News Latin America Maximo Pacheco, President of Codelco: “Every day there are more companies that...

Maximo Pacheco, President of Codelco: “Every day there are more companies that understand the shared value of being a member of the State”

Codelco, the Chilean state company that ranks as the world’s leading copper producer, unexpectedly broke into the heated debate that opened Gabriel Boric’s announcement on the national strategy for the development of the lithium industry. The president of the copper company, Maximo Pacheco (Santiago de Chile, 70 years old), became the protagonist of the new public policy overnight.

Businessman, economist and politician, Pacheco was already on the front line: he was Minister of Energy in the second Government of Michelle Bachelet (2014-2018), from where he led the transformation of the energy matrix that allowed the rise of renewable energies. He then resigned early to work as former President Ricardo Lagos’ campaign generalissimo, in his frustrated attempt to be the center-left candidate in the 2017 presidential campaign. Before that, he worked in the private world: he was the head of the US giant International Paper for Europe, Middle East, Africa and Russia.

He is a man who has been on both sides of the coin in the private and public world. And he is the one who must now negotiate, from the Codelco board, an exit that allows the Chilean State to operate in the Salar de Atacama, which concentrates 90% of the country’s lithium reserves, before the term in which the contracts that The Chilean State has two private companies, through Corfo, which are the ones that currently exploit the mineral in that place. The plan is to achieve a public-private agreement in which, yes, the State always has control.

After landing in Santiago de Chile after a busy day in Antofagasta, the city that the Government chose to launch its new policy, Pacheco confessed on the phone, on the way from the airport to his house, that the conversations for Codelco to enter the equation came from months ago. “Since the second half of last year, President Boric was convinced that it was urgent, given the prices we have seen, that we had to get out quickly to play this game and that it was a problem to enter in five more years.” After several conversations, the president decided that Codelco was the one to take the challenge forward.

Ask. How are they going to negotiate with SQM and Albemarle so as not to wait for their contracts to expire?

Answer. President Boric asked Corfo to give Codelco a mandate to look for the options and to sit down in this negotiation with the actors that participate in the Atacama salt flats and see what are the best ways to ensure that we can take advantage of this important moment that is experiencing lithium and all the opportunities associated with its development. We have had our teams working. Legal, financial, economic, commercial, people who are in the field of business development. And we have experience in this, we are a company that has an international size and presence.

Q. What incentive can SQM have to associate with the State and remain a minority?

Q. A lot, why?

R. Because they have a contract expiring in 2030 and they have a certain production limit and there are many aspects of business strategy and business development and opportunities involved here. Lithium is considered by the States as a critical mineral and I believe that every day there are more companies that understand the shared value of being a partner of the State in these businesses that involve natural resources. Historically, we always imagined that business was capital and labor, but today it is increasingly clear that business is capital, labor, and land. And the land has to do with the territory, with natural resources and with a factor that is very central to States: the wealth associated with nature. There are more and more companies that feel very comfortable doing business in the area of ​​natural resources associated with the State.

Maximo Pacheco during a visit to northern Chile on April 21, 2023.Codelco

Q. Why not make a design more similar to that of copper today in Chile, where there is a large company, Codelco, but there is also space for private individuals who can freely see who is in control?

Q. Do you agree that the State is always the controller of these projects?

Q. How are other international companies going to enter the Salar de Atacama, understanding that the negotiations will be mainly with SQM and Albemarle, which are the companies that are already there?

R. Let’s do the work in stages first. We are first at the stage of the actors that already exist and then we will see how the other challenges associated with the salt flat are addressed.

Q. If the negotiations prosper with SQM, an at least paradoxical scenario could occur: that the government of Gabriel Boric ends up being a partner of Julio Ponce

R. What we are proposing here is not a negotiation with a first and last name, but a negotiation with actors who are currently in the salt flat and have contracts. It has been said that these contracts will be fully respected and we will look for a way to negotiate contracts to create shared value between the parties.

Q. The news did not go down well in the private sector, because they were “displaced” [desconcertados] in front of this ad…

R. Yeah, but let’s say things by name. Displaced is not a bad word, it means that perhaps they were not waiting for the Government to be capable of making a decision or for the proposal to be in line with the tone that was raised. But I have heard different opinions. I think that at first there may be an overreaction, but as the days go by we will begin to perceive that we are generating opportunities with this strategy that are of enormous value for the country, for Codelco and for private companies. I am careful and cautious in this. I know the enormous weight of responsibility that our board of directors, the company and I have in this, but I am very optimistic that, after this first overreaction, there will be people who will realize that this could be very interesting and important for the country.

Q. Once the bill to create the National Lithium Company, 100% state owned, How will Codelco enter?

R. That is a responsibility of the Legislative and the Executive. But what has been proposed is that the National Lithium Company has a very central responsibility in what is the development of the productive matrix, the development of new technologies and new businesses related to lithium. It seems clear that the model considers that the operation and exploration would rather be through this public-private company.

Q. Can the lithium industry become the new Chilean salarythe new copper?

R. No, what I believe is that we are at a stage in the economic history of the world where priority one is the decarbonization of the economy due to climate change and global warming. And in this energy transition process, first of all it requires a lot of copper –which is the conductor of electricity par excellence– and it also requires more lithium, which is the electricity storage par excellence. As a country we have 25% of the world’s copper reserves and 40% of the world’s lithium reserves. This is of unique strategic importance. It is an expectant moment for the Chilean economy due to the fact that it has these two critical minerals.

Q. And in terms of resources…could it become as important as the copper industry in the long term?

A. I dare not say so, because copper has had decades without a substitute and, in the case of batteries, all this is still developing news. Obviously, there are technological alternatives that are being explored. But the important thing is that we had lithium at $5,000 a ton and today it is trading at $30,000, six times more. We have everything that is electromobility, everything that is renewable energy that uses a lot of copper and also lithium. There is a very powerful synergy here. All we’ve been saying for years is how long are we going to continue with this unresolved issue. And now there is a way.

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