By Laura Clarke
SANTIAGO, Chile--Chile's deteriorating competitiveness within
the global copper mining industry is a concern, but both
state-owned Chilean copper company Codelco, the world's largest
copper producer, and the country, are taking steps to mitigate
this, the company's chief executive said.
Chile has become less competitive on the world copper scene in
recent years on account of its rising domestic production costs and
comparatively poor productivity levels as its copper ore grades
decline.
In an interview with Dow Jones Newswires during the copper
sector's major annual gathering, Cesco Week hosted by the Center
for Copper and Mining Studies and CRU group, Codelco Chief
Executive Thomas Keller said that Chile's declining competitive
stance within the global mining sector comes hand in hand with its
own economic development. Chile is the world's largest producer of
the red metal, responsible for around a third of global
production.
High energy costs are a major drawback to the competitiveness of
Chile's mining industry. Mr. Keller said that the company and
official sector are taking steps to alleviate this problem, and
that he was optimistic that the growing consensus of a need to take
action on this issue would yield results.
The other key issue, he said, is that of the rising cost of
human capital while at the same time productivity levels lag behind
those in other countries.
"I think that indeed we've been losing competitiveness but that
loss is due partly to our own economic success--the cost of labor
has increased but that's part and parcel with the significant
growth that the industry has experienced and the country has
experienced," Mr. Keller said.
"Chile is now in a virtual full employment situation and that of
course translates into improved conditions for the workforce and
improved labor conditions. The exchange rate also reflects the
wealth of the country. These changes do affect our competitiveness
but they are largely here to stay," he added.
Wage increases in Chile have not been reflected in increases in
productivity, however. Benchmarking studies have shown that
productivity levels in other countries far outpace those in the
South American nation.
At the same time the percentage of copper in Chile's ore
bodies--in line with grades in other countries--is declining.
Antofagasta PLC (ANTO.LN) forecasts that within 10 years Chile may
no longer have the best ore grades in the world. This levelling of
the playing field, combined with Chile's high and rising costs,
exacerbates the loss of the nation's attractive edge over others
for mining investments.
Mr. Keller said that the mining industry in Chile is taking
steps to ensure its labor force is more competent going forward.
"Dramatic" improvements are needed in this area, he said.
Chile is however still attracting the largest expansion budgets
in the copper industry, which leaves room for optimism for the
industry's future development, Mr. Keller said.
Codelco is also exploring in other Latin American countries
including Colombia. Local investments, however, continue to be the
company's priority, Mr. Keller said.
"Growth is not an objective for us per se, and many of our
projects will only replace production that we otherwise will lose.
We are focusing on developing our resources and we are not growing
for the sake of growing," he added.
Write to Laura Clarke at laura.clarke@dowjones.com
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