In 2021, Chile’s way forward as a democracy reached a crossroads when its December general election came down to a contest between José Antonio Kast, a right-wing populist similar to Brazil’s Jair Bolsonaro, and Gabriel Boric, a 35-year-old former student activist from the left.
The possibility of Kast’s victory endangered the promises of Chile’s new Constitution when it was yet to be formalized. The country voted by plebiscite to rewrite its 1980 Constitution, which was adopted under the dictatorship of Augusto Pinochet. Kast, an open supporter of Pinochet, was an obvious threat to the new document’s promises of a more inclusive democracy and the institutional rejection of the dictatorship’s legacy.
A Kast presidency would have also cut short Chile’s efforts to fight climate change, much as Bolsonaro has done in Brazil. Kast had promised to strengthen legal protections for companies that receive permits to extract Chile’s natural resources.
Boric defeated Kast in December with 56% of the vote. As a candidate, Boric pledged to elevate the climate crisis as a top government priority. His election now virtually ensures that climate protections will be enshrined in the Constitution that Chile will soon rewrite.
The biggest sticking point in this debate is the future of the mining industry. Chile has the world’s largest reserves of lithium, an essential material for electric car batteries as industry transitions to alternative energies. Chile also has the world’s largest copper reserves, producing about one-third of the global supply.
Lucrative as they are, the mining processes for copper and lithium damage the unique and increasingly vulnerable ecosystems surrounding them. Copper is mined in the arid northern regions and in the Andes, while lithium is extracted from salt flats in the Atacama Desert, consuming huge amounts of water in drought-prone areas with local populations.
At present, Chinese demand drives copper and lithium extraction. Beijing pushed out the U.S. and Canada, on whom the Chilean commodity market was once far more dependent, years ago. China is currently Chile’s largest purchaser of both minerals, and its largest trading partner. Outgoing president Sebastian Piñera was friendly to Beijing and actively worked to make Chile more attractive to Chinese investment.
China exerts a great deal of control solely by the scale of its mineral consumption. In 2019, regulators in Chile approved a $4.1 billion deal that gave Tianqi, a Chinese mining firm, a 24% stake in SQM, one of Chile’s two major lithium firms.
As far back as 2005, China benefitted from an agreement between trading company China Minmetals and the Chilean national copper firm, CODELCO, that gave the former access to copper at a below-market price, at a time when copper prices were increasing internationally. When the agreement expired in 2017, China Minmetals signed a new accord with the Piñera government that let it explore for lithium and acquire lithium mines in Chile—this time without an expiration date.
China’s investment in mining — and other industries such as agriculture — has significanty benefitted Chile’s private sector. But the extent of China’s economic control is seen by many as a clear erosion of Chilean sovereignty. Nowhere is this more true than Chile’s electric grid, of which China now controls about 60% after purchasing domestic firms Chilquinta and General Electricity Company in 2019 and 2020.
Beijing’s activity in Chile is by no means an exception in the region; its practices have been the same in many Latin American countries, such as neighboring Argentina and Brazil, to the same effect.
With a new Constitution in play, it is hard to imagine there will be no shift in Chile’s economic relationship with China. Boric is committed to changing lithium mining practices and the sectors where profits are distributed. As a first step, he has vowed to create a national lithium firm, modeled on CODELCO, and to put tighter constraints on private-sector mining companies.
He has also called for a pause on new bids for mining contracts, which the Piñera government sought to increase in an effort to raise lithium production to 400,000 tons per year. Boric is not alone in this. On Jan. 4, lawmakers from Chile’s centrist Christian Democrats introduced a bill to prohibit new bids in the final months of a presidency.
Since Boric has been elected, Beijing has not seemed bothered by the possibility of change in the investment relationship. It is more likely that China will adapt rather than react and will see Boric as a temporary inconvenience. But if Boric is able to implement his full agenda, he may surprise China and the rest of the world’s largest copper and lithium consumers.
Sarah White, M.A. is Senior Research Analyst & Editor at the Lexington Institute. The views expressed are the author's own.
