Chile’s weekend runoff puts copper future at stake

On Dec. 14, Chileans go to the polls to elect a new president who will govern until 2030 and shape the country’s most important economic engine: mining.

Voters face a stark choice between Jeannette Jara, a Communist Party member and former labour minister under current President Gabriel Boric, and José Antonio Kast, founder of the ultra-conservative Republican Party.

Security and illegal migration now dominate public concern, but the future of state copper giant Codelco sits at the centre of the economic stakes. The company, once the backbone of Chile’s modern economy, is drowning in debt, burdened by aging infrastructure and only beginning to rebound from years of production declines. Chile’s economy is forecast to grow 2.5% in 2025, according to government estimates, but that drops to nearly zero without mining.

Jara promises more police, lifting banking secrecy to fight organized crime and new measures on living costs and wages. Her industrial plan calls for stronger labour laws, renewable energy expansion, deeper state involvement in lithium and a 10% increase in mining output. However, she has struggled to distance herself from the current government and attract votes beyond its core supporters. 

 

Credit: Americas Society and Council of the Americas

Kast has made migration his rallying point, vowing walls, fences and trenches along the Bolivian border to block irregular crossings from countries such as Venezuela. He has offered no mining-specific blueprint but says sweeping spending cuts and a leaner state will revive growth. His proposal includes trimming $6 billion from Chile’s $82 billion budget and auditing government operations to root out what he calls state employee waste.

At the same time, Boric’s administration has tried to improve the investment climate, slashing red tape in Chile’s complex permitting system and signing new trade deals with the European Union, United Arab Emirates and the Trans-Pacific Partnership.

His National Lithium Strategy, once feared as a cover for nationalization, has proven successful. State partnerships with Rio Tinto (NYSE, LSE, ASX: RIO) and SQM (NYSE: SQM) are due to unlock investments which could double production of the mineral within a decade.

Loss of face

Codelco, long a symbol of national pride, is now near an industrial breaking point. By December last year, debt had risen above $20 billion and output was only starting to recover after hitting a 25-year low in 2022.

Legal obligations to send 70% of profits and 10% of sales to government coffers have throttled its ability to reinvest, threatening both its future and Chile’s fiscal stability.

Some investors say Sunday’s vote can become a defining test for Chile’s mining future. John Zadeh, CEO of junior investment firm Discovery Alert, said the outcome could reshape foreign sentiment. “Chile’s election is a referendum on how to balance resource nationalism with economic pragmatism,” he said. “The status quo, however, guarantees decline.”

As the world’s top copper producer and second-largest lithium supplier, Chile plays a critical role in global electrification. Any slowdown in its mining engine would likely reverberate far beyond its borders.