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A Critical Moment for Latin America's Mineral Supply Chain · Columbia Energy Exchange

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  2025-07-14-Jobet-Moerenhout-Rivota-transcript
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  Juan Carlos Jobet: If you are the US you want to reduce the dependence on, on China, you need to put money on smelting and refining capacity. You can gradually increase production, I mean, in your own country, but you have to take into account the time horizons. And I don't think you need to do that all at home. You need to build strong relationships with a network of countries. Chile, Canada, Mexico, Peru are pretty friendly, reliable partners of the US.
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  Jason Bordoff: The global race for critical minerals is accelerating as countries rush to secure supply chains for these essential materials. These resources are important not only for a range of energy technologies, but also for the broader economy, and they become a major focus in policy and trade discussions.
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  At the center of this competition sits Latin America, home to vast lithium reserves in the so-called lithium triangle, and nearly 40% of the world's copper deposits. But recent price, volatility, and geopolitical concerns have created new challenges. Early this month, President Trump announced a 50% tariff on copper imports, further jolting markets, with copper prices jumping over 13% in a single day.
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  So how are countries in the region navigating these new trade and market realities? Can Latin America build mineral supply chains that are more resilient to geopolitical shocks? And how are these governments responding to the environmental and economic concerns of Indigenous and local communities?
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  This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff.
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  Today on the show, we have our own team: Juan Carlos Jobet, Tom Moerenhout, and Diego Rivera Rivota.
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  Juan Carlos is Chile's former minister of energy and mining, and a distinguished visiting fellow at the Center on Global Energy Policy. He's currently the dean of the School of Business and Economics at Adolfo Ibanez University.
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  Tom leads the Critical Minerals Initiative here at the Center on Global Energy Policy and is a professor at Columbia School of International and Public Affairs. And Diego is a senior research associate here at the Center on Global Energy Policy.
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  We explored the possible impacts of Trump's proposed copper tariffs on Latin American producers and the challenges facing lithium production in the region. We talked about the trend toward resource nationalism and how Latin American countries are positioning themselves in terms of US-China competition. And we discussed how the Trump administration is investing in a homegrown mineral supply chain and what the recent tax bill means for critical mineral development. I hope you enjoy our conversation.
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  Juan Carlos, Tom, Diego, wonderful to call you all colleagues and wonderful to have you here on Columbia Energy Exchange. Thanks for making time to be with us.
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  Juan Carlos Jobet: Thank you for having us.
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  Tom Moerenhout: Absolutely.
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  Diego Rivera Rivota: Thank you for having us.
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  Jason Bordoff: So we had this wonderful trip a month or so ago – I've lost track of time – where we spent time in Chile, in Santiago, in Atacama, seeing some of the development mining, copper mining, lithium development, a big part of the work you all do at the Center on Global Energy Policy. Juan Carlos, obviously the former energy minister of Chile and Tom, you lead our critical minerals initiative. So it was really important for the center to be on the ground in a country as important as Chile. Incredibly educational for me. And so I really want to talk about the time we spent on the ground there and we thought it would be interesting to have a podcast to talk a little bit about some of the issues that were raised on our trip and some of the things we discussed. And I remember when we scheduled this wondering whether that was too narrow a topic to talk about Chile.
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  But the president of the United States has made this a little more timely and relevant because just unfortunately a few days before this conversation, and we're talking about a week before this will come out to our listeners, everyone's talking about copper and everyone's talking about Chile too because it's such an important supplier. Obviously major new tariffs, 50% tariffs on copper imports into the United States. So Tom, maybe you could just sort of set the stage for everyone listening that have seen these headlines, what do we know that was done? And maybe we don't totally know yet what these tariffs are being placed on. Are they on raw copper? Are they on refined or processed copper? And we'll come to why that's important. What are you hearing in terms of what the potential implications of this are? Obviously Juan Carlos would love to have your perspective on how all of that news was received in Chile. But Tom, go ahead.
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  Tom Moerenhout: Yeah, thank you Jason. So before the copper tariffs, there were tariffs on aluminum and on steel, and I think many people were expecting actually a 25% tariff on copper. That's what I've heard from a lot of my sources. And the 50% came a little bit as a surprise. And what we know now is that 50% seems to be a decision that will apply to raw material or concentrates, but also refined material. And even copper semis, which are basically the pipes, the rods and so forth, the impact of that can be really quite substantial. It's going to be a significant inflationary impact on downstream industries, whatever that is—data centers, chip manufacturers, electric vehicles, et cetera. And I think the goal of it, of course, is to kind of start substituting a little bit of foreign production with domestic production and refining. And I think the challenge that I hear from a lot of people is first, this doesn't happen in a day. You're setting us back for several years of higher prices and downstream industries are going to have to deal with that.
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  And number two, we are not sure that that investment is going to flow that easily because it turns out that some of the tariff decisions have been scaled back or they were quite uncertain what happens in the next administration. Maybe they will choose a different course and you don't make these big investment decisions for smelters, which are multi-billion dollar capital investment projects. You don't make that on the basis of “we might have tariff” in the next three to four years. That's just not enough. The time horizon is much more. So there's a lot of uncertainty at play, but I think a lot of people are currently not very happy, especially when you're operating in the industries that consume a lot of copper.
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  Jason Bordoff: And just remind people listening, what problem are policymakers in Washington trying to solve? We'll leave aside for the moment whether tariffs are the right solution or not, but what's the issue?
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  Tom Moerenhout: No, absolutely. So the US and a lot of the industries obviously are heavy consumers of refined copper, right? Today about half of the refined copper that they use is coming from imports. And so US policymakers are experiencing that as a potential risk into the future as well—a future which is copper heavy. Now I do think it's important to add that yes, half of it comes from imports, but those imports actually come from countries that are allies of the United States. Two thirds are from Chile, around 15% is from Canada. It's not that stuff is coming from China. We actually see very little refined copper coming from China, but that's sort of the main threat. They want to incentivize bigger copper production in the United States at the mine site, but also at the refining part, sort of trying to fix that general midstream smelting problem that the US has—a lack of capacity there.
