SHARED INFRASTRUCTURE IN CHILE: THE CHALLENGE OF PRIVATE COLLABORATION

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment (April 2017)
CHAPTER 10A
SHARED INFRASTRUCTURE IN CHILE: THE CHALLENGE OF PRIVATE COLLABORATION
Francisco J. Valdivieso
Partner
Valdivieso, Gutiérrez & Manríquez Abogados
Santiago, Chile

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FRANCISCO J. VALDIVIESO, Partner, Valdivieso, Gutiérrez & Manríquez, Santiago. Between 2009 and 2014, he was an Associate of the firm Cariola, Díez and Pérez-Cotapos, where he worked in the areas of Mining Law, Natural Resources, and Corporate and Foreign Investment. His professional practice has focused on assisting local companies and foreign investors in the analysis, preparation of legal aspects and the development of investment projects, mainly mining-related. He has extensive experience in the preparation and negotiation of different types of contracts, such as trading, mining purchase option contracts, exploration, drilling and exploration agreements, and other contracts related to mining activity. He has also participated in the acquisition and sale of mining companies and projects, water rights, public bidding processes and in the processing, constitution and judicial defense of mining concessions throughout the national territory. For the development of mining, energy and other projects, Mr. Valdivieso has been in charge of advising his clients to gain access to the estates where these projects are located, actively participating in the negotiation of contractual easements and in various easement trials. He has also been in charge of processing various administrative permits related to investment projects. Mr. Valdivieso received his law degree from the University of Los Andes in 2009. During 2013 he enrolled in the Diploma Program in Natural Resources and Energy, from the Pontificia Universidad Catolica, where he finished with a mention in Water Law. He is a member of the Bar Association.

Synopsis

I. Introduction

II. Shared Infrastructure as an "open access" regime

III. Review of the current Chile's situation

III.1. Difficulties for private sharing initiatives

a. Competitive issues

b. Coordination costs

c. Lack of public incentives for private sharing initiatives

III.2. Benefits of private collaboration the under current situation

a. Exploitation of stranded deposit and increase of mining investment

b. Reduction of environmental impact

c. Avoid antitrust liabilities and optimal use of essential facilities

d. Social license for mining industry

IV. Conclusion

I. Introduction

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One of the key issues for the mining industry is the infrastructure. Supporting infrastructure for mining projects, such as ports, access roads and railroads, power lines, water access and desalination plants, are very expensive, usually at least doubling the investment required for the extraction and processing of minerals. Additionally, due to the size of the mining infrastructure, relevant environmental impacts are normally produced.

Shared infrastructure can be addressed through public policies ruling the infrastructure development or creating the needed infrastructure for different companies to use, or through private initiatives for a collaboratively development of mining projects. From both public and private approaches, shared infrastructure has great potential in the framework for sustainable development, significantly contributing to both hosting countries and the mining companies involved.

From a public perspective, shared infrastructure refers to public policies ultimately imposing an "open access" regime for the infrastructure, being, therefore, an excellent tool to plan for the future development of natural resources in countries where it is still possible to anticipate or to adjust their mining industry development. Nonetheless, there are many countries similar to Chile, with a strong mining trajectory, that have not considered practically any regulation for shared infrastructure.

In this paper we will review where Chile stands on the matter, and how the topic of mining-related shared infrastructure has increasingly been addressed by private initiatives. We will analyze the difficulties and the main benefits for private non-regulated collaboration, the risks and challenges of the current situation for a country such as Chile, and finally suggesting some adjustments on our regulation and institutions in order to incentivize private collaboration in the future and for the future of the mining industry.

II. Shared Infrastructure as an "open access" regime

As mentioned, shared infrastructure has been mainly understood as public policies encumbering future or existent infrastructures with an "open access" regime. Considering that for many countries an effective exploitation of a its mineral wealth is essential for its sustained growth, implementing shared infrastructure polices is an excellent way for them to reach optimal exploitation of their resources, inspired on the idea that "to be beneficial for a country's development, non-renewable resource extraction needs to be leveraged to build long-term assets, such as infrastructure, that will support sustainable and inclusive growth".¹

Therefore, from a public policy perspective, an "open access" regime would be beneficial for a country by: (i) permitting an effective exploitation of its natural resources.

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The lack of availability or access to the necessary infrastructure is an evident entry barrier for small and medium size companies, which are possibly unable to build their own facilities, as a result decreasing mining exploration and increasing stranded deposits. A well-coordinated infrastructure development would positively affect the economic development of the country since it would boost more investment, more project findings and, thus, rising taxes and royalty collection; and (ii) better addressing the infrastructure needs for the country's broad-based development. An appropriate development on infrastructure may foster other economic activities to grow by using such facilities on the hosting regions, promoting eventually broad-based economic development.

The lack of regulation on the matter in Chile has produced the need of private collaborative solutions for facing similar goals and obstacles. Such private sharing initiatives have increasingly taken place in many countries in the last years.

III. Review of Chile's current situation

Chile has no policies imposing either "open access" regime or "shared infrastructure" obligations in the mining industry, and, thus, existing collaborative initiatives for the development of mining projects have been promoted privately.

In our regulation, there are...