FT SPECIAL REPORT
Investing in Chile
Tuesday April 27 2021
Critical test looms on inequality
Constitutional change
could move Chile closer
to addressing causes of
unrest. By Michael Stott
I
t was hardly the future that Chile-
ans imagined. During his first term
as president, in 2011, Sebastián
Piñera had told the Financial Times
that he expected the country to
graduate from emerging market to
developed nation status by 2020. But,
just a few months before that target
date, rioters turned the centre of San-
tiago into a war zone, setting fire to
offices, metro stations and churches in a
wave of destruction that then gave way
to weeks of tumultuous protests.
The events of October 2019, which
Chileans refer to as “el estallido” (the
explosion) are set to have lasting conse-
quences for a nation that was hailed as
one of Latin America’s success stories.
Most significantly, there will be a new
constitution. Elections next month will
select delegates to a constitutional
assembly, which will spend about a year
drafting a carta magna to replace the
current document, dating from the mil-
itary dictatorship of General Augusto
Pinochet.
“It’s a big test for Chile,” says Felipe
Larraín, who served as finance minister
until he left office in a reshuffle trig-
gered by the protests. “Are we able to
move forward in a way that doesn’t
derail our path of development
with . . . gradual moderate changes that
improve the livelihoods of Chileans but
don’t throw away the base which pro-
vides [these livelihoods]?”
A plethora of little-known candidates
has created uncertainty over the likely
composition of the assembly but Chile-
ans favouring gradual change draw
comfort from rules that stipulate a two-
thirds majority for the new charter.
www.ft.com/reports | @ftreports
Juan Pablo Illanes, the former editor
of El Mercurio, Chile’s leading newspa-
per, says the country appears to be
divided in roughly equal proportions
between three groups: the centre left
Time for change: Chileans celebrate
after voting for a new constitution
Cristobal Olivares/Bloomberg
Inside
and centre right, which have dominated
politics since Pinochet, and the hard ‘We are here to deal
left. “The most likely outcome is that with adversity
the traditional left and the traditional
right win two-thirds between them,”
... and carry on’
Illanes says. President
This idea is calming the business Piñera looks
lobby. “We’ve seen an improvement in to the
the mood,” says a Santiago banker. “At
one point, parents at schools were talk- future
ing about moving their families to Page 2
Miami. Now, it appears there will be a
good group of moderate people elected
who will be able to . . . block things that
don’t make sense.”
Provided the constitutional assembly
springs no major surprises and the price
Rewriting the rules
of copper, a key export, stays strong, the Chile is to have a new
Chilean economy appears set for a constitution but how
rebound. The IMF expects GDP growth
of 6.2 per cent this year, enough to
radical will it be?
Page 3
return output to pre-pandemic levels,
and some forecasters are even more
bullish. Green leadership
The recovery is being powered by one How northern Chile
of the world’s fastest vaccination pro-
grammes and Chile has also deployed
is becoming a
one of the developing world’s most gen- renewables powerhouse
erous Covid-19 relief packages, worth 10 Page 4
per cent of GDP in direct fiscal support,
according to the finance ministry. Support grows for
Once the pandemic subsides, how-
ever, attention is likely to return to the marginalised Mapuche
inequalities and deficiencies in public Awareness of the
services that triggered the estallido, as
well as the subsequent violence. Jean-
indigenous people’s
Christophe Salles, Latin America CEO of plight is increasing
the pollster Ipsos, says crime and vio- Page 5
lence are the top concern of most Chile-
ans, ahead of poverty and inequality. A copper-led recovery?
Coronavirus only features in fifth place. Miners warn of tax and
These matters will also dominate the
presidential elections in November. Bil- legal hurdles for Chile’s
lionaire incumbent Piñera cannot run main export
Continued on page 2 Page 6
2 ★
Interview Sebastián Piñera He has faced an earthquake, riots and Covid but wants to be remembered for laying foundations of prosperity, writes Michael Stott
Dogged by adversity,
Piñera eyes his legacy
S
ebastián Piñera is no stranger
to adversity. Eleven days
before the start of his first
term as Chilean president in
2010, one of the strongest-
recorded earthquakes devastated his
country. Much of that presidency was
spent picking up the pieces.
His second term in office, which he
hoped would hasten Chile’s passage
from middle-income status to fully
developed nation, has instead been
marked by a triple crisis: the
coronavirus, a prolonged spell of riots
and social protests in 2019, and last
year’s global economic downturn.
“We aren’t here to complain or to cry
over spilt milk,” Piñera says briskly in
an interview with the Financial Times
when asked about the multiple
misfortunes. “We are here to deal with
adversity, overcome it and carry on”.
Adversity was not much in evidence
early in Piñera’s career. He made his
first fortune by bringing credit cards to
Chile in the 1970s. Then he made a
shrewd early investment in LAN Chile,
an airline which later became Latin
America’s biggest airline LATAM. In the
process, he became one of Chile’s richest
men, with a fortune of nearly $3bn,
according to Forbes.
