Pinochet's former son-in-law seeks to rule out that the State exploits lithium on its own and keep the business for himself without a tender
Ponce Lerou’s operation within the Government of Chile to perpetuate his control of lithium
SQM, the mining company that was privatized and is in the hands of Pinochet’s son-in-law, Julio Ponce Lerou, has infiltrated the State of Chile with key operators to ensure that it is left as the sole partner of the State, without bidding for it and through a direct agreement. SQM seeks to take advantage of the creation of the National Lithium Company to maintain effective control of the «white gold» business in the country.LETS DO A LITTLE REMINISCING
It should be remembered that a large part of SQM’s profits come from the exploitation of the Salt Flat of Atacama, which is the world’s largest lithium reserve, a company that was nationalized in 1971 by Salvador Allende, and then in 1983 began its process of privatization in favor of Ponce Lerou, during the Pinochet government.
Then, in 1995, through an obscure process during the government of Eduardo Frei Ruiz-Tagle, the dictator’s son-in-law was given the lease of the Salt Flat of Atacama until 2030 or until the extraction of 180,000 tons of lithium. This lease was made under manifestly abusive conditions for the public finances, which included the payment of a fixed income of barely 5,000 dollars a year to the State, plus a smaller percentage of the sales made by the Ponce company that were calculated from a quarterly report prepared by SQM itself, which was never inspected by a higher authority.
After detecting that SQM was committing serious and multiple breaches, during the second government of Michelle Bachelet, CORFO filed a lawsuit to annul the lease. In that presentation, it was detailed how, for decades, SQM benefited irregularly at the expense of the State in the Salt Flat of Atacama, including obtaining environmental rights in its name and to the detriment of the treasury, as well as overlapping belongings in the name of the mining company with those owned by CORFO and that the company had been obliged to protect during the term of the lease, among other actions against the interest of the State.
Finally, within this judicial process, a new agreement was reached with the mining company. Thus, in January 2018, Eduardo Bitran, in his capacity as Executive Vice President of CORFO, signed a conciliation with SQM where its exclusive right to exploit the treasury’s assets in the Salt Flat of Atacama was maintained until 2030 (the date of the original contract), in addition to increasing the original authorization of 180 thousand tons of lithium within 45 years, to 180 thousand tons per year until 2030.
Although the new terms were able to partially reverse SQM’s actions against the State’s tax interests that had been denounced, and the percentage that the State would receive from sales of lithium from the Salt Flat of Atacama was substantially increased, the new conditions guaranteed Ponce’s company an income of at least 8,000 million dollars.SQM’S VITAL PROBLEM
Without a doubt, the new contract signed with CORFO in 2018 was an enormous triumph for SQM, in a context where its systematic breach of the original terms of the lease and the serious attack on the public interest that it had committed for decades in its exploitation of the Salt Flat of Atacama had been made public, but also the extensive corruption plot that Ponce had set up with the illegal financing of politicians was exposed. Important right-wing representatives were involved in this network, such as Sebastian Piñera and Pablo Longueira, as well as parliamentarians and historical authorities of the former coalition, such as Jorge Pizarro, Fulvio Rossi, Roberto Leon, Rodrigo Peñailiio, Enrique Correa, Osval Puccio, among many others.
However, the main problem for SQM and for Ponce is what to do after 2030 when the contract with CORFO to exploit the Salt Flat of Atacama expires, which represents a substantial part of SQM’s profits, and could even put at risk its continuity.
Market analysts comment that SQM’s revenue success is due to its almost monopolistic status achieved from the contracts it obtained in the government of Eduardo Frei Ruiz-Tagle. This has allowed it to generate huge profits despite occupying primary technology for the subtraction of lithium.
In other words, after 2030, following the contracts and current legislation, the Salt Flat of Atacama concession is terminated and the business for Pinochet’s former son-in-law ends.STRATEGY AND TACTICS: PONCE’S PLAN.
Faced with the serious risk of losing the exploitation of the Salt Flat of Atacama, Ponce seeks to install at least two ideas in the authorities and in the public opinion, in order to continue controlling the lithium market in the country:
1. The State does not have the necessary technical capacity to develop lithium projects in Chile;
2. SQM is the only one that has this capacity and the necessary infrastructure to develop lithium projects in Chile in the short term, improving environmental and efficiency standards.
To achieve this objective, Pinochet’s former son-in-law began to execute a strategy that continues and deepens what he had successfully done for years in a scenario of total impunity, which includes three fundamental pillars:
1. Infiltrate CORFO, Codelco and Enami, which in practice have a clear influence on the development of the so-called «national lithium strategy»;
2. Launch a massive communication campaign to clean up SQM’s image in the public eye and lower the political cost associated with the State agreeing directly with the company, which explains the massive advertisements on the streets, on radio and television where SQM is promoted, although the company does not sell any product directly to the public;
3. Trying to coordinate a high-level political team to influence important leaders of the governmental coalition parties, in addition to trying to infiltrate the circle closest to President Boric, who has never been part of Ponce’s networks.
All this occurs after the idea of creating a «National Lithium Company» had already begun to take hold during the government of Michelle Bachelet. This initiative would allow the State to take control of the exploitation of the mineral, displacing the position of private actors to sign contracts to perform certain specific tasks, but always in a subordinate or minority position.
