Chile bet by the copper-green

Chile is an old mining district. Some of the farms that operates Codelco —the company's most important market for copper, the property of the State— have more than 100 years old. In recent years, the heat of the boom of the raw materials, the country has grown in its level of revenue and placed to the head of development in Latin America. However, the production of this mineral is expensive: labor, water, space, logistics... And that makes you not be able to compete on price with mining areas with more young people, such as Mongolia. Chile can improve its regulation, to invest, to change the laws and be flexible in their processes, but the extraction of copper in the country will still be more expensive than some of its competitors, the doubling in GDP per capita.

In that context, with the aim of designing its mining and extend the model of development based on raw materials —Chile is still dependent on a good measure of copper, that represents between 10% and 15% of their income— the country has set as a goal to be strong in the well-known as copper green, a product on which you can fix your traceability in relation to their productive process.

Reliance natural resources

Among the experts there is some consensus that the model of development in chile, based on the export of natural resources, is not in crisis. But in Chile, as happens in countries such as Japan, are increasingly harder to grow. The capital invested in doing the same thing, in short, is going to yield less. The export matrix is similar to that of some 40 years ago and the south american country is still dependent on a good measure of the copper (it has a 27% share in the world production, is the global leader and account with a 22% of reserves).

Codelco has good deposits, which are at least six decades of production, but the country will continue to be a process of slowdown as in the last 15 years, unless they find a new strategy. For the drivers of copper verde, Chile should emulate what he did at the beginning of the years ninety, when in the return to democracy bet in favor of global trends, such as the opening. The new global trend, to which Chile looks, it is the revolution of traceability.

“we're Going to certify, under global standards, the traceability of our cathode, which is the format in which it is traded the copper in the international markets”, explained in Codelco. “The cathodes Codelco will have a seal that will give warranties to our clients in respect of eight dimensions of the production process: carbon footprint, water footprint, footprint, emissions, safety, transparency, inclusion, community impact and respect for human rights”. The economist Oscar Landerretche, former president of the board of Codelco and a major driver of the initiative, explains with an example: “The situation of the chilean mining in front of the peruvian, or Mongolian is similar to that of the industry of the radio and the artifacts of music of the germans versus that of Taiwan. What is the option that was taken by the germans? They decided to make radios more expensive, because they are more expensive, but better”.

Landerretche indicates that the problem is that, unlike the germans with their music equipment, so that Chile sells is a commodity. Therefore, there are no varieties of copper: or copper more beautiful, or of better quality. Betxlarge Where could Chile, then, to have a comparative advantage over its competitors? “What is happening with a certain trend in the international markets, giving value to the traceability of the production of many things —starting with food—, given a chance. Because what you can sell Chile, what distinguishes it is that it is a country whose institutions are considerably more mature, transparent and have the best practices,” notes the economist. “The challenge is how one becomes the comparative advantage of the chilean in a competitive advantage to project our mining. The solution I came up with was the copper green”.

Since last November, Codelco announced the project at a mining meeting in Shanghai, the company has signed three agreements with important international firms: Nexans in France, Mitsui in China and BMW in Germany. “The Government promotes the copper-green,” notes the undersecretary of Mining, Pablo Terrezas. “We have the corporation public-private High-Law, whose aim is innovation in the mining industry in Chile and the production of copper-green, so that we can open up new markets”. In the copper indicate that, in parallel, the copper project green started running this year in one of the production centers of Codelco located in the north of the country, the Division Gabriela Mistral. “This will allow us to ship by the end of 2018 our first production of copper cathodes green, which will represent 5% of the production of Codelco. The aim is that, in the medium term, 100% of our copper production has this seal,” report from the state-owned company.

Product differentiation

“Is the path to the disassociation of copper from the idea of commodities”, indicates Landerretche, has embarked on a crusade to convince you that your country should be placed in front of this global trend and not just a receiver. Bet on a distinct market of copper according to the traceability, as is already the case with products such as aluminum, cobalt, diamonds, or in sectors such as agribusiness. But how necessarily a market differential will make it possible for Chile to be able to put a higher price for their copper, such as often ask the miners of the country? “In the case of diamonds, yes. They are more expensive. The bet is that you have copper that has eight, six, two, or just a seal. Some companies is not going to be able to certify that the use of resources is completely transparent, something that Chile itself can. It is a country that, in general, behaves well and is institutionally has relating to good practices”, she adds.

The eight stamps chosen by Codelco follow the line of large companies like Apple or Boeing, whose traceability is determined by categories that not only have a relationship with the environment, but with the ethical and the relationship with the community. There will be a change in the product that Chile sells to the world —fine copper and concentrated, fundamentally— but a new strategy of adding value to mining products. To succeed, the commitment to differentiate in traceability could be extended to other productive sectors of the south american country.