Chile's new GPS office set to speed up permitting for investment projects

Chilean President Sebastián Piñera's government has declared that reactivating investment is an essential factor in boosting economic growth.

In November, economy minister José Ramón Valente highlighted 7.1% growth in investment in 3Q17, the highest expansion seen since 2Q13, according to figures published recently by the central bank.

The push for investment is being spearheaded by the government's new sustainable projects management (GPS) office, which was launched in May to cut speed up bureaucratic procedures to boost large investments.

Along with the creation of the GPS, Piñera has proposed a "pro-investment agenda" with 18 initiatives involving all economic sectors and the modernization of the environmental evaluation service (SEA).

The GPS registry has a total 233 projects involving investments of US$58.8bn from 2018 to 2021. The mining sector leads the way with 50 projects and investments of US$28.5bn, accounting for 48.5% of total investment.

What is the role of this newly created office and what are its main responsibilities?

The diagnosis is clear. In Chile, investment companies take approximately five years to obtain a final permit and they often have to process more than 1,700 permits in 20 different government institutions.

"We know that over the last few years, Chile has been transformed into a bureaucratic country from the perspective of investment development and that discourages people who have good ideas and that are faced with a state apparatus and institutions that don't dialogue with each other," said Valente at a recent breakfast organized by mining providers association Aprimin.

Piñera's government wants to reduce that five-year figure by half in the next four years, Valente added. And to do so, the ministry of economy created the GPS office, whose role is to follow and accompany the investment projects in the portfolio through their permitting processes, borrowing the idea of similar offices in Canada and Australia.

Juan José Obach, executive director of the GPS said at a mining seminar earlier this year: "From the economy ministry we want to provide the state with an institution that is willing to look at this permitting process. Today, each of these [government] institutions only looks after its own interests, but there's no one from the state that accompanies the project owners to process their permits."

BOTTLENECKS

The other role of the office is to identify bottlenecks within the institutions such as water authority DGA, national geology and mining service Sernageomin, national forestry corporation Conaf and Chile's national indigenous development corporation (Conadi), which are all responsible for awarding sectoral permits.

The GPS office and the ministry of economy have instructed the country's national commission for productivity (CNP) to identify these bottlenecks that could be slowing projects.

"We instructed the commission to study all the permitting processes sector by sector in order to build a route that investors have to follow and try to shorten it and make it clearer and less uncertain," said Valente at the Aprimin breakfast.

Following this same objective, Obach said that for months the office has organized regular meetings with the institutions to identify the different problems they might have.

"We don't want this to be a short-term effort. We want to provide these institutions with more capabilities and better skills. For 2019, we already have funds that we want to spend on specific projects with them in order to make their permitting more efficient," Obach said.

For instance, the office is working on a project with the ministry of national assets to reduce the permitting time for associated land use concessions from the current 14 months to around half of that.

The office is also working on a modernization project with the ministry of the presidency (Segpres) to create a single platform to process sectoral permits. "Once a project obtains a favorable resolution on the SEA [environmental evaluation service], they're just halfway and they have to process other permits with each of these institutions with different criteria, often subject to the arbitrariness of the authority," said Obach.

Another innovative initiative borrowed from Canada is the implementation of a signed agreement for each project where the evaluating institutions commit to meet certain deadlines.

"Today there are legal deadlines, but in public administration if they don't meet the deadlines, it's not fatal," said Obach. "In Canada... their office was able to reduce the permitting times from four to two years and an important part of their management was to have this agreement," Obach he added. 

The office has also pointed to problems mentioned by the private sector. The GPS has chaired several working tables in the construction, infrastructure, mining and energy sectors to identify their problems.

Mirco Hilgers, partner at law-firm Baker Mackenzie, told BNamericas that he believed the new GPS office will have an important communicational role. He explained that today the information on investment projects is not logged in a public registry, but it directly enters the environmental evaluation system, SEIA.

"As a tool it is very useful because it's good to know what projects are currently in the pipeline, which projects are suspended, if they're operating, and what their economic dimensions are," said Hilgers.

The lawyer also applauded the creation of the office because he believes it will resemble a 'lobbying' office that speeds up investment projects.

"These tools are expected to be useful and are effectively a point of contact between the investor and the government and the government can, within the legal framework, speed up the projects," said Hilgers.

THE MINING SECTOR

The mining ministry has also made an effort to identify bottlenecks in the sector.

Through the new sustainable development unit, mining minister Baldo Prokurica traveled to the Antofagasta and Atacama northern regions and conducted roundtables with mining companies and environmental evaluators to identify the main problems in obtaining a permits.

In the Atacama region there are 31 projects that have had environmental permits granted by the SEA, but which have not started construction. In August, the minister led a pro-investment technical roundtable with Corproa, the promotion agency for the Atacama region, and listened to the opinions of regional authorities, service directors and the managers or owners of mining companies whose projects are undergoing permitting.

Meanwhile, the Antofagasta region has 34 mining projects which have environmental approval, with equivalent capex of US$12.4bn

In November, Prokurica led talks with the Antofagasta industrial association (AIA) and the different institutions to identify the various obstacles that mining projects are facing.

"We're doing this exercise in the mining regions, in order to determine why projects that have an environmental permit haven't been executed... We want to help put the authorities in contact with the companies that are processing their permits so that they can be executed as soon as possible, always respecting the current legislation, of course," said Prokurica.

These roundtables will be replicated in other mining regions.

Another measure announced by Piñera's government aimed at speeding up mining projects is to maintain a constant update of the registry of mining concessions in Sernageomin, using the state's official mining bulletin.

The main objective of this is to keep investors informed in a timely and transparent way about the mining concessions available.

"The information in the Sernageomin is very outdated. It's a trap for investment because investors have to talk to an expert who explains to them how to seek updated information and they have to pay for this updated information," Hilgers said.

Every time a new mining concession is granted, it's not immediately registered by Sernageomin, but there are private companies whose work is to collect this information, systemize it and register it in software, and they later charge for this information, Hilgers said.

"This is a long-awaited reform... One of the main obstacles to investment is that this information isn't open and it's not easy to access," said Hilgers.

Investment growth is the cornerstone of Sebastián Piñera's government. From March to August, eight projects received environmental approval and three have begun construction, Obach announced, adding that the GPS office has contributed to this success, while over the next year another four projects with an estimated total capex of US$1bn are likely to enter the SEA. "We believe that dynamism is already taking place in the sector," he said.