Although this formula was deactivated during the second administration of Sebastian Piñera, it gained strength again with the government of Gabriel Boric, who not only pointed to lithium as one of the most important policies in his government program, but he was also one of the political representatives that in the Chamber of Deputies denounced and rejected, in a more open and frontal way, the acts of corruption in which Ponce Lerou’s company appeared involved, criticizing in a very harsh manner his figure and what he represents.
«What has surprised me the most about the Cascadas case is the level of colonization that the business community has of the Chilean political class», said the then deputy and current President of Chile, Gabriel Boric.THE ROLE OF THE MARICUNGA SALT FLAT.
A first milestone in Ponce’s plans is the Salt Flat of Maricunga, Chile’s second lithium reserve, where Codelco obtained a Special Lithium Operation Contract (CEOL) during the Bachelet administration, which expressly states in one of its clauses that the state-owned company is allowed to exploit lithium by associating with a private company for up to a 49% stake, which is precisely the space that Ponce wants to occupy without any competition or bidding, and from there, negotiate its true and main interest, which is the Atacama Salt Flats.
With this, SQM would not only prevent the State from exploiting 100% of Maricunga’s lithium itself, but Codelco’s intervention would help it confront the indigenous communities that have fought fiercely to prevent environmental damage, in a context where there is no clarity about the real situation of the basin of said Salt Flat. This is especially important considering that a major mining activity could cause irreversible damage to an ecosystem that the environmental authority itself has designated as «fragile».
In fact, both the private projects Salt Flat Blanco and Salts from Maricunga, which obtained environmental permits to develop lithium exploitation in the area during the second Piñera government despite presenting contradictory reports about the situation of the Salt Flat, are facing judicial appeals, presented by environmental organizations and indigenous communities.
Ariel Leon, adviser to the Colla Pai-Ote community, stresses that the fundamental thing is that the Salt Flat of Maricunga not be destroyed. “For us it is sacred, ceremonies have been held there since the times of our ancestors. It is a source of water for the entire region together with the Laguna del Negro Francisco and the Nevado Tres Cruces National Park. We also ask that we not be destroyed as a community, since the salt flat has transhumance routes. There, our animals eat the salt to protect themselves from parasites. If they finally destroy it, that will be an incurable wound for us as native peoples, but also for the region that will be without an important source of water that feeds all the basins», said Leon to the El Ciudadano.
Elena Rivera, a member of the Colla de Copiapó community, maintains that they, » «as a Community oppose the extraction of lithium, whether by any company, be it State or private, and not only from the Salt Flat of Maricunga, but also from Laguna Verde or Laguna Negro Francisco or any other place which is part of our territory or has some cultural vestige for our brothers and sisters from other indigenous peoples. We oppose it because we have seen the destruction, the drought and the reduction of the biodiversity in these places. This happens in San Pedro de Atacama”.
She claims that «if the Salt Flat dries up, we will not be able to continue inhabiting the mountain range, because there is latent damage and with it our slopes, watercourses, bogs and wetlands dry up, and thus, our culture and customs in the territory. We cannot continue to allow a technological advance at the expense of our territories and an advance that is not even for our country”, said Rivera to El Ciudadano.
So as to have the official version, El Ciudadano contacted the Undersecretary of Mining Willy Kracht, who, when asked about future lithium tenders, pointed out: «In the case of the Maricunga salt flat, Codelco is the one who has been assigned the special operating contract and there are a couple of other companies that have interests and are carrying out projects there. So in the specific case of Maricunga we could not talk about any kind of tender”.
“It is different n the Atacama Salt Flat because it is run by CORFO and it has a different treatment, since there is a pre-79 lithium property established there that is in the hands of CORFO, so anything that happens is handled directly by CORFO. In the Salt Flat of Atacama the controller, the owner is CORFO, so it can resolve directly (any issue)», said the representative of the mining portfolio.SQM IS NOT THE ONLY ONE WITH THE CAPACITY TO EXPLOIT LITHIUM
The main idea that Ponce and his network are trying to install in the mind of the people so as to convince President Boric is that SQM is the only one that has the infrastructure and technology to increase lithium exploitation in the short term, improving the environmental sustainability of the processes, be it extraction or processing. The foregoing in a context where there would be an urgency to take advantage of the high prices that lithium has reached, without knowing exactly how long it will remain at those levels.
This, despite the fact that from a review of lithium projects underway at the regional and international level, it can be easily verified that there are many other players with installed capacities that could invest in parallel to SQM and boost the industry with more players from now until SQM’s contract ends in 2030.
The idea that only SQM has the technology that allows it to take advantage of the lithium price “supercycle” is not consistent either, considering that the technology currently used by the company, has been well known for more than three decades and is of low efficiency. The process by which the non-metallic mineral is extracted is carried out by drying the extracted brine in the sun, adding products that purify the ‘white gold’. The ‘innovations’ that Ponce Lerou’s company promises to carry out, which would be less harmful to the environment and would substantially reduce the use of water, have been developed and applied for years by other mining companies.
On the other hand, the discourse on SQM’s “unbeatable” capacities for the extraction and commercialization of lithium clash with the fact that Ponce’s company does not develop successful projects abroad, which are carried out by other public and private entities. In this context, many explain the success of Ponce and SQM only by the abusive conditions in which it exploits the treasury’s belongings, which is attributed to a network of transversal corruption that it has managed to maintain with impunity over time.
