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Lithium policy and the role of the state in Chile

Coauthor Felipe Irarrázaval

On April 20, President Gabriel Boric announced, on national television, the new lithium policy that, in his words, will guide Chile towards a new development model. The strategy will aim at the creation of a national lithium company that will participate in the entire production process; collaboration with private companies; the development of technologies and research to minimize the impact on ecosystems and create more efficient ways of exploiting the resource; the promotion of citizen participation with communities; and the development of complex lithium-based products.

In this way, the new national lithium strategy seeks to take advantage of global demand in a strategic manner, while respecting local communities and the environment. Many of the approaches overlap with the Lithium Policy and Governance of Salt Flats of the National Lithium Commission of the second Bachelet government (2014-2018), except for the creation of the national company and state control over concessions. In that sense, the new strategy takes up that line, although deepening in some aspects, especially in relation to the role of the state.

The history of lithium in Chile has been one of chiaroscuro. The state, owner of the mine properties and, at some point, strategic partner of the companies, started moving aside in the 1990s with the sale of its shares, in the first place, and the establishment of scarce control and information mechanisms on the exploitation of the mineral in the Atacama, in the second place.

For years, the state played a passive role in the economic game. Bachelet’s policy in her second term (2014-2018) established guidelines to give a new impetus to the state, imposing new rules for companies, and negotiating contracts. This improved the position of the state in relation to the private sector and achieved a significant increase in revenue/income collection.

However, it was not possible to move forward in a convincing manner with industrialization and the different public policy instruments aimed in this direction, due to the dispute between different sectors (local, national and international) with interests in the so-called “white gold”.

In this situation of conflict, the announcement of Boric’s government was criticized. Numerous voices, particularly from the opposition, have criticized the strategy as “statist”. They have even highlighted that this strategy nationalizes the resource, although it has always been state-owned and has not been outsourced since 1979.

Undoubtedly, the strategy seeks to boost the role of the state and corporate control in the renegotiation of existing concessions. On the one hand, this will bring the state greater income by participating in the profits generated from the projects. On the other hand, it will enable it to participate in the decisions of the projects, which have had a controversial history of tax and environmental disputes.

Beyond the ideological questioning of the role of the state, the critics also urge speeding up the pace in terms of lithium exploitation and export, taking benefit of the “comparative advantages” that the country has, given the quantity and quality of lithium in the salt flats and the existing demand. For this purpose, different actors suggest that no time should be wasted in building state capacities, as they discourage investment and would create inefficient institutions to face the high global demand for the mineral. Instead, they argue that priority should be given to the role of private companies with established capacities, which could rapidly increase exploitation quotas.

While this argument is debatable, it is worth remembering that a large part of Chile’s backwardness is due to erratic decisions made by the current opposition when it was in government. For example, although during the first government of Sebastián Piñera there were precedents that urged to build a lithium policy, the only option was to tender a new operation contract, which was quickly revoked, in the midst of scandalous irregularities.

Subsequently, during the second Piñera administration, no progress was made with the points defined in the policy of the second Bachelet administration and everything that was put out to bid and awarded, such as the Clean Technologies Institute and the new contracts with the companies, had (again) procedural deficiencies recognized by the courts, which generated conflicts between the different stakeholders involved.

Thus, during Piñera’s mandates not only did they not attempt to build capacities for a sector that was evidently emerging as strategic but also showed serious deficiencies in terms of autonomy to make decisions with respect to interest groups.  In this context, the voices that try to shape policy by the haste of demand and accuse the government of slowness should be self-critical.

In contrast to what many members of the country are currently claiming, the progress that has been made in terms of value addition (such as the recent agreement with BYD for the production of cathodes) and economic benefits (such as this year’s celebrated rents) for Chile, have been made with decisive intervention by the state.

This intervention has been and will be resisted. It is worth remembering that SQM, the main company that exploits lithium in the country, for years was also one of the main companies that irregularly financed political campaigns. For its part, Albemarle had different conflicts with the state over the execution of a clause in the contract to sell lithium at a preferential price, with which it was intended to advance in R&D. These are just a few examples of the dynamics of the lithium-related sectors.

Therefore, private companies focused on increased exploitation and capital accumulation will not by themselves produce relevant changes in the current lithium production model. President Boric’s announcement, even though it is still general, brings a necessary discussion regarding the development model that Chile needs not only in economic terms but also in relation to the role of the state, its capabilities, and socio-environmental considerations in the economic sphere.

Ultimately, the state does not necessarily have worse economic performance than companies. Still, any significant transformation of the prevailing development model requires a state with strong capacities to carry it out.

Felipe Irarrázaval is a Postdoctoral Researcher (COES) and Adjunct Professor at the Institute of Urban and Territorial Studies at PUC Chile. He is a Geographer, holds a Master’s degree in Political Science, and a Ph.D. in Human Geography.

*Translated from Spanish by Micaela Machado Rodrigues  

Autor

Sebastián Carrasco es Profesor Asistente del Depto. de Sociología, Ciencia Política y Administración Pública de Universidad Católica de Temuco e investigador asociado del Centro de Políticas Públicas de la misma Universidad.

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