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Moody’s warns that uncertainty over Chile’s constitution could affect mining investment

Investment in Chile’s mining sector could be paralyzed if political uncertainty about the new constitution is not resolved, rating agency Moody’s said on Wednesday, reflecting the concerns of the sector in the world’s largest copper – producing country.

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Chile is reforming its market-oriented constitution, which dates back to Augusto Pinochet’s military dictatorship. A national referendum on the new text will be held in September, a process marred by low support.

Some of the most controversial proposals for mining have already been rejected by the assembly, but the text is likely to strengthen environmental regulation, which could affect copper and lithium extraction.

Moody’s analyst Barbara Mattos said investment could dry up without guarantees for mining companies. global miners like BHP, Anglo-American y Cora Valley operate in Chile together with the state mining giant Códlcó.

“If the rules are not clear, we will not see an increase in investment in Chile, even though the country has some of the best mining deposits in the world, especially copper,” Mattos said.

“Legislation governing all the norms established by the Constitution will be a very important factor, possibly leading to changes in the conditions for making long-term investments.”

For example, Mattos explained that the ban on activities around glaciers could affect 20-25% of current copper production and some expansion projects, although the final impact is not yet clear.

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This and other regulations, such as prioritizing the use of water for human consumption over mining, will mean increased costs. This, combined with the higher levies expected for mining, would reduce the companies’ cash flows, Mattos added.

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