That is why many players in the lithium market have indicated that there are human and technological resources available that go beyond SQM, and that the State of Chile could acquire so as to build a National Lithium Company that successfully exploits and commercializes this resource by itself 100%. This, in a context where there is still enough time until 2030 to obtain the permits and carry out the necessary works in order to guarantee a continuous exploitation of lithium after the end of the contract between SQM and CORFO in the Salt Plats of Atacama.
However, and pushed by the Ponce operation, operators and government authorities would be proposing as the only realistic option to President Boric that exploitation by the State associated with private companies (an alternative that they value as an act of «pragmatism» in the protection of the “national interest”), should be with SQM as “the real and viable alternative” for such an association.
An example of the interest in developing lithium projects in the country is the Chinese giant BYD, which has been clear in publicly showing its willingness to make a million-dollar investment in Chile. “BYD wants to build a value-added process here; we can commit the capital investment. We have to wait for governmental approval. BYD really believes in Chile and we can do a lot of work here», said Stella Li, executive vice president of BYD and president for the Americas of the company, about a lithium cathode plant for Chile.BUSINESS WITHOUT A TENDER: BETWEEN 9 BILLION AND 18 BILLION DOLLARS LESS FOR THE TREASURY THAT SQM WOULD SAVE FOR ISELF
Betting that the State of Chile will finally give up the option of exploiting and commercializing lithium by itself, many companies have set their eyes on the possibility of becoming part of a multimillion-dollar business, also considering that the treasury has mining properties that cover almost all of the Salt Flats of Atacama, which is the world’s largest lithium reserve, without prejudice to other important projects.
Ponce knows about this situation and the risk it represents for his interests, since, in the event that a public tender is opened, he could lose the business.
An indication of this was the tender that was held at the end of the second Piñera government for permits to exploit lithium, which, although very limited, led various companies to make better offers than SQM.
Although this process ultimately came to nothing, because of the judicial action of indigenous communities that denounced the serious irregularities in the process and the fact that they were not consulted as required by ILO Convention 169, it served to demonstrate that in a scenario of open competition, Ponce’s business is in serious danger.
A fundamental component of these tenders consists of the fact that the bidders are obliged to pay an initial amount for any event, as a kind of «right of key« to enter the business, in addition to a royalty for the volumes of extraction they carry out, all in benefit of the State.
With respect to the first component, it is estimated that the initial amount that a company would have to pay in any event for bidding for the exploitation of the Salt Flats of Atacama would be approximately 18 billion dollars.
In this way, if the government plan is to involve private parties in 49% of the business, leaving the «National Lithium Company» with the remaining 51%, the amount to be paid by the private party, under normal market conditions, should be of approximately 9 billion dollars, as an initial amount in any event, and without prejudice to what must be paid during the exploitation as royalty.
In this scenario, Ponce’s strategy is that the work of his network allows him to keep the share in the lithium business without a tender, either for 100% paying a royalty, or together with the National Lithium Company for a 49 % of the business under the same formula, but always through a direct deal and without SQM paying any initial value, as it would have to do in the event of a tender.
In order to justify, before the authorities, that the State does not make a tender by giving up receiving billions of dollars, the different members of the Ponce network have tried to install the idea that the value of the investments that SQM has made in the Salt Flats of Atacama should be “recognised”, especially the conversion plant in operation where it processes the brines it extracts from the place.
To reinforce this strategy, SQM has made public its intention to invest 1,500 million dollars to improve the efficiency of its lithium extraction and processing processes under more environmentally friendly standards, which, in any case, involves the condition of opening a negotiating table with authorities of the current government to define the terms in which the Ponce company will continue its exploitation in the Salt Flats of Atacama beyond the year 2030, obviously, without bidding involved.
This occurs in a context where decisions on the future of lithium exploitation in the Salt Flats of Atacama must be made in the government of President Gabriel Boric, because any project to install a lithium extraction plant requires between 5 to 7 years to start operating, considering environmental and administrative permits, indigenous and citizen consultation processes, apart from its construction.
If not, there is a risk that the possibility of continuing uninterruptedly with the extraction of lithium after the year 2030 will be reduced to agreeing with the Ponce company, considering that it is currently operating in the area.The Deep State of Ponce Lerou
According to the information provided by our sources, which are consistent with the corruption network managed by SQM for decades and which was partially exposed and unpunished from the cases of illegal financing of politics, we would be facing a Chilean version of the so-called Deep State, which is nothing more than a form of government in «the shadows», which operates through networks of covert power groups, which act ‘in concert’ in order to carry out an agenda.
This Deep State has been working through the ‘infiltration’ of the public apparatus and lobbyists, by the hand of Ponce Lerou, who was General Manager of CORFO during the dictatorship, among other various positions that allowed him to know the State from the inside.
After gaining control of SQM, in 1988 Ponce Lerou stood firm with the Yes campaign for the re-election of his father-in-law, Augusto Pinochet. A year later he was the main sponsor of the presidential campaign of his friend Hernán Büchi. With the Concertación in government, he approached Genaro Arriagada, the right-hand man of Eduardo Frei’s campaign in 1993. From Frei’s second campaign, in 2009, traces of a contribution from Ponce Lerou appear on tickets paid by SQM. Already in the socialist decade of the post-dictatorship, the ‘link’, first with Lagos and later with Bachelet, was through Enrique Correa, with SQM being one of the main historical clients of his consulting firm Imaginaccion.
