Many Chileans will cheer if Michelle Bachellet romps home as expected in a run-off presidential vote this month, but copper mining companies – the mainstay of the economy – are breaking out in a nervous sweat at the prospect.
The industry, which accounts for a third of global copper production and reserves, and a fifth of Chilean economic output, has seen production costs double over the past five years because of higher wage costs and energy bills and lower ore qualities.
And the new government is likely to add higher taxes to these woes.
Ms Bachelet, a left politician who has made free education one of her main campaign platforms, plans to raise corporate income tax from 20 per cent to 25 per cent.
In addition, Chile may bin a law that protects foreign investments in the sector from higher royalty fees, which may deter some projects.
In addition to a 30 per cent slide in copper prices since they peaked two years ago – analysts at Goldman Sachs predict prices will fall a further 12 per cent in 2014 – and a global copper surplus, Chile’s loss of competitiveness has helped reduce a pipeline of about $100bn of potential mining investments down to just $30bn, according to Joaquin Villarino, president of Chile’s mining council.
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