Opinion column by Johannes Rehner, ICLAC senior researcher and director of the Institute of Geography of the Pontificia Universidad Católica de Chile
The content of the National Lithium Strategy (april 2023) aroused some criticism regarding the incidence of the State in economic decisions and its direct participation in the extraction and processing of raw material.
Such criticism is familiar, although such incidence is very common in other countries; but in this instance it is striking, because in the case of this strategic metal the state role is manifested in the contracts with SQM and Albemarle: here the royalty has been implemented since 2016 and far exceeds the one recently approved in Congress (3.5% vs. 1%). In addition, the companies committed to invest millions of US$ in science and even domestic sale of the extracted material is established to achieve a productive chaining in Chile. The international experience provides support for such state incidences.
"The example of Asian countries shows that it can be normal for the state to convene interested economic agents and strategically decide how to proceed, assessing the options."
Success stories such as those of Japan, South Korea, Taiwan and China have shared -with varying temporalities and different political systems- features of "Asian developmentalism". This recognizes the fundamental role of business, is based on the search for competitiveness, encourages international trade to increase capital and boosts innovation to avoid the "middle-income trap". However, the ideological disdain and demonization of the state commonly found in Chile is alien to Asian developmentalism.
Neither Japan nor Korea, much less China, has ever relied entirely on the market for the optimal allocation of resources, and the state has set the long-term development standards. Public-private partnerships and strategic intervention by the state have been the basis of their industrial success and often involve measures that would be described here as interventionism.
The lithium sector presents an opportunity to go beyond granting extraction permits and receiving taxes: to think about development and evaluate options, benefits and negative externalities. In lithium this is relevant for partially contradictory reasons: Asian demand projection for lithium is very high, but few dare to forecast beyond 2035 because of the technological alternatives that may become viable; the mineral plays a key role in addressing climate change and promoting clean and renewable energy, but has massive impacts on the fragile and poorly studied ecosystems of the salt flats.
The Asian countries' example shows that it can be normal for the State to convene interested economic agents and strategically decide how to proceed, evaluating the options. This, because of its own responsibility, or at least, because it owns the resources. The concept that state-owned companies do not generate income is false, as CODELCO's contributions to the Treasury show conclusively; and the recurrent argument that foreign companies will not invest if the State implements important payments or forces collaboration is unsubstantiated, especially in mining.