Introduction to The Mining Treaty between Chile and Argentina

Mining Integration and Challenges for the Copper Industry
The Mining Treaty between Chile and Argentina is a strong step in the inexorable and promising integration process between both countries.Hence the transcendental significance that the ceremony held this week in San Pedro de Atacama has. During the ceremony, hosted by the President of Chile, Mr Ricardo Lagos, and the President of Argentina, Mr Fernando de la Rúa, the Integration and Complementation Mining Treaty and its additional protocol ratification instruments, were signed and exchanged.

Chile already counts with several centuries of mining development. During that time, and from a State stand point, we have gone through a solely productive outlook towards a global understanding of the world markets for metals and minerals.Our world leadership in products such as copper, lithium, and nitrates drive us to develop an alertness and responsable attitude when monitoring opportunities and threats in the international markets.

The Treaty is an instrument that will support the development of the mining activity in Argentina, integrating to its productive activities and State policies not only the state of the arts extraction and processing technologies, but also the world quality and environmental standards.Likewise, Argentina opens to face all the world-market variables.

We know that the mining activity is vital for the Chilean economy. Copper in average accounts for 39% of Chilean exports in the last decade, 8.5% of its GDP and 35.4% of the world copper production in 1999. In our country, the foreign investment in mining materialized during the 90s, reached an approximate amount of US$12.5 billion, which corresponds to 35% of all the foreign investment materialized in Chile during that period.

Argentina is called to also turn itself into an important international participant in mining.The 170 thousand tons of copper produced in 1998, the over 50 non-metallic elements and the almost US$1 billion generated by mining, are some of the figures that show the growth of the mining activity in Argentina, which can turn it into an important mining country.That is why the interests of these two countries in mining intertwine when looking into the future.

As for the challenges, for the Latin American countries and for our country in particular, it is an advantage to count with an strategic ally such as Argentina, that shares our worries about developing sustainable mining projects.

It is as relevant, to count with a new partner to add resources and will in the defence of the markets for our products, in the search for new applications for copper in particular, and in the development of marketing strategies that support the expansion of great potential markets such as China, India and Brazil.The latter are huge markets for the present uses of copper, since they only consume 1/10 or 1/100 of what it is consumed by mature European or North American markets, whose consumption reaches an average of 10k/year per person.

We know that copper demand is not kept and does not grow by itself, so it is of utmost importance that the mining countries stop believing that focusing on the task of producing efficiently and waiting for the incomes from this production to generate sufficiently and permanently is enough.Chile has experienced a significant improvement in its competitiveness over the last years, especially regarding the production costs.In spite of the significant achievements of the Chilean copper industry, we understand that this efficiency reality is not enough all by itself.On the contrary, a passive attitude towards the markets implies serious risks for the future of the copper industry, and so the preoccupation for the world demand and the systematic attention given to it are indispensable.

The first step in the right direction is to know deeply the markets in which copper participates. Copper is a metal bought by over 60 countries in the world. Asia, America and Europe, mainly, consume in equal proportions the 13 million tons produced annually, and it is remarkable the significant growth of the demand in Asia, who over a period of 40 years has become the main consumer.

There is another great aspect where a bigger initiative from the mining countries is essential: placing copper at the forefront of innovation in the world. Everyday, in different places of the world, new ideas arise and new products and processes are developed.In this dynamic progress, copper must make its presence felt to be permanently considered as a useful and powerful element in the future of mankind. The urgent need of facing these tasks derives from the fact of knowing that copper competes with other metals everyday.

 

Not only the known properties of copper should make up the framework we must focus on, it should be a broader one based on the discovery of new uses and applications.If we focus our efforts on thorough research and apply it to copper and its characteristics, we would be strengthening the only but great possible path for the future of the metal, which is the competitiveness in the international markets through an active commercial action.We need to know more about copper in order to guarantee its future economic sustainability.

In none of the markets where it participates copper is irreplaceable, but at the same time in each one of these markets, copper presents a high competitiveness either for its better quality or for its price.

Despite the transcendence of these matters, the reality shows that what has been done for copper so far is not enough.While plastic allocates 9% of its sales to research and marketing, copper spends less than 1%. Even aluminium allocates a higher proportion of its incomes to this task.

This task is not only for companies, but also for countries.While the companies focus their interests on the short-term results, the countries that own the resources must consider the long term as the relevant goal for their interests.The future topics that we have discussed here are relevant for the interests of Chile as well as Argentina’s. These two countries, which have devoted long years to the search for economic stability and for the wellbeing of their people, need to count continuously on their natural resources richness.

The treaty will enable the exploitation of gold, copper and silver deposits in border areas, where today, at least, the projects of Pascua-Lama and El Pachón are considered (notwithstanding the materialisation of others in the future). They involve an investment close to US$2 billion equivalent to the construction stage of these projects, apart from about US$1.250 billion in inputs and services expenditure during the construction period of these projects and about US$6 billion in inputs and services during their use-life (about 25 years). All of these along with the necessary country development investment in infrastructure for communications, roads, harbour and water sources connections.

We expect from Argentina an ally in this task who, through a real and active commitment, consolidates the productive axis of the southern hemisphere in the world copper market, taking part in the initiatives aimed at the future of this metal.The defence, research and marketing of copper will enable Chile and Argentina to benefit from the future of mining.