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Chile’s presidential election first round winner to bring challenges for the mining industry

by Cecilia Jamasmie | November 18, 2013 | Reprinted by permission of MINING.com

Michelle Bachelet, 62, the most likely political figure to be Chile’s new president after getting 47% of the votes in the November 17 election, won’t be bringing major changes to the mining industry in the short term, but some fear her suggested constitutional changes could pave the way for a greater state role in the sector.

Bachelet, who led Chile from 2006 to 2010, becoming the first—and so far only—woman to become president of the copper-rich country, obtained nearly double the votes of her nearest rival, but not enough for an outright win. She will have to wait until a second round runoff, on December 15, to seal her victory.

But since most polls show she will be the next leader of the country, most analysts have already started to predict what is in store for the mining industry under her government.

Bachelet based her campaign on three broad promises: reform of the constitution introduced by dictator Augusto Pinochet, an overhaul of the education system including free university access for all, and tax increases equivalent to 3% of gross domestic product that would finance needed reforms in the educational system.

A former political prisoner, pediatrician, defence secretary and Socialist Party stalwart, she didn’t indicate much about her plans for the resource sector in the months previous to the November 17 election. However, she did emphasize the country needed to “recover” its competitive edge in mining, mainly by bringing power prices down and revising the concessions system to simplify the creation of new mines, as well as to boost exploration.

Interviewed by local paper La Tercera (in Spanish), Bachelet said the likely changes include altering mining royalties and funding programs for state-owned mining company Codelco, the world’s number one copper producer.

Opponents fear Bachelet, who spent the past two years heading the UN agency for women, may be laying the foundations for more extensive changes in the long term. Under Chilean law, the state has the right to royalties for the exploitation of natural resources, especially mineral ones, so they think an increase in mining royalties is highly likely.

On a phone conversation with MINING.com, a high-level mining industry executive speaking on condition of anonymity said the main issue he sees for miners under the Bachelet administration would be the right to use water resources.

Under the current law, he explained, mining companies have the right to use any water they find while conducting activities. But as the resource becomes more and more scarce, especially in the north of Chile where most mining takes place, he said many would expect centre-leftist Bachelet to interfere.

“Communities in Atacama, the world’s driest desert, often feel they have to compete with mining companies for their water supply … a president who vows to fight for the poorest cannot sit back and do nothing about it,” he said.

Latin America’s example

Chile, the world’s top copper producer with a fast-growing economy, low unemployment and a stable democracy, is commonly cited as an example for the rest of Latin America.

With production of roughly 5.7 million tonnes of copper a year, the red metal accounts for 60% of the country’s exports and 15% of its gross domestic product. The nation is also home to 30% of the world’s known copper reserves.

Major mega-miners such as BHP Billiton NYE:BHP, Anglo American and Glencore Xstrata have operations in Chile.

Reprinted by permission of MINING.com

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