Chile’s Economy Minister highlights key role of foreign investment in green offensive

Chilean Economy Minister Nicolas Grau said foreign investment must play a central role in helping the country achieve a rapid green transformation.

The new left-wing government, which took office this month, has a strong focus on the environment.

In order to green the economy, agreements and “rapid investment in new sectors” will be required, Grau said during a conference call on investments by Fundación Chilena del Pacífico, a public-private organization responsible for supporting Chile’s economic integration into the Pacific Basin.

“To put it more simply, we believe that the new targets set by Chile will be clear business opportunities from the perspective of foreign investors and we will try to be very clear about the areas that can bear fruit,” Grau announced.

“Foreign investment will continue to play a very important role, perhaps even more important than before, because, as I mentioned at the beginning, the transition to a green economy requires, above all, the mobilization of resources very quickly. He added that foreign investment is an excellent driver for moving in this direction. .

Chile is already on a green highway, which Grau admits. The previous government introduced a bill on climate change, worked on long-term plans to decarbonize the economy, and developed a green hydrogen strategy. With a growing park of renewable energy plants, Chile aims to achieve net zero carbon emissions by 2050.

“What needs to be complemented is a common economic strategy, which is accommodated by the various actors, both internal and external, that allows us to move in this direction,” Grau said. He added that “the objectives are already well established”, in addition to emphasizing the need to develop various instruments, especially financial instruments.

Foreign direct investment rose 72% year-on-year between January and November 2021 to nearly $16 billion. The mining, finance and energy sectors account for the most payments, of which China, the United States and Canada were the main investors last year. However, the country has seen a rise in domestic capital outflows since the 2019 social protests. Investors have tightened their portfolios since then.

The objectives of the Ministry of Economy – which is not part of Chile’s Ministry of Finance – include building a long-term development plan for the country, supporting dialogue and cooperation between the public and private sectors, and reducing uncertainty, Grau pointed out.

He added that the government’s plans also include the use of multilateral spaces to improve and modernize Chile’s trade agreements.

He said the tax reform bill, due to be presented in June, does not propose tax increases for companies or foreign investors, but will focus on increasing income by taxing wealthy individuals.

After the election of President Gabriel Borek, who took office on March 11, political risks in the government have receded and the main cause for concern today is the process of rewriting the constitution.

In the energy sector, investor appetite has been stimulated by plans to phase out coal-fired power plants by 2040 and replace this capacity with solar, wind and battery storage solutions.

Hydropower project managers are also looking for opportunities. A subsidiary of Canada’s Innergex this week gave $420 million to a river-running project for environmental assessment. In the project documents, Inversiones San Carlos mentions Chile’s commitment to withdraw some thermal power plants and the need for solutions to mitigate intermittent wind and power generation.

Chile’s installed capacity of 32 GW – taking into account both operating plants and factories in the testing phase – is broken down into about 42% thermal power plants, 37% non-conventional renewable power plants and 21% large hydroelectric plants.