Along the way, he acquired a
reputation as a fearsome dealmaker.
“You don’t want to be on the other side
of the table from Piñera,” says one
business figure in Santiago.
As a conservative billionaire and
leading member of the elite, Piñera was
an easy target for the street protesters of
2019, whose uprising was motivated
partly by anger that the fruits of Chile’s
strong economic growth had not been
shared widely enough.
Piñera was criticised for a heavy
handed initial response to the riots after
he declared a state of emergency and
Finance minister quietly optimistic on
growth and pandemic recovery prospects
A new wave of the coronavirus, a fresh
lockdown and a prolonged bout of
political uncertainty might sound
daunting but Rodrigo Cerda, the
finance minister of Chile, is unfazed:
the Pacific nation is likely to
outperform an official forecast of 5 per
cent growth this year.
“I share with many people [the idea
that] the bias will be to the upside,”
Cerda, right, explains. “We are
continuing to be conservative [in
our forecasts]”.
The IMF is even more
bullish. it predicts an
expansion of 6.2 per
cent this year,
which would erase
last year’s
pandemic-related
fall in output.
Oxford Economics
believes Chile may
grow by 7.5 per cent.
Higher prices for copper,
Chile’s main export, have helped to
fuel growth as well as a generous
Covid support package, worth about
10 percentage points of GDP. Unlike
most of its peers in emerging markets,
sent the army on to the streets, saying
Chile was “at war with a powerful
enemy”. His poll ratings plunged to
single digits and demonstrators called
for his resignation.
“Of course, we have made mistakes,”
Piñera admits, “but I think that, in the
FINANCIAL TIMES
Investing in Chile
Chile will have no problem paying for
it. Cerda says the pandemic showed
the value of Chile’s rainy-day funds.
“For a long time, we have said to
Chileans that we save in good times
and that’s what we have done. In bad
times our rule allows help for them.”
Chile’s debt-to-GDP ratio is set to
climb to 43 per cent by 2024 but, at
that level, would still be the envy of
many developed nations. Cerda
believes those rainy-day funds
show the value of Chile’s
market-friendly economic
model, despite the
criticism it has
received since the
riots in 2019.
“When you look
at the past 30, 40
years in Chile, we
have seen a very
significant fall in
poverty rates, we have
also seen Chileans who have
increased their incomes very
significantly,” the minister says.
Another 30 to 40 years like that would
allow the country to reach fully
developed status. MS
main, we have managed to direct the
three big challenges on to the right
path”. The social protests have been
channelled into a democratic process to
elect members of a special convention
to draft a new constitution; the
pandemic has been fought with one of
Hard bargainer: Sebastián Piñera has gained a reputation as a fearsome dealmaker — Cristóbal Olivares
the world’s fastest vaccination
programmes, plus Latin America’s most
comprehensive testing regime; and the
economy is forecast to recover its
pandemic-related losses faster than any
other in South America.
Still, the experience has been a severe
test for the president, whose long
experience in the private sector often
influences his style of governing. “He’s
the best CEO Chile could have but he’s a
horrible politician,” says one banker in
Santiago, echoing a commonly heard
view that Piñera’s people skills are no
match for his business acumen.
One former official, who knows him
well, says of the president: “He is a very
smart man and an able manager. But he
is impossible to like.”
With an energy that belies his 71
years, the Chilean leader wants to be
remembered when he steps down next
year for helping to bring his country
intact through its most difficult period
in half a century and laying the
foundations for prosperity.
The goal of developed nation status,
however, remains elusive. Near the start
of his first term, Piñera told the Financial
Times that he hoped it would be reached
by 2020, yet a decade later he admits “we
still have a long way to go”.
Andrés Velasco, a former finance
minister under a centre-left
government, criticises Piñera for failing
to do enough to stimulate economic
growth, saying that he relies excessively
Country’s
critical test
on tackling
inequality
Continued from page 1
again and, for the first time in decades,
the communists are likely to mount a
serious challenge in the form of Daniel
Jadue, the mayor of a Santiago neigh-
bourhood. “We said this country was
like a pressure cooker waiting to
explode — and it exploded,” says Camila
Vallejo, a Communist party congress-
woman. She points to inadequate pen-
sions, excessive working hours and
unacceptably big gaps between rich and
poor as factors that must change in an
overhaul of the economic model.
The Chilean economic miracle, which
lifted the country from one of Latin
America’s poorest to one of its wealthi-
est in four decades is for Vallejo “an
image sold [abroad] of a part of Chile,
that part born in a golden crib, which
was always favoured by neoliberalism”.
But, even if Chile does not opt for the
hard left, a populist president remains a
distinct possibility in November. One
politician doing well in early polling
is Pamela Jiles, a former TV anchor
who promoted legislation that allows
Chileans to pull money from their pen-
sion pots to spend during the
‘The world will be very
different. We cannot
arrive late for the
technological revolution’
on a belief in “animal spirits”. “If the big
reason to vote for Piñera was to achieve
a lasting increase in the rate of growth,
he's failed to deliver,” Velasco says.
