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Chile's mining review

10 October 2019 Carla Selman

Chile's Supreme Court on 26 September ordered a further re-assessment of the USD2.5-billion Dominga iron-copper mining project, returning it to the Antofagasta Environmental Court for a new review. The project was halted in 2017 following an adverse ruling by the Chilean Council of Ministers over its potential effects on the environment. That decision was strongly criticised by the private sector, which considered it "politically biased".

Chilean firm Andes Iron, Dominga's owner, requested a review of the Council of Ministers' decision, which was granted by an April 2018 Antofagasta Environmental Court ruling. In turn, environmental organizations escalated the case to the Supreme Court. The Supreme Court's ruling stated that there were no procedural irregularities by the Council of Ministers and ordered a new technical evaluation to be conducted by the Environmental Court.

In addition to two mining pits to extract iron and copper, the Dominga project provides for the construction of a port at La Higuera in the northern Coquimbo region, near an ecological reserve.

Significance

The Supreme Court decision effectively reverses Dominga's approval process – which began in 2013 – to where it stood one year ago. This will delay the process by at least a further 12 months. The reversion highlights the legal uncertainties in Chile's regulatory framework and inconsistencies in the actions of environmentally related institutions.

The ruling signals an increased risk of delays and lengthy court cases for large-scale projects, particularly those regarded as affecting the environment or facing reputational issues. President Sebastián Piñera is attempting to expedite approval for large-scale projects, particularly in mining (by reactivating stalled projects worth USD50 billion), energy, and infrastructure.

In 2018 Piñera set up a Sustainable Projects Office (Oficina de Gestión de Proyectos Sustentables: GPS) to streamline bureaucracy and is currently reviewing 265 projects worth USD74 billion. However, according to the GPS, the environmental approval process will still take approximately 3.5 years. If the Antofagasta Environmental Court blocks Dominga – which it had previously favored – this would clearly indicate an inconsistent stance, potentially suggesting that its decision depends on the discretionary perspectives of the court's members (who have changed since 2018) rather than strict adherence to technical standards.

Posted 10 October 2019 by Carla Selman, Senior Research Analyst, Country Risk, IHS Markit

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