Ponce Lerou also supported the campaigns of Sebastián Piñera. In the first (2009) he used Jaime de Aguirre, director of Chilevisión, to transfer money from Pampa Calichera for his political campaign. According to Carlos Tromben and Ignacio Schiappacasse, SQM contributed almost a million dollars to Piñera through false invoices. A sample of the closeness between the two is that once installed in La Moneda (Presidential Palace), Piñera invited Ponce Lerou to Sebastián Piñera Morel’s wedding in December 2011.
For Bachelet’s second campaign, Ponce Lerou’s contribution was for an estimated amount of $204,999,332, agreed between the treasurer of the campaign of the Nueva Mayoría candidate, Jorge Rosenblut, and the general manager of SQM, Patricio Contesse.
Politicians from across the political spectrum, from the UDI to socialists, came to Contesse’s office, as his secretary revealed in statements to the prosecution. This is how Pablo Longueria, Jovino Novoa, and several more, passed through that office exchanging favors. It is known of SQM’s contributions to the campaigns of Jorge Pizarro, Fulvio Rossi and Jaime Orpis, among others. Meanwhile, Contesse took various parliamentarians, such as senators Jorge Pizarro, Pedro Araya and then congresswoman Carolina Tohá, to see the SQM offices in María Elena on the company’s private plane.
Patricio de Solminihac confessed to the Prosecutor’s Office regarding the 2013 presidential campaign that «I do not handle the exact figure, but it should be more than US$1 million and less than US$10 million» in contributions.
In short, criminal investigations into irregular political financing revealed, in 2015, that SQM had invested at least 7,000 million pesos in political campaigns. An accounting report delivered by the same company to the National Prosecutor’s Office recorded the payment between 2009 and 2015 to 156 people close to Bachelet and Piñera, apart from several other politicians.
But beyond politics, SQM has a network of «experts» to defend its interests. In these tasks, they are also concerned with contributing to the training of technical cadres and technological innovators, and SQM’s way of operating is to establish links through job offers and research funds assigned to Mining Engineering schools, the support of centers of study, and the placement of key actors in positions of influence, thus infiltrating the public apparatus with lobbyists and promoters of their policies.
Among the men for SQM’s current operation, which is to extend the exploitation concession of the Salt Flats of Atacama beyond 2030 and without bidding, would be Jaime San Martín, who currently holds the position of operations manager at Codelco, but who previously worked for more than 16 years for Ponce Lerou.
San Martín joined SQM as deputy manager of metal development in 1997, became Vice President of Mining Affairs in 2005, and Vice President of Operations in 2006, a position he held for 7 years. In this context, he developed a close relationship with Augusto Pinochet’s former son-in-law, which he maintains to this day.
In 2016, he joined Codelco as Strategic Projects Development Manager, concentrating on «the design and implementation of the Corporation’s strategic projects, with a focus on some of its assets, such as lithium and other non-metallic minerals contained in its mining concessions of the Maricunga and Pedernales salt flats, defining Codelco’s lithium strategy, proposing business models to achieve it and leading the search for strategic partners for the lithium business”, according to himself.
But Jaime San Martín does not work alone, he has a faithful squire. This would be Tomás Esguep, who since 2020 has served as Codelco’s Business Development Director, while from 2011 to 2016, he also served for SQM in different positions associated with the development of metallic mining projects, which allowed him to maintain a high profile within the company, and gain the trust of Ponce Lerou.The ‘old guard’ is back on the attack
As revealed in detail by a source within one of the State companies in charge of the negotiations, who prefers to keep himself anonymous due to the seriousness of the situation and possible reprisals, the main operator of this entire strategy is an old friend of Ponce Lerou . This ‘friend’ is Osvaldo Puccio, former Minister Secretary General of the Government between 2005 and 2006, during the administration of President Ricardo Lagos. He was also Ambassador to Austria in the time of Eduardo Frei Ruiz Tagle, a time when he began a friendship with Pinochet’s former son-in-law, married to a former Austrian horserider, a nationality that Julio Ponce adopted himself.
Between July 31, 2012 and August 19, 2013, Puccio was a member of the board of directors of Pampa Calichera, one of Ponce’s ‘cascading companies’ through which he controlled SQM and which were sanctioned by the Superintendency of Securities. and Insurance for serious violation of the regulations on the stock market to benefit Pinochet’s former son-in-law, in a context where the Superintendency of Pensions maintained that such irregular operations harmed the interest of contributors for an amount greater than 44 million Dollars. Puccio was also in charge of Chile to see the issues related to nuclear energy, a matter of high interest to Ponce and where lithium plays a key role. Let us remember that it is precisely the Chilean Nuclear Energy Commission which grants part of the permits associated with the exploitation of lithium.
What is most striking about Puccio’s story is that when he was 20 years old, he was with Salvador Allende in the bombing of La Moneda. He was tortured and was imprisoned on Dawson Island with his father, and went into exile in the GDR . Despite all this, he ended up being one of the main friends and operators of Pinochet’s former son-in-law, Julio Ponce Lerou.
But Osvaldo Puccio would not work alone leading the operation that Ponce is developing within the State to perpetuate his control of the lithium in Chile during this government. Puccio has the help of Ricardo Solari, socialist and leader of the so-called «third party» within the party, who has held various positions during the governments of Lagos, Bachelet and even Piñera.