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  Jason Bordoff: And copper, of course, people don't think about on a daily basis, but for so much of our technology, for our electricity system, if you want to have electric cars, they use massive amounts of additional copper relative to traditional cars, clean energy, on and on. Copper is sort of essential to all of it.
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  Tom Moerenhout: Absolutely. Grids, data centers, defense, electric vehicles—everything is basically copper. That's why we often speak about Dr. Copper, right? Dr. Copper is sort of an indicator of economic health and where the global economy is going.
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  Jason Bordoff: And again, you lead our Critical Minerals Initiative. And so what you described, which is this concern about import dependence, extends to lots and lots of the metals and minerals that we need for defense technologies, for clean energy technologies, on and on. Copper, probably less so than others. Many others we're much more dependent on imports for.
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  Tom Moerenhout: Absolutely. I think of the 50 critical minerals in the United States, copper is arguably the one where import dependency is not the biggest threat—it can be coming in the next couple of years because our copper demand is going up so significantly. But there are minerals where it's a lot worse where we are relying for 90 to 100 percent on China, for example, for exports. So I would not say that copper is one of them, even though I completely support the fact that it was added to the critical minerals list. I think that's evident.
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  Jason Bordoff: And the country from which we import the most copper is...
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  Tom Moerenhout: Chile.
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  Jason Bordoff: Okay, so we're going to go now to the former energy minister of Chile. With that segue, Juan Carlos, I mean just talk a little bit about how this news was received in an ally and a partner of the United States.
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  Juan Carlos Jobet: Well, I think it was a mixture of a bit of surprise in a sense and a little bit of disappointment, I would say. A little bit of confusion as well. Surprise, because we have a free trade agreement in place with the US since 2003. Even though that agreement has a clause that allows countries to use national security arguments to impose tariffs. I mean, we didn't think—I would say most people didn't think that we were going to have 50% tariffs on copper, to be honest. We are, as Tom said, the biggest exporter of refined copper to the US by far. Chile is by the way, the biggest copper producer in the world. We produce around 25% of the world's copper. The second producer is Peru around 10 to 12%. And then the DRC.
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  Jason Bordoff: How important is that to the state budget? State revenue?
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  Juan Carlos Jobet: It's very important. I mean it fluctuates depending on the price of copper, of course, but it's roughly 50% of our exports. It can be over 10% of tax revenue in good years. So it's very relevant for us. It's our most important industry by far, around 10% of GDP, a big source of employment. And we have a very sophisticated and rich ecosystem around copper. So we have state-owned and private companies, we have small, mid-size and big companies. We have Chilean companies and international companies. So it's a very robust, diversified and reliable, I would say, supplier of copper to world markets.
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  I think I said confusion because for me at least, and for many other players down here, it's not that easy to understand what's the logic behind those tariffs, right? Because if the problem is, as Tom said, that the US imports too much copper today and wants to reduce that dependence, that is not something that's going to happen in a short period of time. If you take the whole cycle between exploration, discovering resources, I mean getting the permits, the financing, building, producing and so on, it can be over a decade. So the US is not going to solve this problem in the short term. And the other source of confusion is that Chile, as you said, is a reliable partner of the US where you have a very open economy. We have free trade agreements with 90% of the world's GDP. Most big international companies operate in Chile and sell copper to the US and other markets as well. So it's difficult to think of a more reliable supplier of refined copper than Chile.
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  We produce basically different types of copper, but to make it simple, we produce refined copper and that is the copper that the US buys from us. We also produce concentrates, which is a product that has to go through smelting and refining to then be used by final consumers or manufacturers that use copper. And most of that smelting and refining capacity is in China. But here we're not talking about copper that goes from Chile to China and then to the US—we're talking about refined copper that goes straight from Chile to the US.
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  Jason Bordoff: Refined by Chinese companies? By Chinese technology? No?
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  Juan Carlos Jobet: No. It's basically produced as cathodes in Chile. So there's no link in that supply chain that passes through China. So the geopolitical angle I don't really see. And the companies that are producing that copper are the state-owned Chilean company Codelco, BHP, Rio Tinto, Freeport-McMoRan, which is a US company as well and is a very relevant player. So it's confusing, a little bit disappointing, I would say.
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  Jason Bordoff: Tell me what—please, Diego, go ahead.
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  Diego Rivera Rivota: No, I just wanted to expand on—I think that's a great point by Juan Carlos and beyond Chile. These measures also impact other allies of the US in the region in Latin America. Peru, for instance, that Juan Carlos mentioned produces about 11% of the world's copper supply. Mexico, 3%—they both export to the US. And if we account for it all together, Latin America produces about 37% of copper. And if we look at the refining side of refined copper, that's about 10%. And then the other one that we can't forget that also matters in this is Canada, which along with Mexico faces all these conundrum around the USMCA renegotiations and all these tariff measures. So I think it's a more complex picture that of course has Chile at its core, but it goes also beyond it.
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  Jason Bordoff: Just Juan Carlos, I was curious what impact you saw within the country other than confusion. I know you saw a quote from your foreign minister saying, you'll find new markets, there's no lack of demand for copper globally. Is this a situation where trade flows just shift around? And maybe you could talk a little bit about the outlook for copper in Chile. I think the ore grades may be declining and costs of development and mining may be increasing. Globally, what do you see in terms of the copper supply deficit and what does that mean for Chile? How do these new tariffs affect that?
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  Juan Carlos Jobet: Yeah, so I think most people agree that the outlook for copper is very positive because—
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  Jason Bordoff: In terms of demand, you mean?
