Chile's Latest "National Lithium Strategy" Seeks To Promote State Control And Public-private Collaboration

• Law Firm: Herbert Smith Freehills
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Energy and Natural Resources, Corporate and Company Law, Contracts and Commercial Law, Energy Law, Mining, Government Contracts, Procurement & PPP
• Author: Mr Christian Leathley, Edward Dougherty, Daniela Paez and Carlos Hafemann
• Published date: 16 May 2023

On April 20, 2023, Chile's president, Gabriel Boric announced Chile's new policy on the extraction and production of lithium, the "National Lithium Strategy" (the "Strategy") (speech available here). The Strategy is comprised of a set of high-level principles and general measures aimed at changing the framework applicable to the extraction and production of lithium in Chile. According to the Government, the Strategy seeks to make Chile the "biggest lithium producer in the world ... based on ... public-private partnerships," while extending its economic benefits to Chilean citizens and protecting the environment. Although the Strategy's details are yet to be determined, the Government has made clear that such a determination will secure both the state's control over lithium exploitation and its respect for ongoing private contracts.

In this note, we provide an overview of the main new changes announced in the Strategy, and its impact on current operators.

What's new?

One of the main changes is the creation of a state-owned company, Empresa Nacional del Litio (subject to Congressional approval) that will be involved in the "whole [lithium] productive cycle, from exploration to adding value" through the conclusion of public-private partnership agreements ("PPPA"). The Minister of Finance recently expressed that these PPPAs may take the form of joint venture agreements between state-owned enterprises and private investors, shareholders agreements, or a similar type of contract. According to the vice-president of CORFO (the State agency that "owns" the Atacama Salt Flat), this initiative is motivated by a desire to secure the state's control over the exploitation of lithium.

In any case, the Strategy makes clear that any measure should also incentivize investors to provide "resources, research and development, and market connections." Also, Chile's president announced that until the Empresa Nacional del Litio is created, existing state-owned companies, Codelco and ENAMI, will exercise the responsibility assigned to it.

The Strategy also seeks to introduce other changes, such as the creation of a governmental agency in charge of specialized research and development (Instituto Tecnológico y de Investigación Público de Litio y Salares), and the introduction of a protection program for salt flats from exploitation. The goal is that 30% of salt flats in Chile are completely protected before 2030.

No direct takings or nationalization

Prior to the issuance of the...