It should be remembered that the socialists had previously enjoyed the empire set up by Ponce Lerou. In May 2017, Meganoticias reported that 2,000 billion pesos, part of the money returned by the treasury to the Socialist Party as compensation for assets expropriated during the dictatorship, were invested in shares of SQM and Pampa Calichera. In this way, Salvador Allende’s party obtained profits from the speculative business of Pinochet’s former son-in-law.
Another ‘socialist’ who appears on this network is the former energy minister and current executive president of Codelco, Máximo Pacheco, who along with figures such as Enrique Correa and Jorge Abbott, were members of MAPU.
Despite the fact that he is widely recognized as «a man of great business talent», Pacheco should disqualify himself from any act or negotiation that may involve SQM due to a possible conflict of interest, since his son-in-law is the son of former Senator Pizarro – who was also vice president of CINVER (Committee for foreign investment in Chile). At this point it should be remembered that Sebastián Pizarro Crispi was convicted of two tax crimes committed through his company Ventus Consulting, which issued false invoices for services not provided to SQM, receiving money that ended up in the hands of former Senator Jorge Pizarro.
Meanwhile, Ernesto Águila, former PS and very close to Ricardo Solari, works on the second floor of La Moneda as an adviser, and is one of the key players in this operation. A regular columnist for the media, Águila is a doctor in Education and an academic at the Faculty of Philosophy and Humanities of the University of Chile, where he became director of Extension. He has also worked as a researcher at the Equality Institute of the PS. In the first Bachelet government, Águila was director of the Studies Division of the Ministry of the General Secretariat of the Presidency (2006-2008). In January 2020, a hundred Socialists resigned from the party arguing reasons related to «principles» along with several other Socialist militants, such as Germán Correa and the current vice president of Enami, Jaime Pérez de Arce. Then, they formed the Socialist Platform, and defined themselves as «to the left of the PS». Águila himself publicly differed from the official PS by «assuming an anti-neoliberal position». He also called for “the unity of the left: no more Concertación, no more the reissue of that conglomerate. And commit ourselves to linking the left to social movements”.
One of the sources indicates that the role of Águila was key to the appointment of Willy Kracht as Undersecretary of Mining.WILLY KRACHT: FROM CESCO TO THE UNDERSECRETARIAT OF MINING
Willy Kracht, a former socialist and who currently belongs to the Socialist Platform collective, became known during his visit to Juan Carlos Jobet, Sebastián Piñera’s Mining Minister, when Jobet had granted the lithium concession at the end of his recent government. After leaving the ministry’s office and being consulted by the press, they declared that the tender was correct in legal terms and «there was nothing that could be done anymore».
In his career, Kracht escalated to integrate the mining commission of the government program of Apruebo Dignidad (Approve Dignity) and later became the Undersecretary of Mining. Although he began to be a member of the Socialist Party, he resigned after the social outbreak of October 2019 and became part of the Socialist Platform, a collective founded by political analyst Ernesto Águila. In May 2021, he became a member of the Convergencia Social (Social Convergence – CS), a party with good prospects as it is the president’s group.
Consulted by El Líbero, Ernesto Águila commented on Kracht: «Willy is an excellent academic». He also recounted that the current undersecretary enrolled in Social Convergence so as to support Boric’s candidacy in the primaries, while continuing to regularly participate in Socialist Platform meetings. Águila added that Kracht “is someone who knows a lot about the world of mining in Chile. He is a very warm and friendly person. He is a very open and dialoguing person”.
Kracht, Chemical Civil Engineer and Master in Engineering Sciences, is an academic at the Mining Engineering Department of the University of Chile, a member of the Editorial Board of the Minerals Engineering magazine. He also generated contact with mining companies as deputy director of the Center for Advanced Technology for Mining (AMTC). His academic credentials validated him on Boric’s campaign economics team.
His task was to reassure the private world that the rules of the game for mining companies would not change in an eventual victory for Boric. In a letter to El Mercurio, published on December 8, 2021, ten days before the presidential runoff, Kracht clarified that “our proposal seeks to capture part of the rent efficiently, without putting mining development at risk. (…) In our vision, mining -with its public and private components- is key to the economic development of the country”.
Four days before the election, interviewed by Reporte Minero, he assured that he would promote the «virtuous model of public-private relationship that Enami represents». Likewise, he explained that from this perspective, the strengthening of said company would imply «not only maintaining it as a State property and protecting its patrimony, but also giving it support so that it can continue fulfilling the role of promoting small-scale mining».
In addition to the usual visits by Mining Engineering students to SQM’s salt flats in the Salt Flats of Atacama, in the case of Kracht, relations with SQM grew closer when he joined CESCO’s board of directors in June 2019. Kracht joined this board of directors together with Daniela Desormeaux, an economist from the Pontificia Universidad Católica de Chile with 18 years of experience in the mining industry, such as her time at SQM and the creation of consulting firms; and Osvaldo Urzúa, an industrial engineer from the University of Chile, with a PhD in Science and Technology Policy from the University of Sussex and an employee of BHP Billiton for more than 11 years.
THE DISCREET WORLD OF SEMINARS
The Center for Copper and Mining Studies (Cesco) is a space where academia and business meet. It was created in 1984, one year after the dictatorship’s Mining Code was issued, which opened space for foreign capital and the privatization of the deposits for mining.