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  Juan Carlos Jobet: Yeah, yeah, because of demand and prices. Because I think demand is expected to grow because electric cars use twice as much copper as conventional internal combustion engine cars. Offshore wind, onshore wind, solar PV—I mean power generation plants use much more copper than coal, nuclear and natural gas. So as we move towards more clean technologies, the demand for copper will grow and that demand for clean technologies will increase demand for copper on top of what we have been using copper for mostly in the last several decades, which is construction, electronics and so on. So it's a pretty strong demand outlook. And from the supply side, most people agree that it's getting increasingly difficult to develop new copper mining capacity. So most people agree that the price should remain strong for a while. Just to give you a sense, in the case of Chile, we need to deploy over $80 billion in investment between now and 2033 or something just to keep up with the expected increase in global demand. So if we want to maintain our market share in global markets, we need to deploy that amount of money. And that is difficult because of permitting, because of environmental issues, getting the financing and so on.
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  And the US—it is a relevant customer for us, but we send around 10% of our copper to the US. So it's not nothing, but we can find other consumers for that copper in other markets, which could be counterproductive for the US I would say. I think manufacturers in the US—car manufacturers, manufacturers of electronics and others, construction materials and so on—will have to pay higher prices. Higher prices for final consumers reduce demand and that demand, we will find that demand somewhere else, I think, right? So I don't see very clearly how this is going to impact Chile negatively, to be honest. It might have a short-term effect, but I don't think this is going to have a huge effect in the long term.
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  Jason Bordoff: And if you were giving unsolicited advice to US policymakers that were concerned about concentration of copper supply and mining—I think notwithstanding the data on what is imported to the United States, somewhere around half of global refined copper supply comes from China—if you want to change that reality, increase, diversify supplies, increase production elsewhere, including within the US's own borders, what do you think would make sense?
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  Juan Carlos Jobet: So the way I think about this is that I don't think that getting most of your minerals or materials from other countries is a problem in itself as long as you have diversified and reliable sources of supply. So when you think about Russian gas to Europe, I don't think the problem was Russia. I think the problem was that it was 40% for Europe and more than that for Germany. So it was concentration. So if you are getting 100% of your copper from abroad, but it's 10% from 10 countries that are friendly partners, reliable, open liberal democracies, what's the problem? I don't see a problem in itself by importing a big chunk of your materials. Now if you want to reduce your concentration, which I mean, okay, let's do that, I think you need to first reduce China's dominance on smelting and refining capacity, I think.
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  This is something a bit technical, but as all deposits grow older, ore grades go down and you lose your capacity to produce refined copper easily, and you need smelting and refining—you produce concentrates and you go through smelting and refining to produce cathodes. And most of that capacity is today in China, by the way. The price that miners pay to smelters and refiners to do that work today is negative. So the TCRCs as those terms are called are negative. So it's overcapacity of smelting and refining. So if you are the US, you want to reduce the dependence on China, you need to put money on smelting and refining capacity. I don't see a way around that. You can gradually increase production in your own country, but you have to take into account the time horizons to do that.
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  And again, I don't think you need to do that all at home. You need to build strong relationships with a network of countries. And I think the list that Diego went through is a pretty good one, right? Chile, Canada, Mexico, Peru are pretty friendly, reliable partners of the US. So one last thing. I've seen no effort by US companies or US state agencies to help develop smelting and refining capacity in Chile, for example, which could be something that makes sense if you want to diversify the reliance on smelting and refining capacity away from China, but I don't think that is happening.
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  Jason Bordoff: Tom, can you talk a little bit about the policy outlook here and what you think—there is of course a time lag or time problem, it takes a long time to develop mines. We've seen how long Resolution Copper mine, a massive resource in Arizona, has been under development and lots of discussion of permitting reform and abundance and making it easier to do some of these projects. How do you square that circle between the reality that it takes a long time, but if you don't have some incentives—and they could be incentives for domestic production, they could be restrictions on imports—no one's going to get started. And so what does that mean for how we should think about imports, the security issues with imports and a tool like tariffs?
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  Tom Moerenhout: It's a really good question, and I think the answer is different for different minerals. I think what we have with copper is, as Juan Carlos was saying, we have major oversupply on the processing and refining part in China. So what you're now trying to do is potentially build something up that will not compete globally—I don't want to say ever, but it's not going to compete globally. So what you're doing now, or the way I'm interpreting it, is a lot of copper that goes to China that is refined in China, of course goes into products in China and those products are then exported to the United States. That of course is a real story and China has an advantage in that refining and processing, and as a result, they have lower prices for inputs. And so I think the way the administration is thinking now about a solution is we need much more processing and refining capacity because we can't allow that.
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  And I think the objective is a good one. The way they go about it with respect to copper is a bit bizarre because again, like Juan Carlos was saying, Chile is an allied country, you can do business with them. Chileans prefer to do business with the United States. There's a certain—I don't want to say capitalist business logic, but they speak the same language and I think that is very important. And here you have an opportunity to do that, to potentially build capacity as well within an allied country and as a result, make sure you actually get the lowest cost intermediates for your own domestic manufacturers. Other minerals, especially those where China has a really major export share to the United States—yes, I think tariffs will be part of the equation. I think that makes sense to a certain extent. Right now the balancing is super difficult, right?
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  Because we have all of these industries downstream where competitiveness is huge and margins are quite thin, razor thin, so how do you match the two? And the answer is, well, it's going to cost you quite a bit of money now. Tariffs are part of that. I think other solutions, especially within more niche mineral markets are ones that include things like offtake agreements, potential stockpiling, sort of helping to make sure that there is a floor pricing in case of predatory pricing, something like that. You have this whole playbook and tariffs is one part of them, but now it seems that there's maybe potentially over-focus on tariffs, which is going to add inflationary consequences and maybe not enough on some of the other policies focusing on supporting supply.
