Business upset about Chile’s plan for state control

SANTIAGO, Chile — The Chilean government’s newly announced plan to have the state take a majority stake in the lithium industry disconcerted business leaders, though analysts cautioned that the proposal appears to try to strike a middle ground between competing interests.

President Gabriel Boric announced in a national broadcast Thursday night, April 20, 2023, that private companies will have to partner with the government in exploiting Chile’s lithium, a metal used to make rechargeable batteries.

Boric said the state would take a controlling interest in each partnership, leading some to call it a nationalization of the industry, while others disagreed.

“Phrasing it as nationalization is too strong … it’s a quasi-nationalization in that the playing field will now be leveled in favor of the state,” said Nicolás Saldías, senior analyst at the Economist Intelligence Unit for Latin America and the Caribbean. “There is no level playing field for the private sector in Chile.”

Chile is the second largest producer of lithium and holds the world’s third largest reserves of the metal. Demand for lithium is expected to soar amid the transition to renewable energy around the world and the growth in electric vehicles that are powered by lithium batteries.

The South American country has recently been losing ground to others in the race to exploit the metal so there was much anticipation over what Boric, a leftist, would announce as the country’s strategy for the industry.

“There were no great surprises, which doesn’t mean that it isn’t a very important change in the model,” said Mariano Machado, principal analyst for the Americas at Verisk Maplecroft, a global risk intelligence firm.

Under the plan, all companies wanting to work in Chile’s lithium sector will have to take on the yet-to-be created National Lithium Company as a partner and the “state will have control,” Boric said Thursday. Existing contracts will be honored, but Boric expressed optimism they could find a way to boost state participation in their operations before they expire.

“It’s not a theft of the concessions. It’s a changing of the rules rather than abruptly breaking them,” said Emily Hersh, CEO of Luna Lithium, a lithium exploration company with projects in the Americas.

Two companies currently mine lithium in Chile, Albemarle Corp. of the United States and local company SQM with concessions set to expire in 2043 and 2030, respectively. Shares in the two companies plunged Friday, April 21, following Boric’s announcement. (AP)