El Ciudadano consulted with said center, which responded that the financing channels are through the directors’ fees and, mainly, the organization of the Cesco Week Santiago seminars, held every year at the beginning of the year and, since 2012, the Asia Copper Week , also an annual dinner held in Shanghai.
Although – according to Cesco – the mining companies do not directly finance the center. Cesco expalined that their income was mainly obtained from participation fees, but it is observed that the mining companies enter either as sponsors or with presentations.
This was the case in mid-August 2022 at a seminar organized by Cesco and sponsored by AngloAmerican, Minera Collahuasi and SQM, with the active participation of mining companies, lawyers and researchers. The meeting was entitled ‘Modification of the legislation on exploration and mining in Chile’, and it was held at the Hotel Cumbres de Vitacura in the midst of the constituent process, when the demand to nationalize mining resources was in the air.
The opening was in charge of Alejandra Wood, who in 2015 took over as Executive Director of Cesco, after working for three decades at Minera Escondida and BHP Billiton, as manager of communications, corporate social responsibility and external affairs. In May 2022, she was appointed to the management of Codelco.
In the seminars, the executives of the mining companies meet with lobbyists and engineers who think about new extractive processes. In between, they exchange cards and explore opportunities for collaboration over coffee. And so, little by little, academics and researchers begin to become consultants.
The Undersecretary of Mining was in charge of giving the welcoming words at one of these events – the recent Lithium Forum – held at the end of September 2022 at the Western Marina Hotel in Santiago. In two of the four modules of the meeting, a SQM representative (not particular) participated with a stall in the exhibition in the program open to the public. What does appear are the main sponsors of the event: SQM and Albemarle.KRACHT: “IN ATACAMA AND MARICUNGA THE SITUATION IS MORE OR LESS RESOLVED”
Willy Kracht holds perhaps the only record of any official in the current government: having been applauded by El Líbero. In an extensive profile made by the far-right newspaper, they spare no praise for Kracht, whom they describe as «with a technical, dialogue oriented and purposeful profile and his commitment to the cooperative role between the State, business and academia is to be highlighted». The newspaper also pointed ourt that he was moderate and that he did not want to put mining development at risk and that he was considered by business sources as a «well-prepared man that knows the different problems of the industry».
In the publication, El Libero came to outline Kracht as the possible Minister of Mining, noting that «the positive vision (there is of him) is transversal among those who have shared labor instances with Kracht, whom they describe as a propositive person, open to dialogue, with broad proposals, defender of the mining sector and with a faithful conviction of the cooperative role between the State, companies and academia”.
When asked by El Ciudadano about the way in which the government plans to exploit lithium in our country, and especially in the Atacama, Kracht pointed out that «in the other salt flats, we do not rule out that the mechanism to find strategic partners, could be done by tenders”.
Regarding the date of the announcement of the National Lithium Company, he said that “we do not have a definite date for the announcement, but it should be soon. As reported by the finance minister, we have an expectation that it wll occur in January, but we do not have a defined date yet, nor with respect to the spokesperson».
Asked once again about what will happen to the Salt Flats of Atacama, the world’s main lithium reserve, he said: «This is something that CORFO is (solving) or should solve directly and I would hope that in 2023 there will be news about it. We are concerned about activating the industry in the other salt flats. What is going to happen in the Salt Flats of Atacama is a CORFO issue, I don’t think we will see an announcement about it soon”.
He also added that, «then, we should expect that for the other salt flats, other than the Atacama and Maricunga, where the situation is already more or less resolved, we will have a search for strategic partners for the State through tenders, or eventually under well-defined conditions, direct treatment if there is a good association with State companies such as Codelco in this case”.
Regarding the denunciation of the network that Ponce is operating, Karcht pointed out «I have no history of any SQM lobby, and the meetings that have existed have been requested by the transparency mechanisms. They have been technical meetings (…) I rule out that there is a lobby, in the sense of being perpetuated in the Salt Flats of Atacama”, he pointed out.
Once appointed Undersecretary of Mining, Kracht has taken care to express to the business community that he is sure that he is to be included in the ownership of the National Lithium Company. Shortly before assuming the position, he made a presentation at the Challenges and Opportunities Forum for Lithium Mining in Chile, a forum for executives from the mining industry. On the occasion, he was concerned to announce that Enami «can act in association with various private actors». Among the seven tasks to be done in the short term – highlighted in his presentation – he considered «exploring eventual strategic partners that allow accelerating the incorporation of Chile into the lithium value chain».
In this same sense, Kracht told El Ciudadano that «for example, in the Infieles and Aguilar salt flats we are seeing a direct deal with ENAMI, because they come to us to request it and then ENAMI will have its own search for partners».
In January 2022, the Colla Pai-Ote community, inhabitants of the Salt Flats of Maricunga, sued the tender made by Piñera because the indigenous consultation required by ILO Convention 169 had not been carried out. Later on, in other instances, they managed to maintain the order not to innovate. The legal process showed that despite what Kracht said after the meeting with Piñera’s minister, there were things to be done.
Interviewed in June by the financial media Bnamericas, the undersecretary stressed again that «we want to have something that is open to collaboration with private parties». On the occasion, and arguing the lack of knowledge regarding the exploitation of lithium by Codelco, Kracht announced that he believed that it would be better that “the State could have several strategic partners at different stages of the value chain. A strategic partner [for example] that helps us in the exploitation and production of lithium carbonate. Eventually there could be another partner to support us with the development of materials for the batteries”.