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  Jason Bordoff: Tell me if you agree with this and see if you can characterize it for people listening. We talk a lot about mining and doing more mining in the United States. You've rightly focused in terms of the security concerns about China's dominant position in these markets being the refining and processing. There's some like rare earths where they have a dominant position in production as well. So the idea is, well, you can build an oil refinery, etcetera. Why can't you just do refining and processing for critical minerals anywhere? The scale, the magnitude, the efficiency of the decades that China's built this refining capacity—if you think about trying to replicate a significant share of that in the United States, it raises a lot of environmental issues too. Doing all that refining and processing, it seems incredibly hard for me to imagine how not just a couple of projects come online, but you do enough of this domestically to really change the position in any reasonable timeframe of a decade or two. China's still going to be pretty dominant in the refining and processing of these supply chains for a long time, and I'm wondering if you agree with that. Give people a sense of that scale and what we're really talking about. And how should we think about that as a policy challenge?
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  Tom Moerenhout: I definitely agree with it. Anybody would agree with that statement. I think there should be very clear prioritization of critical minerals. One of the things that I struggle with today is that you have 50 critical minerals. That's about 40% of your entire periodic table elements. And when everything is critical, nothing is critical. And so I think there needs to be a prioritization, definitely focusing on the ones where China has big production capacity and big refining capacity together. So then we're talking about things like gallium, germanium, rare earths, of course, as well. So that level of prioritization I think is important. Now when you think about that processing refining part, and I don't want to sound sort of derogatory towards what China has achieved, a lot of people like to jump on government subsidies has been part of the game for sure. The other thing is just that they have excelled at copy-pasting smelters time and again, and as a result, by that copy-pasting—it's the same thing with technologies—you learn by doing so, you deploy as much as you can and your learning curve then drives down cost. That's kind of what China has also done on the smelting refining part. And to replicate or to think that you can replicate something like that with, oh, we're going to incentivize one, two, or three smelters, that's just not realistic. What you do is you invest in smelters to improve your security of supply if you wish.
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  And I think that's an important way to think about the edge that China has and how long that is going to take to diversify away from that. And as a result, also you need friends. That's just how it is. You need to combine market shares, you need to combine investment potential and so forth. Mineral Security Partnership was a good idea around that. I think not enough happened there, but hopefully it will in the coming years.
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  Jason Bordoff: Juan Carlos, can you say a little—you mentioned earlier you have an approach with state companies and private companies, but just help people listening understand how Chile thinks about the role of the state in copper. We'll come to lithium in a minute. Also, the importance of a company like Codelco, how the country thinks about copper governance, partnerships with private actors, discussion of nationalization of some of these sectors.
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  Juan Carlos Jobet: Yes. So in copper we have a state-owned copper company called Codelco. As you said, that's the result of the state expropriating—nationalizing—private companies in the seventies. So when Codelco was created, it represented over 80% of Chile's copper capacity. But after that, we brought in a lot of private investment, mostly during the nineties when the economy opened up after the dictatorship. And most of the increase in copper capacity, production capacity since the nineties was driven by private companies. So what you have today in Chile in copper, it's a very rich and diversified ecosystem. You have Codelco and then you have, as I said earlier, most of the big international players with very relevant presence in Chile. We also have a small state-owned company, it's called Enami, that basically helps small and artisan and medium-size miners process their minerals. And we also have privately owned by Chilean investors, companies called Antofagasta Minerals. And the way I think about Codelco is I don't think Codelco is the most efficient company. Maybe in private hands it could be a bit more efficient. It's still the biggest copper producer in the world, Codelco, as a company.
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  But the way I think about it is I think that most Chileans understand that minerals are natural resources, non-renewable, and that we need to take advantage of those resources and to make sure that the people capture a fair share of the rents that copper production generates. And even though you could argue that the state could capture a fair share through taxes and royalties paid by private companies, I think that having a state-owned company helps us with—I would say the political economy of the whole thing, right? Because I think Chileans feel that having a state-owned company, even though it's not the most efficient one, makes people feel that it's a balanced, kind of fair agreement. We have private companies, state-owned companies, we all have our piece of this pie. So I think Codelco has an active role in production but also has a political role by increasing the legitimacy of the private sector. That's the way I think about it. And we can talk later about lithium, which is a completely different story.
• 0:55
  Jason Bordoff: And the outlook for copper production in Chile, which is sort of seen as a pretty mature market after decades and decades of production, do you see it continuing to grow?
• 0:56
  Juan Carlos Jobet: But much more slowly than it grew in the nineties. So just to give you a sense, between 1990 and 2004, our production grew 3.5 times, right? Since then, it has remained mostly flat even though we invested a lot of money, but it was mostly to replace the declining ore grades that were falling, right? As deposits grew older. And going forward, I think it will increase, but just slightly.
• 0:57
  Jason Bordoff: Diego, when we visited, it's helpful to see energy infrastructure, mining infrastructure in person to get a sense of the scale. It's true for oil and gas, it's true for mining, and we went to visit the largest open pit copper mine in the world. Just give people listening a sense of how you saw that. And then I want to talk about what we saw—it was a hole in the earth that could put two and a half Empire State buildings in it. And you can imagine how many mountains around it were created, cities displaced over time by the amount of earth that was moved to do this. And then we met with some of the indigenous communities there to talk about—as Juan Carlos said, this provides an important source of revenue to the company. But the question of how Chile thinks about sharing that revenue with local communities and the engagement with local communities in terms of environmental issues, water usage, just share a little bit about the conversation that you moderated for us there.
