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  • Population, mn: 17.9
  • GDP, US$bn: 247.2
  • GDP per capita, US$: 13,801.7
  • Inflation, CPI ave: 3.8
  • Budget Balance, % of GDP: -2.7
  • FX, LCY/US$: 676.5
  • Mining GVA, US$bn: 20.3
  • Mining Industry Value, US$bn: 22.8
Regulatory Risk Rating
73
0
100
Score: 73
Low Risk
The combination of some of the world's largest copper deposits and a business-oriented regulatory framework has encouraged international mining companies to invest in Chile since legal reforms were undertaken in the 1980s. These reforms resulted in the creation of many new mines and thousands of new jobs and saw a considerable boost to the country's economy. The stability of the country's mining regime, which is one of the best in the South American region, will ensure that the country continues to attract such investment for years to come.

Corruption Potential Index

Score: 85
Very Low Corruption Potential

Corruption Risk Index

Score: 91
Very Low Corruption Risk

Regulatory Risk Rating

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Environmental Overview Commentary plus sign

CHILE ENVIRONMENTAL REGULATION

GENERAL

Chile sits on the western edge of the South American continent, with Argentina, Peru and Bolivia bordering. The country is both one of the world’s narrowest and one of the world’s longest, resulting in diverse climates and terrains as one journeys through the country from north to south. The north of the country is primarily desert and includes the Atacama Desert, which is known to be the driest non-polar location in the world; further south, in the central part of the country there exists a Mediterranean style climate with fertile lands, forests and valleys which extend from the capital Santiago; in the southernmost region, the end of which is just 600 miles from Antarctica, one finds a particularly rough terrain with deep fjords, and a cold, wet climate with extremely harsh winters; to the east are the Andes mountains which stretch along the entire eastern border of the country, separating Chile from neighboring Argentina.

Around 20% of Chile’s territory is protected by a system of national parks and reserves. As with the climate and terrain the flora and fauna vary across the different regions of Chile and in fact the country has some of the highest levels of endemic flora and fauna in the world. Chile’s waters are rich in marine life; blue whales, dolphins, sharks, including the great white, salmon and sardines populate the South Pacific Ocean and a number of seabirds such as cormorants and penguins can be found in the coastal regions. In recent years, hordes of dead sea life and sea birds have washed up on Chile’s coastline and the full causes of this phenomenon are, as yet unknown, but the El Niño currents are certainly a contributing factor.

In recent years, controversy has surrounded a number of mining and energy projects which have faced fierce opposition from communities, NGOs and local authorities, who have resorted to litigation as a means to challenge environmental licenses, claiming investors’ non-compliance with environmental legislation. The most common opposition is used through a writ of protection in the Court of Appeal, which is an injunctive relief, basing the claims on the guarantee established in the Chilean Constitution of the fundamental right to live in an environment free from pollution.

In some cases, citizens have been successful in obtaining the revocation of an environmental license and subsequent halt of the project. One of the major cases involved Pascua Lama, a US$8.5 billion gold mining project developed by Minera Nevada SpA, a subsidiary of Canadian Barrick Gold. In 2013, a group of indigenous peoples filed an injunction arguing the company’s severe failure to comply with obligations contained in the environmental license and illicit interventions of hydrological resources, which were causing negative effects on the environment. The court ordered the suspension of the project’s construction until all measures established in the environmental license were fulfilled. In 2013, Barrick decided to postpone the project indefinitely.

PRINCIPAL LEGISLATION AND REGULATOR

Under Article 19(8) of the Chilean Constitution, citizens have the right to live in a pollution-free environment and the state is obliged to protect this right and ensure the conservation of nature via environmental legislation. The main statutory environmental framework in Chile is contained in the Environmental Law (No. 19.300, 1994). The law introduced the Environmental Impact Assessment System (“Servicio de Evaluación de Impacto Ambiental”, or “SEIA”), which sets forth the process for obtaining a project’s environmental license. The Environmental Law is supplemented by a series of bylaws. The main bylaw relating to Environmental Impact Assessment (EIA) is contained in Decree No. 40 (“Reglamento del Sistema de Evaluación de Impacto Ambiental” or “RSEIA”), which approved the new regulation of the SEIA.

The Environmental Law was recently modified in 2010 when Congress enacted Law No. 20. This was a result of the need to restructure the environmental regulatory system, as Chile sought to become a member to the OECD. The new law created three centralized institutions to oversee and enforce environmental regulations: (i) the Ministry of the Environment, in charge of applying policies and promoting sustainable development; (ii), the Environmental Assessment Service (“Servicio de Evaluación Ambiental” or “SEA”), in charge of assessing projects that according to the law must undergo EIA; and (iii) the Environmental Superintendence (“Superintendencia del Medio Ambiente” or “SMA”). The latter is perhaps the most significant innovation to the environmental regulatory structure, as the SMA has the power to suspend a license or adopt any other urgent measures to preserve the environment when “the execution or operation of a project or activity generates immediate and severe harm to the environment as a consequence of severe infringement of the norms, measures and terms’’ as established in the license.

