Chile Finance Minister Mario Marcel Says He Is Open to Tempering Copper Royalty Bill
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(Bloomberg) -- Chile is willing to discuss lowering the tax burden for mining companies in a royalty bill before Congress, the top copper-producing nation’s finance minister said in an interview.
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The industry is expected to offer suggestions in meetings with the government next week, Mario Marcel told Bloomberg TV Thursday. In changes he announced on Tuesday, the royalty would be reduced if the sum of all taxes exceeds 50% of operating profit.
“There is no red line,” Marcel said while in Washington DC for the International Monetary Fund’s Spring Meetings. But any further concessions would require support for reforms, he said. “We cannot just introduce more flexibility and still have uncertainty on where the voting will go.”
Marcel is attempting to increase the government’s take of copper earnings to fund increased social spending without undermining the nation’s competitiveness as an investment destination. At stake are tens of billions of dollars in projects needed to help meet growing demand for the wiring metal in the clean energy transition.
He’s also steering President Gabriel Boric’s economic reform plans, which suffered a blow last month when lawmakers rejected a tax overhaul. The government is facing numerous challenges including a fragmented congress and fast inflation at a time when analysts bet it will be one of the only major regional economies to contract this year.
A former central bank head and government budget director, Marcel is one of the best-evaluated cabinet members, public opinion surveys show. He is one of the administration’s main representatives before investors, and has led talks on bills with lawmakers and the presentation of social aid packages.
Wealth Tax
Still, in March, Chile’s lower house unexpectedly rejected the government’s flagship tax reform that would have created the nation’s first levy on wealth and aimed to finance a series of spending increases, dealing another severe blow to 37-year-old President Boric, as well as Marcel.
As the government works out new plans for a tax overhaul, it will be prepared to review its push for a wealth levy “on the basis of the alternatives that may be put forward,” Marcel said.
“A wealth tax is one of the issues that has been most discussed,” he said. “Many people don’t like it. Some people say it’s too difficult to implement.”
Chile’s economy has shown mixed signals in recent months. It grew less than expected at the end of last year, barely exiting recession with help from an increase in mining output.
Most recently, central bank data showed activity dropped again in February, though after a jump the prior month. Put together, Chile has dodged the “brutal crisis” that many were forecasting, Marcel said in late March.
Meanwhile, at 11.1%, Chile’s annual inflation rate stands at nearly four times the 3% target. The central bank, led by Rosanna Costa, is holding the benchmark interest rate at a more than two-decade high, waiting for further signs a slowdown in consumer prices is taking hold.
--With assistance from Eduardo Thomson.
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