Chilean Government Releases its National Lithium Strategy

On April 20, 2023, Chilean President Gabriel Boric announced his government’s “National Lithium Strategy,” a new holistic strategy around Chile’s vast lithium resources. The strategy envisions that State-owned entities will play a major role in the entire production cycle of lithium and that the private sector, through public-private partnerships, will contribute its knowledge, experience, capital, technological innovation, and market network, provided that the State-owned entities retain majority ownership or control of the salt flats with strategic value for the country. 

The full text of the National Lithium Strategy was recently released in mid-June 2023, key features of which include:

• Creation of a Strategic Committee for Lithium and Salt Flats, which will be led by the Mining Ministry and be in charge of coordinating with other agencies, public institutions, regional governments, and the private sector.
• Creation of the National Lithium Corporation, which will participate in the entire production cycle of lithium, from the elaboration of a lithium cadaster to the exploration, exploitation, treatment, and subsequent industrial stages of lithium, such as the assembly of battery cells and recycling. This will be a State-owned corporation that will partner with the private sector for the sustainable development of exploration, exploitation, and other aggregation of value for lithium projects.
• Creation of a protected salt flats network.
• Modernization of the institutional framework, safeguarding the effects of the production cycle on salt flats and local communities.
• Creation of the Institute of Technology and Public Investigation of Lithium and Salt Flats, whose main objective will be the generation of know-how and technologies to improve the processes for the extraction, production, aggregation of value, applications, and recycling of lithium, and the understanding and protection of salt flats. This institute will also collaborate with the lithium resource cadastral works to be carried out by private and State-owned companies and will compile and make available information regarding the exploration and exploitation of lithium projects in accordance with the Escazú Agreement.
• New role of the government in the production activities at the Atacama salt flat. After the expiration of the existing contracts for the exploitation of the Atacama salt flat,¹ the Chilean government will actively participate in the exploitation of the Atacama salt flat through public-private joint ventures.  If a public-private joint venture is formed to exploit lithium in this salt flat, the State-owned corporation will own the majority of any such public-private joint venture.
• Role of the government in other salt flats with strategic value for the country. In the case of other projects of exploitation with “strategic value for the country,” public-private partnerships will also be established with control of the production decisions by any such public-private partnership being retained by the government.

Insights on the Expected Public-Private Partnerships

• All projects involving a public-private partnership will include, as a base line, all of the requirements and benefits in favor of the Chilean government and local communities that are currently established under the contracts for the exploitation of the Atacama salt flat.
• The form of the public-private partnership and the mechanisms to choose private partners may vary depending on the characteristics of each salt flat, the activity to be performed (e.g., exploration or exploitation), and the participation of incumbents. However, a structural principle for any public-private partnership will be to foster the objectives of the National Lithium Strategy and any such partnership will be implemented via joint ventures.
• Any exploration or exploitation project in a salt flat with private participation will require a Special Lithium Operating Contract (“CEOL”). Tenders for these contracts must be public, and the contracts will require detailed reports and other tools to keep the government updated with information obtained through the project.
• If an exploration CEOL with a private company shows potential for exploitation, the private company will have a preferred option to enter into an exploitation contract with the State-owned corporation.
• As previously mentioned, projects of exploitation with “strategic value for the country” will require that the government retains control of the production decisions of any such public-private partnership. Unfortunately, at this time the National Lithium Strategy does not provide more clarity about the criteria to be used to identify a project (or salt flat) as “strategic” and/or how the government will implement the control of the production decisions under the public-private partnerships.

The recently released National Lithium Strategy is an ambitious strategy that is trying to balance a timely exploitation of Chile’s abundant lithium resources with the goals of ensuring that the country and its people receive the benefits of these resources (including through the traditional exploitation, development of know-how, technologies, and other businesses) while at the same time preserving the environment.  To this end, the National Lithium Strategy places the Chilean government at the front and center of the entire strategy and requires that any public-private partnership with respect to strategic salt flats be controlled by, or majority-owned by, State-entities.

The implementation of the National Lithium Strategy will not be an easy task for the Boric administration and will require the enactment of new legislation for the creation of the National Lithium Corporation and the modernization of the legal framework.  According to the National Lithium Strategy, the modernization of the institutional framework and the first open tenders for the exploration CEOLs by private companies are expected to occur during the first semester of 2024.  Aside from the typical debate that will surely take place in the coming months as more information becomes available, the private sector is already signaling major concerns regarding the strategy’s principle that the government will control (or retain majority ownership of) any public-private partnership related to strategic projects. 

We will continue to monitor the implementation of the National Lithium Strategy and the opportunities and challenges that may be of concern to the international private sector wishing to participate in the development of Chile’s lithium resources.

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¹ As noted in the National Lithium Strategy, the exploitation of the Atacama salt flat is currently performed by two private entities under separate lease agreements with Corfo (a State-owned entity) that expire in 2030 and 2043.