Another considerable modification to the environmental framework was introduced by Law No. 20.600 (2012), which created the Environmental Courts and bestowed upon them the power to resolve environmental disputes.
In 2008, Chile ratified ILO Convention No. 169, a legally binding international instrument that recognizes and protects the rights of indigenous peoples and promotes their cultural identity. As a consequence, a process of consultation must be carried out under for certain projects under an EIA. In 2013, two regulations affecting this process were enacted. Decree No. 66 established a new procedure of consultation. Additionally, the RSEIA was modified to incorporate specific regulation on consultation through Decree No. 40. Pursuant to Article 85 of the modified RSEIA when a project directly affects one or more human groups of indigenous descent, a consultation process must be designed and developed.

EIA PROCESS

There are two types of environmental assessments in Chile: an Environmental Impact Statement (“Declaración de Impacto Ambiental”, or “DIA”), and an Environmental Impact Study (“Estudio de Impacto Ambiental”, or “EIS”). As defined in the SEIA, one of these must be prepared prior to starting any mining and/or development project (including coal, building materials, peat or clays) or processing and disposal of tailings and waste. The Environmental Law requires that any project or activity that may have environmental impact in any of its phases, perform an EIS prior to execution. Article 10 lists a number of activities that are required to undergo this process, including mining development projects. Article 11 of the Environmental Law reads in part: “The projects or activities … [require] the preparation of an Environmental Impact Study if they generate or present, at least, one of the following effects, characteristics or circumstances: a hazard for human health; significant adverse effects on the quantity and quality of renewable natural resources; resettlement of human communities; significant alteration to a populations’ livelihood or customs, located adjacent to a protected population, resources or areas; significant alteration of the scenic or tourist value of an area; or an alteration of monuments or sites with an anthropological or archaeological value”. Thus exploration activities will require an environmental assessment if they are likely to cause any of the impacts outlined in Article 11 of the Environmental Law. Projects or activities which do not cause the impacts identified in the legislation will be required to complete a DIA only.

Environmental Impact Statements must be presented to the Regional Commission on the Environment within the Region where the project is located. Where the project or activity may cause environmental impacts in more than one region, the Environmental Impact Statement shall be presented to the Executive Directorate of the National Commission on the Environment. The environmental authority has 120 business days (which may be extended up to 180 business days under qualified circumstances) to issue a decision regarding a study. For statements (DIAs), the time frame is 60 business days (which may be extended up to 90 business days under qualified circumstances). If no response is given by the relevant authority within the established statutory deadline (Law 19.300, articles 15, 16, 18 and 19), it is assumed that the response to the DIA or EIS is positive.

As a result of the environmental assessment process, the authority will issue a resolution either rejecting or approving the project. If it is considered that the project fulfills the necessary environmental requirements, an environmental license will be issued (“Resolución de Calificación Ambiental” or “RCA”). Once obtained, the project will need to acquire other specific legal authorizations, such as air, waste and water, among others. Decisions on EIS or DIA and the subsequent issuance of the permit, are made by the relevant Regional or National Environmental Commission and may be appealed.

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Mining Overview Commentary plus sign

CHILE MINING REGULATION

GENERAL

Chile, officially the Republic of Chile, is a South American country with an unusual shape that is something akin to a long narrow ribbon as it stretches over 4,000km across the western coastline of South America. The country is bordered by Peru to the north, Bolivia to the northeast, Argentina to the east and the South Pacific Ocean to the west.

Chile is endowed with vast reserves of copper, gold, lithium, molybdenum, silver, iodine, and natural nitrates as well as other minerals. It is the world’s largest copper producer and a long time global leader in the copper industry. With over three million metric tons of fine copper reserves in the territory the "red metal" leads the country's extractive industry. During 2014, it generated one third of global copper production, far ahead of other copper producing countries including China, Peru, and the United States of America, which roughly made up 7% each. In short, the mining industry has historically occupied a predominant role in Chile’s economy, with copper alone providing 20% of the nation’s GDP and 60% of its exports.

In 2010, Chile formally became the 31st member of the Organization for Economic Co-operation and Development (OECD) and its first South American member. It is currently the most competitive economy in Latin America, which makes it a favorable destination for investors, who are encouraged by its business-oriented regulatory framework. Foreign investment in particular has played a key role in the development of the mining industry and in the national market in general.

The country was ranked in 26th place in the Fraser Institute’s Policy Perception Index, which included ratings for some 109 jurisdictions.

PRINCIPAL LEGISLATION AND REGULATOR

According to Article 24 of the Chilean Constitution (1980), “The State has absolute, exclusive, inalienable and imprescriptible ownership of all mines, including natural guano deposits, metal bearing sands, salt deposits, coal and hydrocarbon deposits and fields and other fossil substances except surface clays, regardless of property rights of natural or legal individuals over lands wherein they may be found”. Chile’s mining regulation is based on legal provisions that were enacted as part of the Constitution, which were established to stimulate the development of mining and to guarantee the property rights of both local and foreign investors.

