The recent rise in copper prices has once again raised a key question: if the metal climbs sharply, do mining regions receive more resources through the Royalty mechanism? The official response from the Ministry of Finance is clear: no.
By Camila Bejarano
According to the Ministry, the resources allocated to regions and municipalities through the sectoral levy do not depend on real-time copper revenues.
In the case of regional governments, the calculation is defined in Article 4 of Law 21,591, which created the new Royalty framework. The regulation establishes that the Regional Fund for Productivity and Development (FRPD) must receive the equivalent in pesos of 275,500 Annual Tax Units (UTA), based on their value as of December 31 of the previous calendar
year—equivalent to approximately US$270 million. This amount is transferred annually and guaranteed for nine years. Starting in the fourth year, it may be supplemented by additional resources defined in the national Budget Law.
In simple terms, regions have a legally guaranteed amount that does not automatically increase or decrease depending on whether copper trades at US$4 or US$6 per pound.
A similar logic applies to municipalities. Law 21,591 establishes that the Mining Municipalities Fund includes a fiscal contribution equivalent to 2,500,000 Monthly Tax Units (UTM), amounting to approximately US$205 million. These resources are distributed primarily among municipalities with greater dependence on the Municipal Common Fund or with lower own- source revenues. Therefore, there is no direct link between copper prices and municipal allocations, the Ministry of Finance explains.
How Royalty Distribution to Regions Has Changed
According to Fiorella Ulloa, Head of Regulatory Policy at Plusmining, it is possible to compare the situation before and after the Royalty reform—though with an important clarification.
“Before the Royalty, mining regions did not receive direct or differentiated revenues from mining activity. Copper revenues flowed to the central treasury and were redistributed generally, without a clear or traceable link to the territories where the mineral is extracted,” she explains.
Under the new law, the situation has changed. “With the current Royalty framework (approved in 2022), that dynamic shifted. Since 2024, specific territorial funds have been in place. In particular, the law created two main distribution mechanisms: the Regional Fund for Productivity and Development and two municipal benefit funds—the Mining Municipalities Compensation Fund and the Territorial Equity Fund—which ensure direct, permanent, and predefined transfers to regions and municipalities, especially mining communities.”
The amounts are already established in the 2025 Budget Law. Under the FRPD, Antofagasta receives CLP 13.868 billion, Tarapacá CLP 10.630 billion, and Atacama CLP 10.494 billion. The Metropolitan Region receives CLP 30.058 billion.
Under the municipal funds, Antofagasta receives CLP 17.893 billion from the Territorial Equity Fund and the Mining Municipalities Fund combined; Tarapacá receives CLP 8.156 billion and Atacama CLP 12.701 billion.
In budgetary terms, Royalty contributions through the FRPD represent approximately 13% of the regional budget in Tarapacá, close to 10% in Antofagasta, and around 10% in Atacama. “Beyond the percentage, the key point is that this is a structural source of revenue: it is established by law and incorporated into the regional budget every year,” Ulloa explains.
She agrees with the Ministry of Finance that “there is not necessarily an automatic transfer from higher copper prices to greater regional investment capacity in the medium term. The resources received by regions through the Royalty do not depend directly on copper prices, as their amounts are predefined in the Budget Law with a long-term projection of approximately nine years.”
However, she acknowledges an important nuance: “Higher copper prices increase the country’s aggregate fiscal revenues, including Royalty-related taxes paid by mining companies, which can expand overall fiscal space. Nevertheless, whether that additional space translates into more resources for regions is not automatic—it depends on budgetary and fiscal policy decisions at the central level.”
Where Higher Copper Prices Do Have an Impact
Juan Ignacio Guzmán, economist and CEO of GEM Mining Consulting, details the fiscal effects of rising copper prices and provides specific figures.
“For every one-cent increase per pound in the copper price, that is equivalent to approximately US$22 per tonne of copper sold. Considering that Chile produces between 5.3 and 5.7 million tonnes of fine copper per year, each additional cent—or US$22 per tonne—translates into an increase of roughly US$120 million to US$130 million annually in gross copper export revenues.
