The new Mining Royalty is expected to distribute an additional US$450 million to regional governments and municipalities. The bill was promoted by the Government and has now become law thanks to approval by Congress.
Among the key components of the Mining Royalty Law is that part of the resources collected will be distributed in three funds to strengthen the development of regions throughout Chile, especially mining areas.
The US$450 million dollars will thus be distributed as follows:
- Fund for Productivity and Development: US$225 million for regional governments. The resources will be used to finance productive investment, broadly understood as projects, plans and programs to promote productive activities, regional development and scientific and technological research. When distributing this fund, mining regions will be compensated according to indicators that recognize their needs.
- Fund for Mining Municipalities: US$55 million to municipalities that have works directly related to mining activity, such as deposits, tailings, ports, etc. The fund aims to offset the negative externalities of mining. A Chilean Copper Commission (COCHILCO) report will determine the municipalities in the mining regions of Tarapacá, Antofagasta, Atacama, Coquimbo, Valparaíso and O’Higgins that have works directly related to mining activity within their territories. According to estimates, around 32 municipalities and close to two million people would benefit. When distributing this fund, the sources of income in these territories will be recognized and the negative externalities generated by mining activities will be compensated.
- Support Fund for Territorial Equity: US$170 million to the country’s most vulnerable municipalities. The fund aims to make progress towards closing gaps of a territorial nature; therefore, it will focus on municipalities with little capacity to generate their own income. It will reach around 300 municipalities in Chile, benefiting close to 11 million people.
What other funds have been committed to regions throughout Chile?
Collection of the royalty would be redirected to regions throughout the country from 2025. However, in order to provide an advance of resources for sub-national governments, an agreement protocol has been signed to establish three new regional and municipal funds:
- A Bridge Fund to Support Regions and Municipalities for 2024, for the amount of 50% of the contribution they will receive from the Mining Royalty from 2025. That means US$112.5 million to benefit regional government via the Fund for Productivity and Development; US$85 million via the Fund for Territorial Equity to be distributed among the most vulnerable municipalities; and US$27.5 million via the Fund for Mining Municipalities.
- A Multi-Year Fund for Citizen Security in the 2024 budget law. A contribution of US$350 million will be added to this fund for three years on top of the Mining Royalty from 2025.
- A Triennial Resource Fund to leverage investment projects in productive infrastructure in the country’s northern regions (Arica and Parinacota and Coquimbo). Resources worth an average US$200 million per year will be included in the 2024-2026 budget laws, which, according to evaluation of their operation, will be incorporated into the distribution of Mining Royalty resources with the same validity as the regional and municipal funds.