A prosperous and politically stable nation, Chile enjoys abundant natural resources and is the world’s largest producer of copper
Chile is a country of nearly 18 million people that occupies a narrow stretch of land running down the west coast of South America. Its neighbours are Peru, Bolivia and Argentina, and the country is bordered to the west by the Pacific Ocean, with the Drake Passage to the south linking the South Atlantic and Pacific oceans. Chile’s national language is Spanish, and its capital is Santiago, home to 6.3 million people.
The unique nature of Chile’s geography – stretching north to south some 4300 km and 39 degrees of latitude – means that it enjoys a variety of climates and topographies. This diversity ranges from the Atacama desert (the most arid in the world) in the country’s north to the mountainous and snowy expanses of the extreme south.
Economy and industry
Chile is considered one of the more prosperous and stable nations in South America. Indeed, the economy was one of the world’s fastest-growing in the 1990s and 2000s. This is in large part due to Chile’s abundant natural resources, which include copper, lithium, potash, iron ore and precious metals.
The mining industry plays a significant part in Chile’s economy. The country has a long-standing history in resources, with coal and silver mining having taken place as early as the 18th century. In modern times, 50 per cent of Chile’s national exports are attributed to the mining sector, and the industry contributes around ten per cent to the country’s overall GDP.
The mining industry is a major employer in the country, and EY reports that the sector is responsible for employing around eight per cent of Chile’s workforce directly and indirectly through mining. There are currently 120 AusIMM members based in Chile.
Some of the world’s largest mining companies have operations in Chile, including Anglo American, Barrick Gold, BHP, Freeport McMoRan, Glencore and Rio Tinto. State-owned mining company Codelco is also a major presence in the country, and for the period ending 30 June 2018 had produced 875 000 tons of copper.
Copper is a major export for Chile, and it is the world’s top copper producer. Copper exports provide around 20 per cent of government revenue. In 2016, Chile provided nearly 27 per cent of global copper production, and the country has 210 Mt of copper reserves. BHP’s Escondida, located in northern Chile, is the world’s largest copper-producing mine. Chile is also the world’s second largest producer of lithium, and is home to the largest extractable lithium reserves.
The country has enjoyed significant foreign direct investment, helping to grow its mining industry. Overall, Chile is viewed favourably by investors due to its political stability, competitive tax regime and well-developed and maintained governance frameworks and infrastructure. Furthermore, the country is open to trade and is party to 26 trade agreements with countries around the world, including a free trade agreement with the United States since 2004, with China since 2005 and Japan since 2007. Major foreign investors in Chile include China, the United States and Brazil.
However, like all mining jurisdictions, Chile’s mining industry faces challenges relating to:
- water availability and cost
- declining ore grades and more difficult orebodies
- issues around productivity
- community opposition to mining activity.
Strong leadership and sound operating practices will be needed to ensure that Chile continues to make the most of its abundant natural wealth.