Private parties or individuals may explore and exploit Chile’s natural resources through mining concessions, which are granted by the courts through a judicial decree and the technical support provided by the National Mining and Geologic Service (SERNAGEOMIN). The principal mining framework is composed of the Chilean Constitution (1980), the Organic Constitutional Law on Mining Concessions (Law No. 18,097) and the Mining Code (1983). In addition, Chile has an Environmental Law (Law No. 19.300), which introduced the Environmental Impact Assessment System (SEIA). The main bylaw relating to Environmental Impact Assessment is Decree No. 40 (RSEIA).

The Foreign Investment Statute Decree Law 600 (DL 600) is also of note as it is the main mechanism used by investors, under which a contract is entered into with the state. While the foreign investor’s obligations include making an investment within a specific timeframe, the state guarantees that there will be no discrimination in economic matters.

GRANTS AND FORMS OF MINERAL TITLE

The following outlines the exploration and exploitation rights which may be acquired in Chile and the process for the granting of such rights:

  • Exploration Concession (Pedimento): The process to obtain an exploration concession is carried out in the civil courts. The applicant must comply with article 43 of the Mining Code, which outlines the requirements for the petition, including the provision of: the petitioner's name, nationality and address; the position of the desired area through UTM coordinates with a maximum size of 5,000 hectares; and the name given to the concession. If the information is complete, the judge will order its inscription in the Mining Registry (“Conservador de Minas”) and publication of the petition. Once the inscription is complete, the applicant acquires the right to carry out all the necessary works for the exploration. Within 90 days of the order, the applicant must request the final judgment (“sentencia constitutiva de la concesión de exploración”), after which SERNAGEOMIN must submit its report. If the report confirms the applicant's compliance with the regulations, the judge will declare the concession favourable.  An exploration concession grants the titleholder the right to carry out the necessary works in the area, and to oppose any foreign intervention. The titleholder may also request any necessary easements, and make use of any water obtained within the concession area (Arts. 107-111, Mining Code). Additionally, following the end of the two-year period, the owner has the right to convert his claim to a mining concession through a “manifestation” (“manifestación”).  An exploration license is granted for a maximum period of two years. However, the owner may make a single request for a further two-year extension before the initial period expires; on renewal at least half of the land must be relinquished (Art. 112,Mining Code).  New exploration concessions may overlap with existing ones; however, the concession with the earliest filing date will always take precedence, providing the claim holder patents the property in accordance with the Mining Code and regulations.

 

  • Mining Concession: To convert an exploration concession to a mining concession, applicants must file a claim and, within 200-220 days, submit a “Survey Request” (“solicitud de mensura”). After acceptance of the Survey Request, the owner has approximately 15 months to have the claim surveyed by a government-licensed surveyor. The surrounding claim owners may witness the survey, which is subsequently described in a legal format and presented to SERNAGEOMIN for technical review, which includes a field inspection and verification. Following the technical approval by SERNAGEOMIN, the file returns to the judge who must dictate the constitution of the claim as a “mensura” (equivalent of a patented claim in the United States). Once constituted, an abstract describing the claim is published in Chile’s official mining bulletin (published weekly) and 30 days later the claim can be inscribed in the appropriate Mining Registry.  Once constituted, a mining concession is a permanent property right, with no expiration date. So long as the annual fees are paid in a timely manner every year during the month of March (Art. 142, Mining Code), clear title and ownership of the mineral rights is assured indefinitely. Failure to pay the annual fees for an extended period can result in the claim being listed for auction (Art. 146, Mining Code). Such claims will be listed 30 days prior to auction; in order to prevent a third party acquiring the claim at auction the holder will need to pay the monies owed, plus a penalty payment.

 

DEVELOPMENT CONSIDERATIONS

In order to develop a mine an Environmental Impact Assessment (“Evaluación de Impacto Ambiental”, or “EIA”) will need to be conducted. Projects which are likely to result in the impacts outlined in Article 11 of the Environmental Law will require an Environmental Impact Study (EIS). The Environmental Law clearly outlines the content requirements and the timeline for the environmental permit process. Decisions on EIS are made by the relevant Regional or National Environmental Commission and may be appealed. In addition, under the 1981 Water Code, water rights are private property, separate from land and can be freely traded; permits are granted by the General Water Directorate (“Dirección General de Aguas” or “DGA”), if water is physically and legally available, such rights can be obtained free of charge.

A mining concession is not equal to ownership of the surface of the land. Both are separate rights, even if they share the same owner. Under the Mining Code, a holder of a concession, whether for exploration or exploitation, has the right to access surface land via an easement (Articles 120 et seq. Mining Code). These easements may be of different natures (e.g. rights of way, occupation, and water and power supply). They are established upon mutual agreement between the involved parties, or through a judicial decree. In any case, the amount of compensation in favour of the affected party must be previously determined (Art. 122,Mining Code). In some cases, the Court may allow the concession holder to use the requested easement during proceedings on damage and use, providing a guarantee or bond is made to cover such damages.

The holder of a concession has the right to fully enjoy the concession and any interference (including interference from the owner of the surface of the land) can be addressed with police force (Art. 53, Mining Code).

ENVIRONMENTAL REGULATION

See Chile Environmental Regulation.

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