According to Budget Office (Dipres) estimates, this results in approximately US$30 million in additional fiscal revenue per year, within a range of US$25 million to US$40 million, depending on company costs and other variables.”
“Regarding Law 21,591, for each additional cent per pound—depending on various factors—the Royalty contribution generally increases between US$8 million and US$15 million.”
Comparing a price of US$4.5 per pound with one near US$6 per pound—a difference of 150 cents—could imply additional export revenues of between US$18 billion and US$21 billion, and increased fiscal revenues on the order of US$4.5 billion.
For context, the tax reform proposal that did not pass during the current administration sought to raise US$3 billion. “Meanwhile, President-elect Kast has proposed reducing fiscal spending by US$6 billion annually. Therefore, US$4.5 billion is a highly significant figure in Royalty terms,” Guzmán notes.
If sustained, the additional 150 cents per pound could generate between US$1.5 billion and US$2.0 billion more than projected under a US$4.5 price scenario. “Considering that the Stabilization Fund’s structural annual budget is around US$450 million, we are talking about extraordinarily significant revenues,” he adds.
Thus, while regional funds are legally defined at relatively stable amounts, a copper boom can generate billions of dollars in fiscal impact—primarily at the central government level.
How the Resources Are Used
The key issue is not only how much funding arrives, but how it is spent. Álvaro Merino, Executive Director of Núcleo Minero, notes that the Mining Municipalities Fund and the Territorial Equity Fund came into force on January 1, 2025, supplementing the Municipal Common Fund.
In 2024, the Mining Municipalities Compensation Fund benefited 44 municipalities, transferring CLP 22.891 billion. In the first half of 2025 alone, it had already transferred CLP 26.360 billion.
The Territorial Equity Fund distributed approximately CLP 70.755 billion in 2024 and CLP 82.953 billion in the first half of 2025 to 301 municipalities. Altogether, municipalities received more than CLP 218 billion in 2025 through these mechanisms.
However, according to data from the Comptroller General’s Office updated as of September 2025, of the 307 municipalities that received Royalty funds, 164 complied with reporting requirements to the Undersecretariat for Regional and Administrative Development (53%), 134 did not comply (44%), and nine partially complied (3%).
Merino is critical of how the funds have been allocated. According to a September 2025 report by the Council for Transparency, 37% of 2024 funds were allocated to investment initiatives, 23% to goods and services, 18% to current transfers, 12% to non-financial asset acquisition, and 8% to personnel expenses.
He argues that “the spirit of Law 21,591 is not being fully upheld. Its purpose is precisely to compensate for existing budgetary gaps among municipalities—under the Territorial Equity Fund—and, in the case of the Mining Municipalities Fund, to offset the externalities of mining activity in those communities.”
“In summary, these resources should be used to promote investment, development, and improvements in communities’ quality of life,” Merino emphasizes.
Antofagasta Regional Government Rejects Criticism
In a recent interview with the Financial Times, Marcela Hernando stated that “governors do not know what to do with Royalty funds and are effectively gambling with them,” casting doubt on their execution.
Her remarks prompted a response from Antofagasta’s Regional Governor, Ricardo Díaz, who defended the administration of the funds. “The statements made by Congresswoman-elect Marcela Hernando are mistaken and reflect a lack of knowledge or information, since it was the Legislative Branch itself that defined how and on what these resources should be spent,” he stated.
Díaz maintains that Royalty resources represent a significant share of the regional budget and demonstrate high levels of execution. According to official figures, total budget execution for 2025 reached 95.9%.
“Royalty funds account for approximately 13% of the revenues available to regional governments for investment programs. If one reviews the 2025 budget execution, the overall execution rate was 95.9%. Therefore, Royalty resources have indeed been used and invested in accordance with the law, which clearly specifies their purpose: productive development, innovation, and territorial development.”
As a concrete example, the governor cited ongoing initiatives in the region funded through Royalty resources, including medical specialist training programs aimed at reducing longstanding healthcare gaps, as well as research and development programs addressing new productive sectors such as green hydrogen, Mining 4.0, and clean energy.
Source: Diario Financiero