Zambia should learn from Chile that solid mining, economic and fiscal policies implemented consistently bring measureable benefits to citizens, says Zambian Chamber of Mines (ZCM) president Nathan Chishimba.

Chile is the world’s largest copper producer – a country in South America which Chishimba compares with Zambia in an article on the ZCM’s website.

“[The countries’] surface area and population are virtually identical, they are both heavily dependent on mining and both receive more than 50% of their foreign revenue from copper,” he says.

Zambia and Chile both produced about 680 000 t/y of copper in 1970. However, Chile has since grown its mining sector and economy, surpassing Zambia’s production.

Chile currently produces eight times more copper than Zambia, has a larger economy, a lower poverty rate and better living standards, according to Chishimba.

The World Bank 2014 rankings classify Chile as a high-income country with a gross national income (GNI) per capita of $14 910. Meanwhile, Zambia is classified as a lower-middle-income country with a GNI per capita of $1 680.

“Given the similarities between the two countries, from both a mining and a broader economic perspective, Chile holds valuable lessons for Zambia as the country seeks to attract investment, boost copper production and ensure that all citizens benefit from the wealth generated by copper,” says Chishimba.

He observes that Chile’s mining tax regime is relatively stable. “It has had only two changes in the past ten years, compared with [Zambia’s eight] over the same period.”

He points out that most mining projects in Chile are governed by an invariability clause which guarantees that the tax regime in place at the time of signing the contract will persist for a certain number of years – up to 12 years for small projects and 20 years for large projects.

Chile actively encourages foreign direct investment through a solid legal framework and has substantial tax incentives and few restrictions in place.

“There are no limits on foreign ownership or control of business entities and no discrimination against foreign investors, who receive similar treatment to Chilean nationals,” Chishimba adds.

Out of 82 countries, Chile ranks thirteenth on the Economist Intelligence Unit’s 2014 to 2018 survey of the friendliest countries to do business in, ahead of the UK, France and South Korea.

But, Chishimba says the South American country is not immune to the mining challenges faced by Zambia – high energy costs, falling copper grades and an overreliance on mining revenue as the main source of tax revenue and foreign earnings.

“However, Chile’s strong fundamentals – a vibrant market economy, good mining policies and an investor-friendly business environment – mean it is better able to deal with the current market downturn and to continue to grow its economy,”he highlights.

Zambia’s copper production is expected to rise by 5% in 2016 to 746 000 t/y, owing to the increased copper output of new mines, according to a report on investment website Zambia-invest.

The estimates are included in a report by global association of the financial industry Institute of International Finance (IIF) titled ‘Zambia: Buffeted From All Sides’.

The report states that Zambia has a copper production target of about 1.5-million tons a year by 2017.

The IIF expects copper production in Zambia to increase over the next few years.

Meanwhile, copper production from Chile’s largest mines dropped 3% in annual terms in the first quarter of 2016, owing to the temporary closure of a plant at global miner BHP Billiton’s Escondida mine, according to a report by news agency Reuters in May.

Further, the value of Chile’s copper exports in the first half of 2016 slid to its lowest level since the immediate aftermath of the global financial crisis, independent provider of information and benchmark prices for the commodities and energy markets S&P Platts reported in July.

“[Chile], the world’s largest copper producer, exported $13.4-billion worth of copper during the six-month period, down 16.1% from the first half of 2015 and its lowest level since 2009.”