For Green Leader, the current regulatory burden in Chile is poorly calibrated towards SMEs, and there is an urgent need for permitting that encourages the entry of entrepreneurs for greater competitiveness in the market.
Regarding the Fiscal Pact and the government's commitment to submit a bill in December to reform the permitting system, aiming to reduce authorization deadlines in the sector by at least 30% and decrease the excessive bureaucracy that, according to the National Commission for Evaluation and Productivity, constitutes a significant hindrance to the country's productivity, competition, and growth, Green Leader CEO Javier Ramírez López stated, "The current regulatory burden in Chile is poorly calibrated towards SMEs, and there is an urgent need for permitting that encourages the entry of entrepreneurs for greater competitiveness in supplier markets around strategic sectors such as Mining and Industry."
Indeed, Green Leader's CEO added that currently, large supplier companies with financial capacity can endure the years-long wait for permits. However, when it comes to Small and Medium Enterprises, the reality is drastically different because the cost associated with this waiting period is too high compared to the intended goal. Most SMEs end up succumbing in the process, resulting in a less competitive economy and the strengthening of larger companies that have been in the market for years.
Javier Ramírez pointed out that, in the case of Hazardous Industrial Waste, for example, the market is dominated by 2 or 3 major companies in the country. "SMEs do not have sufficient incentives to compete in this market because an undertaking involving chemical, biochemical, and/or recycling processes for the treatment of such waste requires permitting that can easily take years. Given this prolonged wait, entrepreneurs do not have the financial resilience to endure the uncertainty of all that time."
Cochilco: Fewer Mining Projects
According to the recent report from the Chilean Copper Commission (Cochilco) on 'Investment in Chilean Mining - Project Portfolio 2023-2032,' which outlines projects that mining companies plan to materialize in the next 10 years, the figures in this report reflect an 11% decrease compared to the previous 2022-2031 assessment. Among the reasons explaining this decrease in initiatives is the consensus among industry stakeholders that the current permitting system, among other factors, hampers attracting investments and increasing mining projects.
"The permitting process for a mining project, for example, which should take no more than 3 years according to legal deadlines, ends up taking 10. It is a period of time out of sync for a country that needs investments to grow and enhance all economic activity associated with the mining ecosystem through various service providers, and that's where we come in as an SME supplier to Mining and Industry," said Green Leader's CEO.
OECD: Regulatory Complexity
In the most recent OECD report (2023) analyzing the characteristics of Foreign Direct Investment (FDI) in Chile, it examines policies and regulatory frameworks impacting this investment, among other variables. According to this analysis, Chile has a conducive regulatory framework for competition. However, the report highlights that regulatory complexity represents a significant obstacle, especially for large investment projects in strategic sectors, due to issues such as lack of clarity in approval processes, where discretion and substantial delays are mentioned as problematic aspects.
CNEP: 309 Required Permits
Last July, the National Commission for Evaluation and Productivity (CNEP) published the study "Analysis of Priority Sectoral Permits for Investment in Chile," covering the period 2018-2022. The study indicates 71 entities responsible for granting 309 permits necessary for project investment. Of these, 63 are classified as critical since they have the potential to halt a project during its processing phase.
The study concludes that the recurring difficulties experienced by those carrying out projects, especially the more complex ones, are related to prolonged processing times, lack of coordination among various State Administration Bodies, and the repetition of procedures. "These circumstances indicate a permitting system that discourages investment development, especially larger projects, as these are precisely the ones requiring the most complex priority permits." (CNEP, 2023)
Reforming the Permitting System
For Green Leader's CEO, the government's commitment to reform the permitting ecosystem to reduce waiting times by 30% is good news, and it is hoped that once the bill is submitted, the Congress will expedite the process. This understanding is crucial as the economy needs to attract more investments, grow, generate more jobs, and increase competition levels within the mining and industry markets so that SME service providers in environmental services and the circular economy, like Green Leader, can also make headway with more projects and investments in a market currently dominated by larger companies.
"Chile has everything to grow, especially in the Copper and Lithium Mining sector, given the high demand for these minerals globally for the transition to clean energy. It is frustrating to learn about the 11% decrease in mining projects for the next decade provided by Cochilco, especially at a time when we need more and better investments. Each mining project that materializes is an opportunity for all SMEs that are suppliers to this sector, especially those of us who have invested in regional development, as is our case in the Antofagasta Region since 2015. Therefore, we are closely watching and anticipating the reform of the permitting system being worked on," explained Javier Ramírez.