Last September, on the occasion of the VI Lithium Forum, organized by B2B and Chilean Mining, Kracht shed more light on the matter, saying that «the design of the future National Lithium Company (ENL) is being discussed within the government, so that before the end of the year we could arrive at a proposal that sheds light on its structure, profitability of its functional units and the business model. And in parallel, continue with the process of searching for strategic partners and the formalization of the territorial dialogue”.
Then, he repeated that from the State «we need to open up to find strategic partners who have the knowledge and with whom we can establish a collaborative relationship to exploit lithium and learn». He finished off his speech by saying that the projected ENL «is not a new Codelco».
As reported by El Diario Financiero in September 2022, the participation of private companies will not be limited to the exploitation of lithium projects, we are also contemplating their participation as minority partners in the ownership of the National Lithium Company.MEETINGS IN THE MINISTRY OF MINING
Analyzing Under Secretary Kracht’s Lobby statutory records of his meetings, we found lithium-related meetings and technology deals with L1X LITHIUM CANADA -Fusion Enertech Development Co., Ltd.- Clean Tech Lithium – jnworldtech – Tsingshan South America, all of which have met on a single occasion with the undersecretary and in their request they detail, with a lot of precision, the reason for each meeting.
In this context, Kracht’s meetings with SQM executives, such as Carlos Díaz, Senior Vice President of Potassium-Lithium operations at SQM and Gabriel Meruane Naranjom, Lithium Research and Production Process Manager at SQM, are noteworthy. Beyond the fact that, unlike what happens with other entities related to the lithium issue, there are more than one meeting with representatives of the Ponce mining company and the record does not provide further details about the specific content of what was discussed.
Furthermore, if a general review of the meetings of trusted men of Ponce with government authorities is made, Ricardo Ramos, CEO of SQM stands out, because since January 2019, he has a record of 7 meetings with government officials. He has already visited twice the offices of the head of CORFO, the body that leases mining properties in the Salt Flats of Atacama. He has also met with the Ministers of Finance, Economy and Mining.
What has caught the attention of many within the Ministry of Mining is the way in which Kracht has appropriated the issue of lithium within the portfolio, clearly displacing Minister Marcela Hernando, who does not seem to be part of the Ponce network.THE ANNOUNCEMENT OF THE NATIONAL LITHIUM COMPANY
In Gabriel Boric’s government program (point 50), he stated that «we will promote the creation of a National Lithium Company that develops a new national industry of this strategic resource, with the communities playing a leading role and adding value to production».
This is an old demand that convened the National Lithium Commission, between July 2014 and January 2015, and which raised the need for a strategic vision for a national lithium policy that contributes to the development of the country, of added value to the product and respect to the communities. The maximization of economic rent in the long term for the usufruct of the State was proposed.
According to reports, the ENL will be carried out by Enami, with the executive vice president, Jaime Pérez de Arce, being a key player in this. Pérez de Arce was appointed in April 2022 and he holds Enami’s main position after the Minister of Mining. Enami exports more than one billion dollars a year and between its own workers and contractors it employs about 3 thousand people.
Pérez de Arce had already held the position of vice president of the State company in the governments of Ricardo Lagos (2000-2006) and Michelle Bachelet (2007-2010 and 2014-2018). He is a commercial engineer from the University of Chile and made a career at Codelco and Enami. He also served as Development Manager of the El Teniente Division and Vice President of Human Resources at Codelco in 2013.
Like Ernesto Águila and Willy Kracht, Pérez de Arce left the PS to form the Socialist Platform.
Also on Enami’s board of directors, since April 2022, is the former member of the CESCO board, the industrial engineer Osvaldo Urzúa Winkler, who previously had a vast career in private mining, serving as government manager of BHP Billiton in 2008 and 2017; He was also the Manager of Communities and External Affairs at Minera Escondida between 2011 and 2021 and worked with Kracht at Cesco.
In charge of Enami, Pérez de Arce has been concerned with the opening of a new foundry plant and the creation of ENL. In interviews, he has stated that they will use the legal possibility for Enami to exploit the Salt Flats of Infieles and El Aguilar, located in the Siete Salares (Seven Salt Flats) area in the Atacama Region, where the foundryis also intended to be built.
And, like Undersecretary Kracht, he has taken care to clarify in each business instanceto which he attends, that the salt flats will have private intervention. In the Chilean Mining portal, he asserted that «we seek to develop these projects through a public-private alliance. Through this CEOL, we hope to incorporate strategic partners that allow us to finance these projects and we want to make it a condition that it be with new technologies, that are more sustainable and that they improve recoveries”.
Enami has already submitted a request from CEOL to the Ministry of Mining for the exploitation of lithium in association with private parties. Pérez de Arce argued in September 2022 to the magazine of the College of Engineers, that they had already began the processing of said concession so that Enami «can partner with private companies to carry out these projects. Based on this initiative, we have created a lithium unit and as this project progresses, a management can be created, and then a subsidiary can be created, which can become the ENL”.
Pérez de Arce was also concerned to make clear that private participation is capital in the creation of the ENL. He thus commented that «the Executive recognizes three fundamental pillars for this project: complete private investment, industrially proven technologies, not at the laboratory level, and the generation of Chilean human resources as a capital».
