Earlier this week, the government of Chile led by President Gabriel Boric introduced a plan aimed at promoting investment into the country and spurring copper mining. Chile is the largest producer of copper in the world, making up 28% in global copper production. It is home to international copper giants, including Codelco, Antofagasta, Anglo American Glencore and BHP. The country is also the second-largest producer of lithium, occupying 22% of global production.
The investment package, dubbed Invest in Chile, brings together public resources, management efforts and regulatory changes. It also calls for the private sector to invest and participate in the nation’s decarbonization efforts.
In a news conference, the country’s Minister of Finance, Mario Marcel, stated that the plan was aimed at boosting investment by at least 5% during the coming year. The plan promotes private investment through tax benefits, which include extensions of reduced tax rates for small businesses, a half-a-billion tax credit fund for businesses with a high multiplying effect and depreciation mechanisms for the whole of next year. It also includes better access to financing and public investment to help the country’s weakened economy.
New mining projects for copper will also be exempt for five years from an ad-valorem tax that was put forward in a proposed mining royalty bill. This component would have imposed a tax on a mine’s production value. The proposed mining bill would also impose a rate on profits for copper prices between $2 to $5. It should be noted that the rate varies based on the price of copper.
The government also plans to reopen investment offices in North America and Europe, while also improving public-safety coordination, which players in the mining sector asked authorities to deal with after reports of an increase in violence that has affected operations in the northern region of Chile.
Furthermore, plans are underway to establish private-public working groups in sectors such as mining, transport, energy and construction. The plan also considers the creation of a regional committee of the aforementioned sectors, whose purpose will be to constantly monitor projects. This is in addition to reducing the number of halted projects and facilitating new initiatives in the mining, transportation, energy and construction sectors.
Last week, the country’s Central Bank revealed that it expected investments in 2022 to decrease by more than 3% and about 4.5% next year. In its latest Monetary Policy report, the bank stated that while the economy would grow in 2022, it would probably contract in 2023.
Copper extraction companies such as Southern Copper Corporation (NYSE: SCCO) operating in Chile are likely to give serious thought to the investment plan and see how they can benefit from any opportunities created in this scheme.
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