Johanna Sydow: Sara Larraín, let’s start with some good news: A mining tax law has been in place in Chile since May. What exactly does that mean, and what has changed as a result?
The new mining tax law is the first tax instrument with redistributive effects. It aims to allocate more of the resources from large-scale mining in particular to the development of the country’s mining regions and its poorest communities, with a portion going to the central government. To achieve this, the taxation of large mining companies has been changed and more funds made available to the regions. The money goes into three funds: a fund for mining communities so that there is compensation for the extraction of natural capital from these communities; another fund intended to finance public investment in the 300 poorest and most vulnerable communities in the country, with amounts varying depending on per capita income; and a third fund whose resources go to the central government, the Fondo General de la Nación, i.e. the general state fund for financing research, education, public construction projects, health care, etc.
You don’t sound entirely convinced …
As I said, this is the first time there is any redistribution at all. With other tax instruments, such as the green tax levied on CO2 emissions and local pollutants, none of the money collected – not a single peso – made it to the five affected municipalities where the 28 coal-fired power plants were located, or to other municipalities polluted by other industries. None of it, none at all, even though the money could have had a positive impact on the local healthcare system. Schools for children with cognitive deficits could have been financed with these funds, epidemiological studies, and the treatment of people with chronic illnesses caused by pollution. But none of the revenue raised by the environmental tax is earmarked for the affected municipalities. The central government collects the pollution tax and the money goes into the general state fund.
Let’s stay with the more positive news for a moment: Chile Sustentable, your organization, was instrumental in advising on a law on the closure and decommissioning of mines. What was that about, exactly?
This law was enacted because there are more than 500 untreated spoil tips in Chile today, some of which have been abandoned, while others are located in mining concession areas that are still active. Since there had not been a law before, no one was held responsible for the environmental damage, which is a burden for all Chileans. The new law regulates this responsibility for the decommissioning of mining sites and the environmental assessment of mining projects from the moment the first money is invested in them. It ensures that the investor will bear the costs of closure and remediation of the contaminated sites, so that these will not be at the expense of the Chilean society.
Your country touts itself as «Chile, mining country». That sounds rather inviting from the perspective of mining companies. What do you think about that?
This slogan is unacceptable to us. The thing to know here is that Chile wanted to practically triple copper production, particularly the production intended for the world market. Others wanted to extract less and instead introduce a second technological stage, mimicking Australia’s strategy. For at least the past five years, Australia has generated virtually the same or even more revenue with consulting services and new technology development as from mining or selling copper. There were a number of ideas to overcome the phase of purely extractive mineral production in Chile and to create a second level related to the topic of mining and the concept of a mining country.
What did you suggest instead?
We were advocating for mining to move into a phase of adding value, creating jobs, increasing social benefits and restoring the environment in the affected areas. While we lost that fight, we did create a document that laid down a number of basic sustainability criteria that are a prerequisite for mining to continue in Chile. In this sense, the recently adopted mining levy is a step in the right direction.
Speaking of value creation: what would it take to get more of that for your country?
Value creation is only one of the elements that are important. Chile will be supplying raw materials to Germany and Europe under the updated EU-Chile trade agreement on critical minerals. This agreement, which has a special chapter on raw materials and energy, also contains language about compliance with environmental impact studies and environmental impact assessments. But there is no mention of respect for indigenous communities. The ILO Convention 169 concerning the consultation of indigenous communities is not mentioned, even though it states that these kinds of mining projects must be approved in advance by local communities. It must be noted here that, when it comes to lithium, the mining projects are located on salt flats, most of which are located in indigenous areas. It is therefore my opinion that the conditions for extraction should be addressed as the first prerequisite for access to raw materials, and only then the issue of value creation.
What do you consider to be the most important conditions for extraction?
Chile does not have a current territorial study. But how can you evaluate the environmental impact of mining if there is no description of the ecosystem in which the mining is to take place? Next, the territorial rights of the indigenous communities must be taken into consideration. Lithium is mostly mined in the indigenous development area of Atacama La Grande, which contains several salt flats such as the Salar de Atacama, which is currently being exploited. These are considered indigenous development areas under Chilean law and can therefore only be exploited with the free, prior and informed consent of local communities.
And has this consent been granted?
By some of the affected communities, yes, but not by all of them. But how was it obtained? By providing a significant amount of money both directly to the Council of Atacameño Peoples and indirectly to the regional government. In other words, negotiations are generally not based on an adequate environmental impact assessment and respect for indigenous and cultural rights, but on money. The trade agreement between the EU and Chile does mention citizen participation and the European Aarhus Convention, which regulates access to information and is the equivalent of the Latin American Escazú Agreement. The latter became effective in 2021 and is an agreement on access to information, jurisdiction and public participation in environmental matters in Latin America and the Caribbean. But citizen participation without consideration of ILO Convention 169 can result in the result in the rights of indigenous communities being violated.
With regard to the entire country: how would you define successful value creation?