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  Diego Rivera Rivota: To have the opportunity to witness the sheer scale of these mining activities, machinery that is absolutely illustrating, very impressive to see there in person and just allows us to better understand how challenging it is to do more and to do better in terms of expansion and building these mines. I think an important factor of this region of Chile, right? We're talking about the northern part of Chile around the Atacama Desert in which we visited these underground mine, Chuquicamata, which basically we were about a kilometer underground there, witnessing these operations, but also around that area, there's a concentration of other copper mines, of mines of other minerals as well. In the case of copper, I think there's this element of how one, the mitigation of impacts can be done and can be improved. And two, an aspect on the benefit sharing. So something that I think comes on and on in conversations with people on the ground in Chile for instance, is that the main city in this region, for instance, Calama, where one flies there, where most miners go there, despite being such an important, such a source of economic activity, the public infrastructure there, the conditions of services, living there do not quite live up to those standards.
• 0:59
  It is really—the reputation that the city has does not reflect the wealth that it could probably have. And that thinking in a way is that fair? This is a fairness, justice. I think it's important to think about them and to do much more and understand why it is in the situation that it is. And I think part of that, and this is something that was represented by several participants in our conversations, was that there is a relatively limited presence of the state at many levels there. And that historically the Chilean state could have done and could do much more to provide those basic services and to better distribute the wealth and the benefits of these operations. So I think I'll leave it for now with that, but I think there's another key element. We can talk about this when we are on lithium, which is an essential issue, which is water. But I'll leave it at that for now.
• 1:00
  Jason Bordoff: Can you Carlos? Yeah, I was going to ask you if you could respond to that.
• 1:01
  Juan Carlos Jobet: I was going to add just a couple of numbers on Chuquicamata subterraneo. We visited, just to give listeners a sense of the size. Chuqui subterraneo took around 15 years to develop from initial studies to operation. Total investment was I think between five and 6 billion. And I mean they have around 2000 people working underground on a normal day, and they will be producing around 1.5% of the world's copper. That's the size of the challenge we have. I mean the International Energy Agency, I think estimates that demand for copper will grow, I don't know, 40% in the next 15 to 20 years. So to keep up with that increase in demand, it's a huge undertaking. Huge. And regarding communities, I think Diego is completely right. Many times local communities feel reasonably that they get the negative consequences of mining, the pollution, the depleted water sources, the traffic and so on, but that they don't get the benefits.
• 1:02
  And it's important for the communities of course, but it also, it's important for policymaking because in many cases, politicians, especially from local regions, push for more taxes for mining companies as if mining companies are not paying enough. And many times it's not that the companies are not paying enough. When you compare the taxes that mining companies pay in Chile, and you compare that with other corporate mining jurisdictions, they are kind of in the same neighborhood around 40 to 45%. The issue is not the level of taxes they pay. The issue is how the state then spends a fair share of that money back into the communities that are experiencing the negative consequences. And what happens many times is that during the consultation processes, the environmental assessment processes, local communities try to impose those kind of necessities to ask private companies to solve the problems that the state, in spite of having the money from mining companies, is not solving for them. So that is complicated.
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  Jason Bordoff: Tom, can you just offer a reflection or two on your takeaways from the engagement we had with indigenous and community leaders and then broaden it to sort of lessons that can be learned from Chile's experience, things to replicate or things to avoid because this is an issue everywhere. Go to Canada, go to United States, Australia, I mean anywhere where there's extractive activity, significant concerns, challenges raised by this activity.
• 1:04
  Tom Moerenhout: Yeah, sure. There's so much to say about this topic. I think there are sort of three big takeaways that I went away with. I think the first one is the complexity of the negotiations and the negotiations need to be there and the benefit sharing need to be there, but the complexity of them is kind of showing a big lack of understanding by a lot of stakeholders. And I think it's important to highlight that. For example, when we went to SQM in the Atacama, which is always sort of, I don't want to use the word vilified, but for lack of a better term, vilified because of their water consumption, right? It's interesting to see that actually we're talking about that very salty brine, most of that. And then when people jump on freshwater, well actually it's mostly their potassium plant that is using freshwater, not so much their lithium operations, yet in the debates about critical minerals, we throw all of that together. And I don't think that is very useful. I think it is much better to discuss sort of mineral by mineral, specific operation by specific operation, what the impacts are and how to compensate those impacts, right? That's number one.
• 1:05
  The second part is benefit sharing and impacts are radically different things. There's very important need to focus on impacts and to compensate and to mitigate them as much as you can, and sort of that hierarchy of trying to avoid, mitigate, compensate and so forth. With respect to benefit sharing, this is historical. This is exactly what Juan Carlos was talking about, the fact that there's a lot of money there and that should be shared with surrounding communities, whether they're Indigenous or local, right? And I think that's sort of an important one to take into account.
• 1:06
  Now the third one is sort of what model works, and that is something I think obviously it's region specific, but that I find very fascinating. One of the gold standards out there, if you wish, a lot of people are focusing on, a lot of NGOs are focusing on as well, is what Albemarle has done. And Albemarle basically said, look, we're going to give you a percentage. We're going to give local indigenous communities a percentage of our post refining revenue.
• 1:07
  That's a big step. We have never seen that before. But now the problem is that that becomes the precedent. That becomes the standard. And for other types of critical mineral production facilities and projects and so forth that might not be attainable within their project economics. And I think that's sort of an interesting one to take away as well. Within those three observations, I think that the biggest thing that I've seen also from Canada and then again in Chile, is the ability to organize on the side of local and Indigenous communities as well. Because then you become a partner that is, I want to say easier to negotiate with. That doesn't mean that you end up with an easy settlement of sorts, right? Or an easy solution, but you have a reliable negotiation framework and this is everything to get to a good benefit sharing agreement, which I think now, and Juan Carlos will know this better, but it seems to me that within Chile, especially within the lithium sector, there's a lot of attention to that because they know full well if we get this wrong from the beginning, it's going to impact our operations later on.
