Codelco-SQM Agreement Boosts Treasury Revenue with Increased Lithium Production

Impact on Tax Collection from Lithium Production Increase

The collaboration between Codelco and SQM for lithium exploitation in the Salar de Atacama until 2060 is set to significantly enhance the Chilean Treasury's revenue. The agreement's potential impact on tax collection from lithium, a mineral taxed via mechanisms like the mining-specific royalty and the First Category Tax, is substantial.

Projected Treasury Revenues

Although detailed estimates from the Ministry of Finance or the Budget Office (Dipres) are pending, former Budget Director Matías Acevedo predicts a notable increase in state revenue. Based on an average lithium price of US$20,000 per ton, Acevedo forecasts that between 2025 and 2030, the Treasury could receive about US$3.4 billion, approximately 1% of the Gross Domestic Product (GDP), with an annual contribution of 0.2% of the GDP.

Codelco-SQM Production Increase

The agreement foresees SQM ramping up its total production by a third, aiming for 300,000 tons of lithium extraction. In the initial phase (2025-2030), Codelco is entitled to profits from the sale of 201,000 metric tons of lithium carbonate equivalent (LCE), translating to annual sales of 33,500 tons of LCE.

Long-term Fiscal Benefits

Looking further ahead, the fiscal benefit could amount to US$3.4 billion annually, solely from the joint venture operations, if the price remains constant. This figure significantly surpasses the expected gains from public spending efficiency measures included in the fiscal pact.

Comparative Analysis with Fiscal Pact Goals

Acevedo highlights the comparative advantage of the increased lithium production revenue over the fiscal pact's efficiency measures. The projected 0.2% GDP contribution per year exceeds the anticipated gains from public spending efficiencies (between 0.11% and 0.13% of GDP) by 55%.