Chile watch: Itaú on mining investment, EY event panelists on wider investment opportunities

Uncertainty on the political front may impact mining investment despite soaring copper prices, Miguel Ricaurte, chief economist at Itaú Chile, indicated.

Prices of the metal have been climbing, supported by a rebounding US and China, supply concerns and a tighter global focus on decarbonizing the energy and transport sectors. 

Likely alluding to a mining royalty bill in congress that would increase the tax burden on miners and a process underway to rewrite the country’s constitution, Ricaurte said: “Normally, high prices of the red metal mean the arrival of new mining investment in our country, although this possibly remains a little uncertain because of the current political situation.”

The bank, during the online event Visión de Líderes, said its models indicate that, by year end, copper prices will be closer to US$4/lb than US$4.70/lb. On Monday, copper hit an all-time high of US$4.86/lb on the London Metal Exchange.

The bank expects Chile's economy to expand 6-7% this year, citing a more favorable external environment and stronger consumption locally, spurred by fiscal stimulus and a third pension funds drawdown. Chile's rapid COVID-19 vaccine deployment is also expected to generate tailwinds.

Chile is the world’s largest copper producer.

ALSO READ: Chile's miners hoping technical discussion will halt royalty bill

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A wide range of sectors present investment opportunities, local business leaders told a webcast hosted by the Chilean office of professional services firm EY.

Among them was Luis Alberto Letelier, chairman of Chile’s association of investment fund managers Acafi.

Letelier said the infrastructure sector – highway, transport and energy, among others – was one of the most attractive. Panelists also identified the health, technology, non-conventional renewable energy, utilities and mining sectors as potential investment targets, with the latter burnished by strong minerals prices.

An EY study of Chilean company executives found 53% expected corporate revenues to return to pre-pandemic levels in 2022, with 30% of respondents interested in taking advantage of M&A opportunities over the next 12 months.

Panelists agreed that companies must reduce costs via automation, boost customer service levels, offload non-strategic assets that generate low returns, have a digital strategy, form alliances, have flexible labor policies and invest in staff development.