First of all, it would be ideal if the jobs were truly local, not just created in Santiago or more industrialized areas, or filled by Germans or Chinese working in these industries. The next question is what technology will be used. The one currently employed for lithium extraction is environmentally unsustainable. It has major negative impact on the water supply of the salt flats, which are primarily wetlands in the Andes rather than mining areas. So value creation has an environmental component, a social component; it’s about working conditions, and it has a technological component that is absolutely fundamental.
Chile and Germany reportedly renewed their raw materials partnership earlier this year, and in this context there was an agreement between the copper producer Aurubis, a German smelter and the Chilean state-owned mining company Codelco. Supposedly, this is about technology transfer as well.
We don’t know anything about this agreement and the renewal of the partnership with Codelco. Germany has long maintained technological cooperation with Chile; including, but not limited to, in the areas of non-conventional renewable energies and energy efficiency. But in other areas this is not the case. Five or six years ago, there was cooperation with Germany on sustainability in the mining sector, but nothing was implemented and there is no progress in terms of protocols or regulations. We also have not seen any new proposal for copper mining, not to mention lithium mining or other industries covered by the agreement between Chile and the European Union. Let’s just take green hydrogen as an example: its production requires water, which is in short supply in Chile, particularly in the central and northern parts of the country. It must be obtained through desalination, which, in turn, is a very energy-intensive process with massive impacts on the coast. And Chile still has no guideline for the desalination process.
Is it true that there are currently no areas in Chile where mining is not permitted? That mining even takes place in the glaciers because there is no law that protects certain areas?
Yes, that is correct. There is an environmental impact assessment process, but project after project is waved through, many of them in protected areas. The only exceptions are the national parks, which have the strictest legal protection status. To protect glaciers, uphold the rights of indigenous peoples and preserve wetlands, we have to fight each mining project individually.
Chile Sustentable has been a strong advocate for glaciers ...
... because for Chile, the glaciers are now the only safeguard against water shortages, droughts, mega-droughts and the decline in precipitation caused by global warming. The Maipo River, which provides 80 percent of the drinking water for the population of Santiago as well as the water for 120,000 hectares of agricultural land and all of the industry in the Maipo Valley, is 60 percent fed by Andean glaciers. As soon as the snow melts in the spring, it is the glaciers that replenish the river, thus securing the crops in the fall and the water supply for Santiago, where 40 percent of Chile’s population live. Without the glaciers, there would be no water.
Much of the copper mining takes place up near the glaciers, however.
In Chile, copper is mined in the high mountains. Citizens’ initiatives have been fighting for a law to protect the glaciers since 2006, and we have managed to introduce six bills to this purpose in the National Congress, but so far without success. Without the glaciers, there will be no water, no cities, no agriculture, no schools. Without the glaciers, there will be nothing. Chile can survive with less mining, but not with less water. It is said that a law to protect the glaciers would hamper the mining industry. But the truth is that the opposite is the case. Without the glaciers, mining won’t be possible, either.
Can you cite an example?
The Chilean copper mining company Codelco has encroached on several glaciers. It has destroyed the Río Blanco glacier in the Aconcagua River basin and uses other glaciers as landfills, as do many other companies. About ten years ago, in 2011, Codelco applied for an expansion of the mineable area, which, according to the environmental impact assessment, would destroy 100 hectares of glacier. This led to a huge public outcry and the project was rejected. Chilean society has recognized the value of glaciers to the country’s water security by now, but mining companies continue to fight legislation for their protection.
We know that the energy transition requires metals, but many other things do as well. Yet it is always claimed that it’s all about decarbonizing the economy, which ignores the fact that other sectors also contribute to high demand and that we need to think about how to reduce demand in those areas as well.
That is the core of the problem. In Chile, 60 to 70 percent of the population do not have access to hot water for personal hygiene. In Europe, no one wants to do without indoor heating, everyone has hot water. People don’t understand why they have to heat their apartments and houses in a different way, not with gas or oil or whatever. The dossier «Fairness in a Finite World» by the Böll Foundation and other organizations in several countries addresses this structural problem. This document and the analyses and proposals it contains remain absolutely valid to the challenge we face today with the energy transition, and thus for the question of whether it will be implemented in a fair or unfair manner.
So we need to focus more on the limits of global resources?
We need to focus more on the limits of the biosphere and, by extension, the rules for access to natural resources. However, we must not structure the discussion solely around those limits, but also on the basis of the right to development. Because the right to development also entails that you cannot just use up a country’s entire natural capital.
And what role should the Chilean state play in your opinion? Does the money from mining benefit the entire population or is it distributed as income over time?
Mining today is primarily about the extraction and export of unprocessed minerals, without value creation. And with the exception of the state-owned mining company Codelco, the profits end up with transnational mining companies. We don’t even know what all they really extract. Besides copper, gold, silver and molybdenum are mined in Chile, as well as a number of other minerals that are not documented. The revenues from the copper exports of the state-owned company Codelco go to the state treasury; that is, to the public fund for financing the state itself, education, health care, public construction projects and so on. In the case of the Codelco copper mine, virtually all profits flow into the state fund. That’s why Codelco has always been referred to as «the government’s wallet», which is managed by the Ministry of Finance. The mining tax law mentioned earlier is important because it is the first instrument that has redistributive effects in the context of the exploitation of Chile’s natural resources.