• 1:08
  And this, I think we also really need to start taking into account in the United States, because in the United States, take now Trump as an example. Trump has this FAST-41 program very similar to Europe, which is basically fast track permitting. Great. So you fast track your permitting on the federal level, but then you're still stuck at the state and the local level and people still have access to litigation and so forth. You don't resolve that with fast tracking permitting on the federal level. You do resolve that with local and Indigenous community benefit sharing agreements.
• 1:09
  Jason Bordoff: I'm going to come to Juan Carlos in a second to talk about Chile's lithium strategy. You talked about SQM and Albemarle, so you helpfully made the transition from copper to lithium. But just for people listening, maybe you could sort of level set by helping people understand, I think we all know how important lithium is to a range of batteries, clean energy technologies, rapidly growing demand for lithium. We visited the lithium mines in Chile, and again, even the word mining means something very different when we think about how lithium is produced than how copper is produced. And maybe you could say something about that, but help people understand how important Chile is to global lithium production and the whole region, the whole sort of triangle of countries there, just so people understand why we're talking about this.
• 1:10
  Tom Moerenhout: Yeah, absolutely. So lithium, the demand for lithium is unlikely to go down. It's only going to go up because it's basically, it's like copper. It's superior as a mineral. You can't easily substitute it. Same thing for copper. You can't easily substitute it. So that's why it's so important. You can get it from sort of two types of deposits mostly. One is from hard rock, so that's conventional mining. The way you think about it, you dig a hole and try to get it out. This is specifically in Australia. Australia is very good at that. And then you can do it through evaporation ponds as well, where you pump up brine, which has a certain lithium concentration. You let that sit in evaporation ponds for a while. A lot of stuff that you don't need, you take away, the water evaporates, and eventually you have a liquid mix that has a high concentration of lithium.
• 1:11
  And that's what Latin America is very well known for, specifically Chile and Argentina. I would say both countries together are very important. Today, Australia is the biggest producer, but Chile is number two, and Argentina is increasing production very, very fast and I think could overtake Chile in the next 10 years or so. The interesting part, I think if you now sort of think very quickly again about US reliance and so forth, what is mined in Australia goes to China for refining, and then it goes to the United States. What is mined in Chile, a good chunk of that is actually refined in Chile at a very, very competitive cost as well. And so you can kind of, depending on exactly what type of lithium you want, you need the conversion facility. That's too technical, we don't need to go into that. But basically you could have a supply chain that excludes China altogether for one of the most important minerals that you have out there.
• 1:12
  Jason Bordoff: Juan Carlos, maybe you could talk a little bit about the outlook for lithium production in Chile, debate within the country over the nation's strategy. Should there be more state involvement? How do you capture all the parts of the value chain, the Indigenous and community engagement, water issues we talked about? How are those being addressed and what do you expect the outlook to be for production and the policy framework?
• 1:13
  Juan Carlos Jobet: Yeah, that's a complicated question, Jason, because the lithium ecosystem today is so complex that it has hampered our capacity to increase production. That's the summary. Whereas in copper, we have a very clear and simple regulatory regime, clear tax rules, I mean concessions that are awarded by courts, industry is open to investment and so on. And we have maybe the most important thing, reasonably broad agreement among political actors on what we want to do on copper. We have nothing of that in lithium, right? We have very obsolete and complex regulation. There's no clarity on how much taxes companies should pay, the process to access concessions or the rights to operate, I mean are very kind of arbitrary or discretionary at least. And the state, basically because of a regulation or law that was passed in 1979 by the military junta then, basically our constitution says that lithium is a strategic resource and that if you are a private company, you can only produce lithium if you get an agreement or a special contract from the state, or you can produce lithium if you are a state-owned company.
• 1:14
  So historically, we have had two companies operating in Chile, SQM, controlled by Chilean investors and Albemarle, the American company. Both of those companies operate under leasing contracts of properties that are owned by the state. And we have made different efforts over the last couple of decades to try to invite newcomers to invest in lithium, and we have not been able to do that. The strategy that this government put in place is based on the idea that the state must control all operations. So they are inviting basically private companies to make the investment, contribute with technology, open markets abroad and so on, in exchange for a minority stake in the new company. I'm a bit skeptical about that. I mean, how things are going to play out and maybe the most important thing as I said is that we don't have a political agreement on where we're going to go.
• 1:15
  So coming back to the point that Tom made earlier on copper, I mean investments in mining and many other big capital intensive industries take a long time to develop. So if you don't have political agreement on where you're going to go and you change your policies every four or five years, it's very difficult to attract investment. We can get into the details. There are some companies interested in joining Codelco or Enami. I mean with Codelco is trying to close an agreement with SQM to increase production in the salar, the Atacama salt flat, but there's still a lot of uncertainty around those agreements. We have presidential elections this year, and this issue, unfortunately, is getting politicized again. So we'll see. Just to give you one number, Jason, we used to produce over 55% of the world's lithium. We now produce around 25 to 30%, right? So...
• 1:16
  Jason Bordoff: I presume that's because the denominator has gotten bigger, not just because the numerator has gotten smaller.
• 1:17
  Juan Carlos Jobet: Yeah, we have increased our production a little bit, but the global market has grown much faster. And it's a clear example of how institutions and good policy matter. We have the natural resources are there, but if you don't have the policy framework in place, this is not going to happen.
• 1:18
  Jason Bordoff: Well, you just told me earlier, diversification is a good thing. So I suppose for the rest of the world, seeing Chile more in the 20% than 50% might be a good thing, but maybe not if you're sitting in Santiago.
• 1:19
  Juan Carlos Jobet: I have a bias. I look at this from a Chilean perspective. I'm sorry.
