Debate Surrounds SQM-Codelco Lithium Agreement: A Strategic Move or a Missed Opportunity?
The recent agreement between SQM and Codelco, labeled by President Boric as a pragmatic and unprecedented milestone in the National Lithium Strategy, has sparked significant debate. The strategy aims for state control over lithium production, a resource often termed as 'white gold'.
Critics argue that the agreement represents a missed opportunity for the state. SQM, seemingly in a weaker position due to Codelco's lease acquisition of the Salar de Atacama from 2030, could have faced a public, competitive bidding process for lithium extraction. This, critics suggest, might have yielded greater profits for the state compared to the agreement reached.
Under the agreement, SQM’s production quota increases by 300 thousand tons until 2030. From 2031, a joint venture is formed where SQM contributes assets and Codelco contributes mining rights. This deal, which effectively grants SQM access to the world's prime lithium deposit until 2060 without a bidding process, is seen as highly advantageous to SQM.
Critics highlight a 'hidden capitalization' of Codelco, with part of the profits (valued at US$4,000 million before royalties and taxes) from 2025 to 2030 serving to offset its high indebtedness. This aspect of the agreement is viewed as an indirect financial boost for the company.
The agreement also circumvents the creation of a national lithium company, with Codelco effectively taking this role, thereby avoiding congressional debate. Additionally, concerns have been raised about the agreement's impact on free competition, as it could create entry barriers in the Salar de Atacama and reinforce Codelco’s dominance in the Salar de Maricunga.
Way Forward for National Lithium Strategy
Despite the agreement, the National Lithium Strategy's goal to determine a network of protected salt flats and grant exploration permits to private companies remains crucial. This strategy aims to catalog available resources and potentially open future exploitation to competitive bidding.
The central question remains: Could the state have gained more by conducting a public, competitive, and transparent bidding process for lithium extraction, rather than finalizing this agreement? Critics argue that a bidding process, as opposed to private negotiations, generally yields better outcomes for the state, leading to the perception that this agreement is an exceptional concession in Chilean mining history.
