Copper boom: The keys to take advantage of the bullish rally amid the increase in demands in an election year

Various experts analyze how the resources provided by the red metal to the local economy could be better used, with a view to the development of the country.

Under the gaze of the various players in the world economy, metals and other raw materials have become a kind of safe havens for the global revival. It is enough to analyze the behavior of copper to understand why.

And it is that the race of the red metal seems to have no brake. The commodity concluded its last session on the London Metal Exchange at around US $ 4.36107 a pound, the highest value of the red metal since August 2, 2011, when it traded at US $ 4.36810 a pound.

Although it is uncertain how long this rally will last, experts estimate that, at least in the short term, copper will continue to break barriers and may break all-time highs, raising questions about how Chile could take advantage of the copper bonanzas to promote the development of the country, in a year of important elections and profound reforms. constitutional.

New mining taxes

In this framework, an option that some parliamentarians have proposed translates into increasing the tax burden of the mining sector, which not only would imply higher tax collection, but could also stimulate investment in progress.

One of them was Congressman Giorgio Jackson, from the Democratic Revolution, who stated in a letter to El Mercurio that, given the current context, it becomes relevant to rethink the mining tax, in order to capture higher rents than is currently done.

From his perspective, the money could be invested with a view to the future, in areas such as education, science, infrastructure, technology.

For his part, the deputy of the Social Green Regional Federation party, Jaime Mulet, defended the creation of an additional tax on the exports of large mining companies, arguing that the profits should be shared by the State and the companies in the sector.

Joaquín Villarino, president of the Mining Council, referred to this matter, who contextualized the economic state of the industry.

“Of the total annual flow of mining, this withdraws as profits only 10%, the same that the treasury withdraws for taxes or royalties, while the remaining 80% remains, in general, within the country, in investment, remuneration , contractors, exploration, it is a direct injection into the national economy, “he declared in an interview with Canal 24 hours.

Added to this, he mentioned that “of the US $ 45 billion that mining has been generating in the last decade on average, mining companies withdraw US $ 4.5 billion as profits.”

The parliamentary demands were analyzed by Juan Carlos Guajardo, executive director of Plusmining, who warned that “when these price bonanzas occur, there is certainly the impression that silver is rising in mining, but you have to look at this in a long-term perspective. term, because they are issues that arise in the wake of this price boom. ”

Along these lines, he added that “it would be necessary to study very well what would be the mechanism that is being proposed, so as not to kill the goose that lays the golden eggs, because a tax certainly has a very positive side, which is the increase in income. of the treasury, but it can also affect investment in the country, and in the end it does not end up fulfilling the objective that is sought “.

In this context, the economist from the University of Chile, Joseph Ramos, ruled out that an increase in the tax burden of the mining sector would be effective. In an interview with EmolTV, Ramos assured that “mining cannot be our permanent dairy cow.”

The expert explained that this is not the time to raise or add new taxes, since “we are in a situation of reactivation, and any increase in the tax burden could stop this process, which is in its infancy. Therefore, any increase has It must be gradual, as long as the recovery is consolidated, otherwise it will kill it, “said Ramos.

However, it should be noted that the rise in the value of copper has as a collateral effect the growth of the fiscal coffers. In fact, the December projection from Chile’s Budget Office (Dipres) revealed that copper revenues could reach US $ 4.4 billion this year, compared to the US $ 3.3 billion it forecast in September.

In this sense, for Hermann González, an economist at Clapes UC, the imposition of new tariffs could reduce the competitiveness of Chilean industry in international markets.

“A measure like that would affect a sector that has already been hit, and therefore could create a disincentive to the investment that is needed, both domestic and foreign. A tax could harm the attractiveness of mining,” said González.

So how could this boom be better exploited?

An alternative is defended by Alejandra Wood, executive director of the Center for Copper and Mining Studies (Cesco), who affirms that if royalties financed long-term investment in research and development, the level of wealth could be maintained. in the country, despite the fact that mineral resources are degrading.

“We believe it is convenient to change the specific tax on mining activity for a true royalty, the one that best captures resources for the State in high price cycles. We are sure this will be a discussion in the Constitutional Convention and that the royalty allows a greater flexibility in its distribution for specific purposes, including support for regional programs and education to ensure future value creation, “the analyst said.

This while the vice-rector for Innovation and Development of the Universidad del Desarrollo, Daniel Contesse, argued that, regardless of the conjunctures in the value of copper, it is important to be aware that Chile has a mining vocation.

Thus, Contesse argued that improvements in public policies and institutions allow better use of the mining cycle.

“We have to develop a more sophisticated mining economy, improve it, and based on our comparative advantages, build longer-term measures that connect with innovation and knowledge. And although there have been advances in this area, these are little known”, he pointed.

And he added, “to push that frontier we must invest and deepen the connection between science, development and the world of mining. On the other hand, when making short-term operational decisions, it is important to keep in mind the long term. term, balance better, and that is achieved to the extent that human capital is well prepared. ”

The key for the industrial civil engineer is to have more advanced professionals and technicians to face the challenge of linking mining to a society closer to knowledge. In this context, the copper rally becomes an optimal scenario to invest in these aspects.

Source: Emol