The Chilean mining industry is losing competitiveness. In 2000 Chile's average copper cash cost was the 5th lowest in the world at US$0.43/lb. In 2013 it was in 23rd place at US$1.765/lb, according to figures from Wood Mackenzie and state mining company Codelco. Countries with lower average copper cash costs than Chile's today include Mexico, Peru, the US and China. Although Chile produces a host of minerals, copper is often considered the nation's cash cow and is essential to the economy: red metal exports were worth some US$38 billion in 2014, 50% of total exports and equivalent to about 15% of GDP, even considering weakening copper prices.
But mining in Chile is getting more difficult and more expensive. Chile's average copper grades are sinking faster than the world average, putting significant pressure on productivity and increasing miners' demand for scarce water and energy, while wages are also rising fast.
Other, less quantifiable factors such as growing socio-environmental pressure and permitting risk or the elimination of foreign investment protections are also playing a role in turning Chile into a place investors must carefully consider rather than the obvious place to invest. Regaining competitiveness is the number one challenge facing the sector.