• 1:20
  Jason Bordoff: Diego, can you help me take this conversation a little more to the region broadly? Brazil, Argentina, Bolivia, Peru, there's a lot of countries in the region that have significant mineral reserves. Do you see them all stepping up to develop those resources? Are they able to cooperate regionally to do that? And how do you see those countries positioning themselves in this world of US China competition? Do they have to pick sides? Will they pick sides? How do they position themselves when this geopolitical rivalry is such a driver now of how places like the United States are thinking about markets and policy?
• 1:21
  Diego Rivera Rivota: Yeah, that's a great question and super interesting one. And I'll start first up with just across the Andes from Chile, Argentina, only last year, depending on the source you check, it more than doubled its lithium production. So while it is now the fourth largest lithium producer in the world, that pace has been ramping up at a very accelerated pace and it is set to continue that path. There are a number of different projects coming in three provinces, mostly basically on the other side of these mountains from Chile. So that's very interesting. In terms of legal and regulatory framework, I think that's a key issue. And comparing it to what Juan Carlos was saying, for instance, in the case of Argentina, it is at a federal level. Provinces hold the majority of decisions on the governance, on the legal framework, the regulatory rules for that.
• 1:22
  And so that has proven to be very attractive for some companies, more so in some provinces than others, but it is definitely happening. So Argentina is definitely one to watch there. For lithium, importantly, those reserves are also brine, right? Like with Tom's explanation of hard rock versus brine, that's the case in what we call the lithium triangle in Latin America. One is Chile, the other one Argentina, and the third one is Bolivia. Bolivia is a very interesting case too, because unlike the other two neighbors that we just talked about, they haven't managed to ramp up their commercial production of lithium, and they have very minimal production in the Uyuni salt flat. And it is all related as well to governance broadly, in the case of Bolivia, the state has the constitutional monopoly to produce lithium. Nobody else can do that other than the state.
• 1:23
  Now, there is a bunch of different legal inconsistencies in which the state-owned company of Bolivia, which is called YLB by its initials in Spanish, has some agreements with some interesting companies. To say the least, one, a Chinese conglomerate that includes CATL, the largest, one of the largest producers of batteries, and the other one with nobody else but Rosatom, the Russian state owned atomic energy company. So like geopolitically, that becomes really interesting, but that has not come to fruition. And then you have another interesting one in terms of lithium, Brazil, which has a different type of resource. There is hard rock. But that has been ramping up significantly. It is deep into kind of complex geographies, kind of complex logistically as well. But that seems to be going pretty well. So I think that's a promising area indeed for production. And then you have prospective resources, but nothing quite proven in other countries in the region in Latin America, Peru being one of those.
• 1:24
  But so far nothing concrete in terms of lithium production. And Mexico is another one that locally, it made a lot of news in the last couple of years. Mexico passed a legal reform kind of moving to state control. So lithium is now a strategic material in which only the state owned company, they created a state owned company, which technically has a monopoly of that production. But commercial production has not really happened. And in the case of Mexico, it has a deposit of clay, so something that commercially has been much more challenging.
• 1:25
  Jason Bordoff: I'll tell people listening, you mentioned the Uyuni salt flat in Bolivia and just as one of the most magical places I've ever seen in the world, encourage people to visit there because that was pretty unlike anything else on earth. Two final quick questions and then we're basically out of time, but Juan Carlos, I'm curious from Chile's standpoint what Diego just said about how countries are thinking about positioning themselves in this world of US China competition. How do you think about that in Chile?
• 1:26
  Juan Carlos Jobet: Yeah, I agree with Diego. I mean it depends on who you ask this question to. President Boric was just visiting the BRICS meeting in Brazil with Lula and the Russians and the Chinese and the Indians and so on. But I think most people agree that we got to be neutral. We don't want to take sides or pick sides. Small developing countries are better off if they rely on institutions and rules when the world comes to a place where the strongest and most powerful does whatever he wants. I mean it's not a good place for small countries.
• 1:27
  So we have, China's our biggest trading partner, but the US is one of our top foreign direct investors. We are in the natural geographic area of influence of the US. We share all values with the US, but we have a very strong commercial relationship with China. So I mean we don't want to pick sides even though we are I think more culturally, geographically, strategically closer to the US. But if the US puts in place policies that alienate Chile, they might end up pushing countries like Chile closer to China, which could end up being counterproductive.
• 1:28
  Jason Bordoff: Tom, let me also ask you, given the significant amount of concern among the federal government here in the US about diversifying supply chains, tariffs might be one tool, domestic incentives to produce could be another. We just saw a pretty significant step, I think taken by the US government to actually take a direct equity, make a direct equity investment in a mining company in the US not for copper or lithium but for rare earths. Can you talk a little bit about that and was it significant and is it a sign of more to come?
• 1:29
  Tom Moerenhout: Sure. I think it was a major policy initiative and it went far beyond the equity investment. It included floor prices for rare earth materials, it included guaranteed offtake agreements for magnets. So this was really the US saying we want to guarantee at least some form of diversification and quite an advanced I would say mine to magnet supply chain. And it's very costly. So they have the offtake agreement, they have the floor prices, they have the equity stake, there's another loan incoming as well. But ultimately it is going to work. And so I think kudos to the administration. We have been saying for so long, the administration needs to take more risk. They don't need to be so afraid of another Solyndra where an investment does not work out. Here they take risk in a place where China had hyper dominance both on the extraction side and refining side.
• 1:30
  And I think that should be applauded now. It's not because they did it again, there's risk, right? Especially with MP Materials. There's a few things that they don't do yet at a very big scale. Producing magnets is one of them, or heavy rare earths, which is a subset of rare earths. So this is no guarantee, but at least they really came out swinging. Whether this is a model for other stuff, I'm not sure, quite frankly it would be a very, very expensive model. That's why it's so important to develop a full playbook for public financing of critical minerals and address things critical mineral by critical mineral. But for rare earths, I think they definitely did their job.
