By Fabian Cambero
SANTIAGO (Reuters) - Chile’s mining sector is looking for certainty amid political fog in the world’s top copper producer, which is redrafting its constitution and on Sunday is headed for a polarized vote led by outsider candidates on the far left and right.
The front-runners have kept their powder dry on copper in the campaign https://www.reuters.com/world/americas/chiles-campaign-trail-goes-virtual-all-two-candidates-forced-into-covid-lockdown-2021-11-04 so far, hinting at hikes to royalties on mining profits. There has also been vague talk from far-right poll leader José Antonio Kast to allow more private investment in state miner Codelco.
The Nov. 21 presidential vote, the first since months of angry protests over inequality https://www.reuters.com/article/us-chile-protests-explainer/explainer-chiles-inequality-challenge-what-went-wrong-and-can-it-be-fixed-idUSKBN1X22RK rocked Chile in 2019, has become a polarized battle between a leftist coalition led by 35-year-old protest leader Gabriel Boric https://www.reuters.com/world/americas/chile-leftist-presidential-candidate-boric-tests-positive-covid-19-2021-11-03 and ultraconservative Kast https://www.reuters.com/world/americas/chile-conservative-kast-maintains-lead-final-pre-election-opinion-polls-2021-11-06.
The battle will be key for the mining sector, which has increasingly come under the spotlight in the region as governments looked to bolster state coffers to drive an economic rebound after the impact of the coronavirus pandemic.
Kast and Boric are from outside Chile's mainstream political parties, with voter anger over pensions, healthcare, education and costs driving demand for change - similar to the abrupt rise of former teacher President Pedro Castillo https://www.reuters.com/world/americas/perus-castillo-mulls-cabinet-reshuffle-under-pressure-opposition-2021-08-24 in neighboring Peru.
"There are candidacies that are at opposite extremes and there is talk of a polarization as a factor that can make any next government complex," said Alejandra Wood, Santiago-based executive director of the Center for Copper Studies (CESCO).
"The presidential campaign adds uncertainty," she added.
The country is already debating a new constitution https://www.reuters.com/world/americas/chile-begins-down-uncertain-road-writing-new-constitution-2021-05-17 and a controversial mining royalty bill https://www.reuters.com/article/chile-copper/royalty-bill-will-put-chiles-private-miners-out-of-business-trade-group-says-idUSL1N2PW1QR, which could sharply hike tariffs on the sector. A new glacier protection law, which could impact some key mines, also still needs to be defined.
Chile is the world's No. 1 producer of copper and one of the biggest suppliers of electric battery metal lithium, with demand rising amid a global shift toward electric vehicles.
Kast and Boric are the favorites to make it to a second-round run-off. If no candidate gets a simple majority on Sunday, the top two will compete in a head-to-head ballot on Dec. 19. A host of legislative and regional offices are also up for grabs in Sunday's election.
'INVESTMENT DROUGHT'
Francisco Acuña, analyst at industry consultancy CRU, said most candidates were aligned on plans to improve sustainability and lower emissions from mining, though there was little clarity on specific measures to achieve it.
Left-wing candidates like Boric and Senator Yasna Provoste have discussed royalties while Kast has proposed vague changes to mining property law to rev up the sector, including opening up state miner Codelco to more private investment.
"The risk is the uncertainty because there is no clear idea yet of what changes would look like," Acuña said.
Diego Hernández, president of the National Mining Society (Sonami), which represents firms in the sector, told Reuters that whoever won the presidential race would need more investment in mining to propel growth, so they would need to sit down and negotiate terms.
Hernández said Kast, Provoste and center-right Sebastián Sichel appeared to recognize the importance of mining in different forms, though they criticized Boric's talks of a more productive role for the State as "confusing."
"With all the needs that the country has, we know that this (large state investments) is not available. Deep down there is a lack of maturity or reality," he said.
Hernández said the elections would spark legal uncertainty, which could lead to a period of "investment drought" that could delay the availability of new copper and lithium to meet the expected increase in demand.
The government has projected mining investments of about $70 billion through the end of the decade, most from private firms.
CESCO's Wood said the sector needed clarity quickly to help make sure developments moved ahead.
"I think the industry is waiting for signals of greater certainty and stability to make investment decisions," she said.