In another interview given to a mining portal, Pérez de Arce pointed out that the exploitation of lithium in the Siete Salares (Seven Salt Flats) area, «clearly is a project that we are going to develop with the private sector and we hope that this project will bring more technology. We hope that it will add value to lithium production, so that we can also develop knowledge and expertise in this area”.
The creation of the ENL from Enami allows its realization without the need to go through Parliament and a qualified quorum law.
The economist and lawyer, Julián Alcayaga, author of The Black Book of Red Metal (1999), points out that “to create a National Lithium Company, a law is not required, that is, it does not go through the Senate. The same State companies can create companies, such as Codelco, Enami, ENAP. There is no problem with the creation and the same other State companies can participate as shareholders. You can even partner with foreign private companies. But the goal is not to produce more lithium as a raw material, but to have it industrialized in Chile to make batteries or other industrial products».
“Creating an ENL is not a legal problem, but a political decision that the government can make. You can decide tomorrow”, pointed out Alcayaga.
Together with the creation of an ENL, it is also contemplated to found a Lithium and Salt Flats Institute in which applied research will be carried out regarding new lithium extraction methods, industrial applications, environment and relationship with communities. This was endorsed in an agreement between the Ministry of Mining and the Consortium of State Universities of Chile, in August 2022.The agreement proposes the implementation of a Multidisciplinary Study Center that promotes basic and applied research and innovation studies.
The inertia of the State regarding the choice of SQM as the ally of the new ENL is beign felt. One of the sources points out that “in practice, it will end up appearing as a partner of the State who, being a State official during the dictatorship, privatized SQM to stay with the company. The same company that when they gave it the concession in the Salt Flats of Atacama extracted more lithium than allowed, which the State had to sue and go to trial, lose it and be forced to reduce the fines”.A WELL ORCHESTRED CAMPAIGN
In May 2022, the acronym SQM appeared for the first time for ordinary Chileans. A large-scale campaign on television, roadside billboards, radio, full page newspapers and sponsoring events like never before. The company of Pinochet’s former son-in-law even placed Carolina de Moras as the host of its Ruta Verde program, broadcasted by the Luksic channel, in a clear attempt to greenwash itself, but why does a brand spend huge amounts of money on advertising if it doesn’t sell products direct to people?
The campaign corresponds to a studied strategy to turn public opinion in its favor for when the lithium concessions for SQM end. This campaign, initially devised from the offices of Enrique Correa, began to be refined in 2019, when after the Cascada scandals and the illegal financing of politics, the mining company began to carry out studies to measure the opinion of citizens regarding the brand. Finally, SQM decided to create a Corporate Affairs Management, headed by the journalist Ignacia López, and commissioned the design of the campaign.
The objective is to produce a public opinion that does not reproach the obscure origin of SQM’s ownership and the monopoly in the exploitation of lithium that they have enjoyed. In the strategy, they use young people and focus on the technological dimensions of lithium.
Asked about the objective of the campaign by the Edwards family newspaper, a former director of the mining company, acknowledged that: «SQM has to do a job to be the best ally of the State of Chile to produce».
“They are preparing public opinion to make presentable a company that has corrupted politics all these years -says one of the sources consulted- so it can continue to enrich itself at the cost of exploiting one of the greatest wealth in the country as fiscal property. It’s hard to swallow, but they’re going to try to get people to support it or not care».
As if it were a labyrinthine house, little by little, key authorities in key decision-making positions have been cornering the heartfelt and transversal demand to take advantage of the lithium boom for the public treasury before it ends. With the argument that the State cannot only exploit lithium, they lead us down a path. A little further, the options are reduced by taking as an argument that it is a national company. And step by step, as during the entire post-dictatorship period, we are being led to the room where Ponce Lerou, Pinochet’s former son-in-law who plundered the State by appropriating a strategic company, awaits us.
As has been confirmed several times in this report, many point out that the government’s path has already been decided and that the development of lithium in Chile will not be assumed by a 100% State Company and that private partners will necessarily be sought. In this context. The alternatives are an open and transparent tender in which private companies compete with the best offer for the public treasury or a direct deal. Is it with the company of Pinochet’s former son-in-law that corrupted almost the entire political class?
In any case, the big problem for Ponce Lerou and his network continues to be President Gabriel Boric, who has the last word, and who is trying to corner who.
What will finally happen? We’ll see.
By Mauricio Becerra
With the supercycle of the value of lithium, the State received in 2022, 3,917 million USD from SQM and Albemarle. As of November, a ton of lithium carbonate was around 80 thousand dollars.
In the last corporate presentation of SQM 2022, the average sales price per metric ton of lithium for the third quarter was reported at $56,000 per ton.
As of December 30, 2022, one of the producing companies, China’s Sinonime Resource Group, is convinced that the price per ton will fall by up to 25% in 2023. Of course, it will do so little by little. From the aforementioned 80,000 dollars/ton, they expect it to drop to approximately 54,000 dollars/ton, while the optimists think that it will be around 60,000 dollars. For the London Metal Exchange, the value per kilo of lithium hydroxide as of January 5, 2023 was $83.50 per kilo, that is, about $83,000 per ton.
The current lease gives the possibility of exploiting 180 thousand tons per year, which sold at the forecast price of USD 60,000 per ton exceeds USD 10.8 billion.