After Chileans went to the polls to elect their new constitutional assembly at the weekend, Lithium Power International Ltd (ASX:LPI) is reflecting on how the newly elected body will impact the country's economic development.
The South American nation, home to the world’s largest lithium reserves and just under 20 million people, has voted in 50 members to draft a new constitution following calls for political and economic reform in 2019.
Right-wing parties secured an absolute majority in the 50-member council, meaning the conservative contingent can easily pass proposals and largely control constitutional reform.
With a majority-controlled assembly now in play, Lithium Power International CEO Cristobal Garcia-Huidobro forecast renewed interest in country’s lithium prospects.
“LPI expects this outcome will provide further clarity and confidence in Chile as an investment destination for any potential funders and/or interested parties in the Maricunga stage one lithium brine project,” he explained.
Chileans call for constitutional reform
Following Chile’s national plebiscite on September 4, 2022, when a proposed constitution was rejected by a 62-38 margin, lawmakers announced a new agreement in December 2022.
One of first draft’s considerations would have made the country a "plurinational state", recognising the land and resource rights of Chile’s indigenous peoples, who make up around 13% of the population.
If ratified, the proposed constitution would have been one of the world’s most progressive. However, the first draft was considered too radical and too long by a large majority of the Chilean people, with 62% of voters rejecting it and prompting last weekend’s election.
Now, a second attempt is being made to draft a new constitution with different rules.
Back to the drawing board
In a nutshell, the new blueprint states that a group of 50 directly elected constitutional advisors will draft changes to the constitution, based on a preliminary draft prepared by 24 experts appointed by Congress.
A 14-member body (also recruited by Congress) will ensure that the proposed text aligns with the 12 institutional and fundamental principles outlined in the agreement.
Simply put, the new agreement ensures that council members will be directly elected, mandates equal representation for both men and women and underscores input from indigenous peoples.
In addition, a three-fifths majority vote will be required to approve the new articles — lower than the two-thirds majority required in the previous convention.
The expert commission will work on a first draft until June 6, with the Constitutional Council to begin work on the same day.
With five months to finalise the charter, the council must deliver the draft constitution by November 6.
A mandatory referendum will be held on December 17, 2023, when Chileans will either approve or reject the new text for the constitution.
Election results
At the weekend, Chilean right-wing parties won more than a 60% majority of constitutional council members, paving the way to freely draft a new constitution and remove the veto option for the left-wing camp.
This is a sharp shift from the left-wing majority elected in the first stage of the process in 2021, and who drafted the text presented in September last year.
The Republican Party, which is mostly comprised of conservative, right-wing members, has now become the leading political force in Chile. It holds 34% of the vote with its 23 members, giving it a veto on amendments.
Meanwhile, President Gabriel Boric’s left-wing coalition garnered about 30% and 16 seats, which included indigenous members.
A separate coalition of traditional, right-wing parties gained more than 20% of the vote with 11 seats.
Finally, Centrist parties took the remainder of the vote but failed to gain any seats.
What now?
Lithium Power International expects the newly elected assembly to have a positive impact on the recovery of economic activity and foreign investment in Chile.
The company claims a majority-controlled contingent will eliminate uncertainties created by the previous constitutional process and provide confidence in the long term on Chile’s political stability and quality of its institutions.
LPI is focused on developing Chile’s next sustainable, high-grade lithium mine on the Maricunga Salar, part of South America’s famed lithium triangle.
The Maricunga Project in northern Chile.
The asset is the most advanced pre-production project in South America and is currently under development as a staged lithium hub with expansion upside.
A definitive feasibility study for Maricunga’s stage one operations forecast a 20-year mine life with a net present value of US$1.98 billion before tax, while the hub is expected to generate 15,200 tonnes of lithium carbonate equivalent every year once it enters production.
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