Isn’t there currently a new lithium strategy as well, i.e. provisions on how this raw material can be mined in a more environmentally friendly way?
No. There is nothing really new with regard to lithium; other than that – due to global demand – the massive exploitation of lithium is to be continued, and that despite the fact that lithium mining is destroying our salt flats in the Andes. It would be important for the government to get involved, but it will only do so to in order to siphon off some of the revenue, without setting conditions for sustainability. It has not imposed environmental, social, redistribution or industrialization conditions, nor has it stipulated the introduction of other technologies than those used in the past. It is our hope that the European Union will live up to its ambitions and commit the European investment companies to high standards and rules with regard to the environment, human rights and technological cooperation.
Significant investments from the World Bank, the Inter-American Development Bank, the KfW and the European Bank are flowing into green hydrogen. It is often said that hydrogen is needed for more value creation. Do you think will also be used in Chile’s smelters or be useful in some other way?
The same steps and standards are required for both the hydrogen and the mining industry. The difference with green hydrogen is that the industrialization process takes place in Chile, because green hydrogen is the export product. In other words, the industry is built in Chile, the technology is installed in Chile. And there is also the possibility that it will become part of the energy industry. If you want to double the national energy matrix to power the hydrogen industry, you will need a lot of land. You also need a lot of water and extensive infrastructure to generate solar and wind energy.
If you could make suggestions to Germany and Europe at the moment about what they should do – apart from reducing consumption – to move towards a somewhat more sustainable world, what would your suggestions be?
I think Europe needs to take a very close look at energy and material consumption in the development areas of transportation, steel, heating, and construction. The world is finite and it is not feasible for Europe to continue to expand its needs at the expense of the rest of the world’s resources. Europe already has a huge ecological footprint in terms of food, energy, minerals and so on. It cannot go on like this, the planet can’t cope with it. Europe must reduce its extraction needs or ecological footprint; the energy and material intensity of the European economy must be scaled back. I think that this point is crucial in terms of climate change, biodiversity, mineral consumption and everything else. I think that is the most important issue.
Anything else?
With regard to the things Europe needs from other countries, it must strive for a fair and equal exchange. So if Europe wants to mine lithium, it must ensure that environmental protection standards are met, human rights are respected and working conditions improved in the country of origin. There has to be cooperation in expertise and technology so that the country can expand its capacity for industrialization and development. The countries of origin must not be condemned to be perpetual suppliers of raw materials without access to the expertise, technology and industrialization necessary to create jobs and an educated society.
You expect a relationship of equals, an attitude of cooperation. How realistic is that?
The EU must understand that it should adopt this stance when dealing with countries it depends on. But, with the exception of some Nordic countries, such cooperation has not been widespread in Europe. As far as Germany is concerned, I would say that the cooperation with Chile in the field of renewable energy and energy efficiency has been very interesting. But that is not a general policy in the European Union. The country that supplies the raw materials must be on the same level as the country that needs them. I think that is the key to a sustainable future. Otherwise, things will get worse, more tense, more geopolitically competitive, and we will end up with a kind of law of the jungle. Democracy and development are two pillars that must never be separated. Development without democracy has no future.
I think that is the key to a sustainable future. Otherwise, things will get worse, more tense, more geopolitically competitive, and we will end up with a kind of law of the jungle.
You were a candidate for president in 1999. What would you have done differently than what was done in Chile?
Naturally, I would have immediately started reining in the mining and forestry sectors. And I would have worked on reforming the water code at the time to put an end to the water market, because the biggest problem we have in Chile today is water insecurity. Mining is threatening our water, the valleys used for agriculture and our food. I would definitely have taken up the issue of forestry in Chile, which needs to undergo a structural change. The restoration of the water catchment areas and lost vegetation masses should be much further along by now. We are in a process of irreversible desertification, which makes the future look less than promising. We now have many environmental migrants because there is not enough water in northern Chile. It is a complex situation and I think we are far behind when it comes to water, mining and forestry policy. We could have a much better economy today if we had been disciplined about creating sustainable conditions.
So you will have to keep on fighting.
Yes, of course. Now and always.
Sara Larraín is a Chilean environmental activist and director of the NGO Chile Sustentable. She co-founded the Chilean Committee for Disarmament and Denuclearization and the National Ecological Action Network RENACE, among other organizations. In the 1999 Chilean elections, she was the Green Movement’s candidate for president.
Johanna Sydow heads the International Environmental Policy Division at the Heinrich Böll Foundation. Her fieldwork on mining in Ghana, Peru and Ecuador (2009-2013) turned her into an advocate for the reduction of raw materials consumption and for binding rules for companies.