Codelco and [Chilean national mining company] Enami will have a role as representatives of the state in each of the public-private partnerships in any of the salt mines that are exploited.
Apart from that, Corfo will instruct Codelco to initiate conversations. Codelco represents the interests of the state well, and that is what is being pursued.
And have talks already begun?
No.
Who will be in charge of that?
Codelco will look into that, because those are decisions to be made by the corporate government of Codelco.
Will they operate as autonomous companies?
Yes, the president’s [Boric’s] orders are that there be certain outlines to those talks, regarding that needs to be achieved.
How long will it take to incorporate the national lithium company?
We want a national lithium company to be well incorporated, we want to listen to opinions about that.
We see it as a company that is present in all stages of the production chain. We want a lithium company that is capable of creating a productive chain, which has added value and so that we don’t have to be buying lithium metal from China.
Is Chile looking to eventually produce lithium batteries?
Yes.
In addition to lithium production, is the government also looking to develop other products?
Yes, in Chile, in various regions.
What are the aspirations as a Latin American level?
It would be ideal if at some point we could complement our neighboring countries, but we are at different stages.
Argentina is exploiting lithium, and starting to produce its first exports; it produces a third of what Chile produces. They are supposed to have more reserves, but they have some administrative issues related to being a federal country, that each of the provinces has its own regulations.
So far it has worked well, because the central government has managed to articulate the three governors of the provinces where lithium is produced, but we also understand that they have less concentration, and other difficulties.
We are interested in advancing with them in research and exchange. We hope that at some point the three countries [Argentina, Bolivia and Chile, which make up South America’s so-called ‘lithium triangle] will be able to produce in a synergic way, taking into account that the needs of the world, demand, is estimated to multiply by seven.
How will you achieve consensus in Congress on the creation of the national lithium company?
To arrive with a very well developed and discussed law, which has been discussed with the communities, the local authorities, with all of them; a process that is not obligatory, but is an advanced consultation, which does not fall within any legal requirement.
We understand that if there is participation in its elaboration and consensus in what we will present, it will be easier to dialogue with the parliamentarians.
What can happen if they do not succeed? Does Codelco remain state under control?
At some point I was asked how long the parliamentary process could take. Parliamentary procedures are only known when they start, but not when they end, and it could take one or 15 years.
That is why we made the decision not to wait until the national lithium company is in place. The contracts in the Atacama salt flats are like a floor in terms of conditions. Through public-private partnerships we want to attract partners who can contribute in other parts of the production chain.
An opinion article in the Financial Times said that President Boric must be careful not to kill the goose that lays the golden eggs. How can this be avoided, or what are your perspectives on the matter?
We have had months of a lot of dialogue, not only between us, because there are different views in the ministries and, apart from reaching a consensus, we have attended to the requirements of many governments and companies.
This is a very important geopolitical issue. We realize the importance of the decisions that are being taken today and, in that context, we have received support, positive opinions in terms of them wanting to be our partners in this matter.
Now, we must also consider that the lithium market in Chile is in the hands of only two companies and the demand from the world is for greater openness. In that context, we expect a diversification of who is present in the lithium market in Chile.
Have you talked to any international players, states?
Yes.
And what do they say?
At a national level we have significant wealth in terms of materials that are critical for other countries. For this reason, at this minute, within the foreign ministry there are many conversations going on to establish alliances in relation to how we supply the needs of the world in terms of critical minerals, not only lithium.
We should not think that the lithium policy will drive away investment. I think it is quite the opposite, because we are laying down the rules for working with us, and looking for the best for the country, the state, and thinking in the long term.
