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Former President of Chilean Nuclear Energy Committee:“SQM is not a worthy partner of the State of Chile”

30/1/2018

 

 

 

 

Gonzalo Gutiérrez, PhD in Physics, Phisicyst at the University of Chile, former President of the Chilean Nuclear Energy Commission, who joined the Presidential Lithium Commission, explains why the Agreement between Corfo and SQM is a harmful business for the country and an aggression against the free competition and the generation of added value.

 

Dr. Gutiérrez arrives at the meeting in which deputies, social and trade union leaders gather to try to avoid the concretion of the announced agreement between CORFO (the Chilean National Corporation for Productive Development) and the private company SQM, held on January 22 at the former National Congress in Santiago.

 

As soon as he begin talking, those present listen attentively to what he has to say and the strategies that should be followed to prevent SQM from continuing to appropriate the Lithium in the Salar de Atacama. The company SQM is controlled by Julio Ponce Lerou, son-in-law of Augusto Pinochet, who seized during the dictatorship the chemical company at a price many times lower than the real one, , 

 

In the scholar's opinion, it has been a harmful business for Chile that this resource under the agreement continues to be exploited by  the SQM, a company that does not comply with environmental resolutions, is being investigated for the illegal financing of politicians, is accused of violating extraction quotas and has been denounced for violating the rights of workers.

 

To add more, SQM is a company that has a "lease" contract with the salar, and has the  majority part of the property of the water rights in the salar, and element vital for the exploitation of the Lithium.

 

This has been understood by the Chamber of Deputies, which in a special session last week rejected the agreement

 

We talked with Professor Gutiérrez, member of the CORFO Committee of Non-Metallic Mining, and asked him if he could identify other possible outcomes to this crisis besides the one given by Eduardo Bitran, executive vice-president of CORFO, who has stated that "the agreement was the only thing that could be done.“

 

What does it mean that lithium is "Non-concessible"?

 

The Chilean mining law allows that when finding a mineral, the mining company can claim it and request an exploitation order getting a CONCESSION that is very broad. Lithium, on the other hand, can only be exploited by the State, a State company, or awarded to a company with a direct contract or with a Special Operation Contract.

 

Regarding the previous answer, what does SQM have today? 

 

SQM has a "lease contract" of the Salar de Atacama, mining properties that belong to CORFO, that is, to the Chilean State. As a tenant, SQM may occupy the Salar space but under certain conditions. If the tenant breaches these conditions, the leasing may stop.

 

Does the "Tenant" SQM breached these conditions?

 

Yes.. SQM was sued long time ago because it has not paid the rent on time. It has a breach with CORFO since 2013. It also failed to comply with 6 environmental resolutions and does not innovate. One of them is the extraction of water and brines and their supposed reinjection, a process that has not been properly controlled. SQM is taking what it wants and without control.

 

On the other hand, when it became publicly known the corruption scandal involving SQM in politics, a civil trial was opened, which is already underway.

 

In addition, of the 6 environmental breaches, 3 are serious, they have already closed some tasks.

 

How does this affect business and competition in the industry?

 

A lot of conditions have accumulated so that SQM cannot be considered a worthy partner of the State. With this contract with SQM, CORFO is giving a very bad signal to foreign and national investors. SQM  is a company that violates international regulations and that could affect the bases of free competition. For instance, last year SQM had to pay more than $30 million to resolve parallel civil and criminal cases that found it violated the U.S. Foreign Corrupt Practices Act, the U.S. A. Securities and Exchange Commission

It is not a company that is generating a fair business model, damaging other companies that want to enter the lithium business. What really exists is an Oligopoly of two companies that preclude the entrance to other actors. SQM in particular took all water rights making it difficult for other competitors to enter. This is very clearly explained in the Report of the National Lithium Commission.

 

What is it that citizens need to know about Lithium?

 

It is relevant to understand that lithium is related to Energy in at least 3 ways: production of electrical energy through batteries and accumulators that are key for electromobility, for computers, cell phones. Also in the case of non-conventional renewable energies, such as photovoltaic or wind energy, which do not have a plant factor of 100%, that is, they work intermittently, the accumulation of energy is key to maintaining the continuity of the system. If we think about a future of Unconventional Renewable Energy in the Atacama Desert, we need the most efficient rechargeable batteries and accumulators, which are based on Lithium.

 

Would the development of NCREs be compromised?

 

What the State should do if it wants to solve the energy problem, and consolidate the effort that has already been made in this regard, is to get into state-of-the-art technology; You must take that Lithium and we are the ones who control the Lithium business, how it is sold, what value is added to it. The only thing that companies like Tesla, Mitsubishi, General Motors and others want, is a continuous supplier that provides lithium for 20 to 30 years; and I do not think they want a lithium supplier that does corrupt business and politics.

 

In what other areas is lithium relevant?

 

In light alloys, Lithium-Aluminum, which is used as structural material for cars, ships and airplanes, which translates into energy savings, key in energy efficiency. And the third use is the role it will play in future nuclear fusion, where lithium is the fuel of fusion reactors. A Nuclear Fusion Reactor, ITER, is already being built in France. The reactor works with Tritium, which is obtained from Lithium.

 

What would happen if the agreement is validated, and the exploitation of SQM continues?

 

Salars are very critical complex eco-systems, which by any variable could dry up, not recharge, collapse flora and fauna. The situation of indigenous communities should also be considered. Excessive exploitation could destroy the business, the exploitable lithium could be lost. The lithium that is in the brines of the Salar de Atacama is the best economically exploitable: it has the double or triple better law than the rest of the salt flats. Better than the deposits of Australia, Argentina or Bolivia. We are delivering the best lithium source to a private company that sell it as raw material, as a commodity, with no added value. It is time for compliance with what was recommended by the National Lithium Commission: "that the State be the true owner of this wealth."

 

What is your opinion of the Special Lithium Operating Contracts (CEOL)?

 

The CEOL is a tender where there is competition between companies. It is better a good CEOL where good companies participate, than this agreement in which the lithium is delivered to SQM. This agreement of Corfo with SQM is a terrible signal not only for the local market, but for foreign investors, who see how the country, instead of punishing a company that violates and corrupts, rewards it by extending the contract, without allowing participate true innovators. With lithium in control of the state we could for example call people like Elon Musk, Tesla, or others, to add value. In the same way, our own scientists and engineers could participate, with their intelligence and talent, in a cutting-edge technological activity, such as lithium applications, developing sovereign science.

 

What are the exits to this agreement of CORFO and SQM so that it returns to the control of Chile?

 

The clearest way to resolve the litigation is for the SQM to return to the State. It is within our legal system because lithium is a non-concessible substance of national interest.

 

It is the State that can and should recover this. It only requires will and political decision. It could be controlled through a company like Codelco.

The steps to recover SQM are very clear, as lawyers Ramón Briones and Hernán Bosselin have explained in press articles. What there is with SQM is a lease. SQM is an unworthy partner for the state, because it has corrupted - as no one had ever done before - state powers. Therefore it is a categorical imperative that the state recovers its belongings, ending with the lease to SQM. This is done through a Supreme Decree, executing an expropriatory act of that task. This of course is contemplated in our legal system. To expropriate, a general law of a simple quorum is required, which must be sent by the Executive to Congress. The state, through one of its companies, for example Codelco, takes over the SQM tasks. I have talked with several workers and engineers of SQM, and would be happy to work in a company for all Chileans. Then a commission must define the provisional amount of the compensation. To pay for it there are several ways: issuing sovereign bonds, or others, that the experts know very well.

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