• 1:31
  Jason Bordoff: And you just wrote a piece for us too as part of a blog series with several other scholars here about what the Big Beautiful Bill will do to different parts of the energy sector when it comes to critical minerals development. I think you called it a mixed bag, but tell us what you think the impact of it will be.
• 1:32
  Tom Moerenhout: It was a mixed bag. So the interesting part of the Big Beautiful Bill is they unlock finance for DOD. So they said you get 2 billion to stockpile, which has brought about another analysis on stockpiling that says if you just want to fill your national defense stockpile, you probably need north of 6 billion if you include copper. So 2 billion is a start. We're not there yet, but it's a start and you get 5 billion to basically invest in critical minerals. I think those are good steps. There are other things where, and that's where the mixed bag comes in, right? First of all, by getting rid of so many of the clean energy credits, you are killing part of the demand side and the demand side of clean energy technologies or energy technologies or digital economy stuff, it's so much bigger than it is from national defense. It's extremely important for national defense, but more demand is coming from the energy sector.
• 1:33
  So you kill that demand side, which doesn't help with project finance. And then the last thing is sort of the advanced manufacturing production tax credit. So the 45X is one where critical mineral refiners. So where we have the biggest problem, we're getting a 10% production tax credit. And this has had a long history. Our team at the Center actually contributed to the drafting of the final rule to make sure that direct and indirect material costs were included. And the consensus at that time was 10% is not going to cut it, it's not going to be enough. And now they just abolished the 10% altogether. They put a phase out approach to it. And I think a lot of people were sort of surprised by that. Because the administration, the previous administration basically said this 10% tax credit, you will get indefinitely because that is what is needed. That long time horizon, that patient capital to kind of incentivize investments and now they just killed it. And that's a bit of a mixed bag. Ultimately the way I think about this is, and it might be wrong, it might be right, it might be something in the middle, is they needed to pay for the tax cuts and they went to cut in places where it was also not very logical to cut if critical minerals, diversification, security of supply is your main objective.
• 1:34
  Jason Bordoff: And again, this focus sort of on domestic policy, but I guess it's worth saying, I assume you agree that if we want to diversify supply that includes domestic production but also tools we have, Development Finance Corporation otherwise to encourage investment in critical minerals in other parts of the world. We're talking today a lot about Latin America and Africa, et cetera.
• 1:35
  Tom Moerenhout: No, absolutely, and I think the DFC and the reauthorization there is absolutely critical, right? The DFC needs to be supercharged and we have not seen that supercharging of potential for investments happening in the last three, four years and before that. So now is really the time to do that.
• 1:36
  Jason Bordoff: Tom, just finally, if you could clarify for people listening because this great conversation and it occurred to me, you guys have said a few things that may not be entirely clear to many people. We talked about lithium production and people mentioned brine and we saw massive ponds of beautiful colors of yellows and blues and greens. Diego mentioned breaking rocks in what might traditionally be thought of as mining activity in an extractive sense and there is still further potential technology, which you wrote about recently that might change still further how people think about mining lithium and how much water it takes. So what's the primer quickly in how one should think about the different ways lithium is mined or produced and what it means for some of the issues we've been talking about?
• 1:37
  Tom Moerenhout: So I think the primer is you have two methods that are dominant right now and potentially an upcoming third one. The two methods are conventional mining from rocks and then the brines.
• 1:38
  Jason Bordoff: And these are just enormous pools of brine brought to the surface and then allowed to evaporate in different stages.
• 1:39
  Tom Moerenhout: That's exactly it. And at the end of that process you get lithium carbonate and that's kind of important as well because you have lithium carbonate, you have lithium hydroxide and different types of battery chemistries like different chemical lithium substances. So the type of lithium that we like in the United States and partially in Europe as well, bigger cars, longer driving distance and so forth, the cathodes for that that we really need is lithium hydroxide. And the problem is that you produce that from Australia and refine it in China. The smaller cars, the ones that are generally cheaper, actually more stable, more safe as well, they like lithium carbonate, which is what you produce from those brines in Chile. So there's a little bit of a mismatch there. So you need to have those conversion facilities if you really want to exclude China from the supply chain. I think that upcoming technology is direct lithium extraction. It's actually a group of technologies where the idea is we pump up the brine, we take out lithium and then we reinject the brine. And the idea is that way you lose a lot of the impacts.
• 1:40
  I think this can be important, but in the medium term horizon, so a lot of people are working on this, we already have DLE today, but you need to adjust it by unit and it's more likely to complement extraction than it is to replace what we have today. And so a lot of tech development is going on there. And one of the interesting things that I find right now is that we actually see a lot of people in the US buying up land specifically to have access to brine resources. And normally you do that when you know that something is developing in the right direction, otherwise you wouldn't. That's where we're at now. The question is not if DLE will scale, the question is when and by whom.
• 1:41
  Jason Bordoff: Great, we are out of time. By the way, this is a podcast so there's no visual element and if people have trouble visualizing what you were just describing, there's a photographer, my team here knows I really like Edward Burtynsky and if you Google “Edward Burtynsky Lithium,” you'll see kind of a fantastic aerial photo of what we visited. By the way, he has an exhibit at the International Center of Photography here in New York for anyone who's in New York and wants to visit that. This was great. Thank you so much to the three of you for all the work you do here at the center. Thanks for organizing that fantastic week we spent on the ground in Chile and all the research and writing you've done since then to help us understand all the stuff. And thanks for explaining it to our listeners today.
• 1:42
  Juan Carlos Jobet: Thank you.
• 1:43
  Tom Moerenhout: Thank you.
• 1:44
  Diego Rivera Rivota: Thank you for having us.