New Developments and Current Trends
The energy and natural resources sectors have been extremely active in Chile during recent years for three main reasons.
First, the rising international prices of copper have driven investment and new projects in the mining sector, including expansions that will increase the speed of development of huge mines. Iron, lithium and other minerals have also increased in terms of investment, studies and new project development. The Environmental Impact Assessment System (“Sistema de Evaluación de Impacto Ambiental”) has been flooded by new mining projects, mainly developed by the private sector but also by the state-owned largest copper producer in the world, Codelco, and a great number of different and innovative supporting initiatives, such as desalination plants, power plants, etc.
Second, the energy sector has become critical for the country’s development, as its current structure has proved unstable, with extremely high prices in comparison to international prices. Currently, there are large hydroelectric and thermoelectric projects under development which will supply an extra 6,000 MW to the system. Furthermore, the government and the private sector have agreed in different systems to promote non-conventional renewable energy, such as small-scale pass-through hydro plants, as well as solar, wind and geothermic projects. During recent years several of these innovative projects have been completed and have started to provide power to the system. There are some additional 2,700 MW in non-conventional renewable energy projects already approved by the environmental authorities and ready to start construction. The government is seeking to deliver its 20/20 Goal in order to have a 20% share of the power matrix based on non-conventional renewable sources by 2020.
Besides high energy prices, tougher environmental standards, especially for thermoelectric plants, and increasing environmental concerns among the population, have transformed almost all energy projects in a significant challenge, plenty of need for legal work.
Finally, as Chile became a member of the Organisation for Economic Co-operation and Development (OECD) in 2009, the country started a modernization process in the environmental sector and institutions. At the beginning of 2010, Congress enacted the most important reform of the Environmental Law which included the creation of new institutions, such as the Environment Superintendence, with strong powers, and Environmental Independent Courts as a counter power. In addition to separating sanctioning and conflict resolution procedures from the administration, the reform's main objects were increasing the technical nature of the environmental impact assessment process, thus shrinking political influence; creating new environmental and conservation instruments for use by the administration; increasing community participation; and bringing objectiveness and transparency to all procedures and approvals.
The carbon credit market (under the Clean Development Mechanism) has also been dynamic in fostering renewable energy sources and is expected to continue operating in the energy and landfills sectors.
In this context, the National Environmental Service, through its regional offices, is responsible for evaluating and approving/objecting around 1,000 investment projects per year in the whole country, representing an average of USD10 billion of investment per year. Such investment is led by the mining sector, but it also includes energy, real estate, industrial, infrastructure and solid and water waste projects.
As the country has continued its development process, the community has become more informed, active and interconnected, with NGOs having a relevant role in this process. This tendency will necessary lead the country to improve its environmental standards in the long term, responding to popular demands. Community opposition to specific projects has been evident both in massive rallies in Chile’s major cities and in court. That process should continue as it is common in more developed countries, but is not foreseeable that it may affect previously acquired rights or the country’s long-term development process, as the Environmental Law specifically recognizes the sustainable development concept which demands the inclusion of conservation, social and economic development. For example, the authorities seeking to enact special regulations for partially polluted areas must consider cost/benefit analyses and studies, and both the community and corporations input in the process.
With a 5% annual growth projected for 2011 and 2012 many foreign companies, specially European, are looking for new opportunities in this stable country which, although with a relatively small internal market, can operate as an efficient platform for business in Latin America.