Chile is still dependent on copper
exports, although it has built up
successful overseas sales of fresh fruit
and wine and is pursuing investment in
renewable energy and the production of
green hydrogen.
The president points to how Covid-19
has accelerated technological change
and says the digital economy is the place
to look for prosperity. “When we return
to a new normal, the world will be very
different . . . ” he says. “We can’t arrive
late for the technological revolution”.
To stay competitive, Chile is creating a
nationwide fibre-optic network for
broadband services and aims to be one
of the first countries in the region to
bring 5G mobile services online. With
other South American nations, it is also
investing in the continent’s first direct
subsea optical cable link with east Asia
and the Pacific, removing the need to
route traffic via North America. Since
pandemic, despite warnings that this
would exacerbate the problem of inade-
quate pensions.
“The risk of populism is not just a risk,
it’s already here,” says Larraín. “We
have had two early withdrawals of funds
from the private pension system and a
third is on its way in congress.”
A wave of populism or a vote for the
extreme left could upend Chile’s reputa-
tion for moderation and prudence; elec-
torates across Latin America appear
unusually fickle amid the pandemic.
Tuesday 27 April 2021
2000, trade with China has grown to the
point where it is Chile’s largest trading
partner. Piñera has no time for trade
wars and wants the US to collaborate
with Beijing rather than confront it. He
will not pick sides over issues such as
whether to use Chinese 5G technology.
“Chile has good relations with China and
good relations with the US,” he says. “It
will hold auctions for 5G technology
according to the interests of Chile,
without us getting into this fight
between the two big superpowers.”
Mindful of protectionist sentiment
among American Democrats, President
Joe Biden said on the campaign trail he
would not pursue fresh trade deals in
office. Piñera nevertheless hopes that
Washington will eventually return to
pursuing the aim of negotiating a free
trade area covering all of the Americas
— a goal set by Bill Clinton in 1994 but
abandoned a decade later.
With less than a year to go before he
steps down, Piñera remains determined
and energetic. A strong Catholic faith
and a supportive family have helped
him weather the storms, he says.
The earthquake in his first term
destroyed a third of Chile’s schools and
hospitals.
“Now we have to face adversities of a
different kind,” he says. “And we are
facing them with all our strength and
will and with the best tools, within
democracy, the rule of law and national
unity.”
Meanwhile, talk of becoming a devel-
oped nation has been replaced by more
pressing concerns: how to improve pen-
sions, education and health, and raise
workers’ living standards.
“The pandemic will leave many fis-
sures in society,” says Ignacio Briones,
who is running for the presidency on a
centre-right ticket after a stint as
finance minister. “There are deep splits
[between rich and poor] which will
need to be addressed . . . the only way to
do this is through negotiated accords.”
Tuesday 27 April 2021
Ballot puts
country at
constitutional
crossroads
Politics
Forthcoming assembly’s
rules are skewed in
favour of centrists,
writes Benedict Mander
A
perfect moment to rewrite
a nation’s constitution
occurs rarely, if ever. But,
with cases of Covid-19 at
new highs, leftists who have
gained this opportunity for reform in
Chile are worried.
“It is like a Greek tragedy,” says Clau-
dia Heiss, the head of political science at
the University of Chile. “We have waited
30 years for change [since the end of the
Pinochet dictatorship]. Just as the
chance comes, suddenly we face adverse
conditions . . . it is very frustrating.”
The economic hardship caused by a
new lockdown is not the ideal context
for a debate on fundamental political
change, following the demonstrations
and riots of October 2019. But a ballot to
elect people to an assembly to draft the
new constitution is due to be held on
May 15-16.
Many of the millions who took to the
streets in 2019 calling for a rewrite of the
constitution are no longer as engaged
with the process as they were. Nearly 80
per cent of Chileans who voted in a ref-
erendum last year — about half of the
eligible electorate — chose to change the
constitution. However, an Ipsos poll
shows that 50 per cent of the population
admit they now feel ill-informed about
the process.
Time for a shake-up
In last year’s referendum,
Chileans voted to change the
constitution, which has been in
place since the dictatorship of
General Augusto Pinochet
The disintegration of the political left
has also undermined the ambition to
abolish the neoliberal economic model,
which is criticised for not addressing
inequality. Unfairness was one of the
core complaints of the 2019 protesters.
Although Chile has been governed
by the centre-left Concertación coali-
tion for most of the past 30 years,
splinters appeared after Michelle
Bachelet stepped down as president in
2018. As well as the new Frente Amplio
(Broad Front) coalition, which is more
leftwing and popular with the young,
dozens of independents have emerged,
Contributors
Michael Stott
Latin America editor
Benedict Mander
Southern Cone correspondent
Henry Sanderson
Metals and mining correspondent
Amy Bell
Commissioning editor
Steven Bird
Designer
Alan Knox
Picture editor
★ FINANCIAL TIMES 3
Investing in Chile
which is confusing the constitutional
process.
“People seek modernisation more
than radical change,” explains López.
country’s economy],” he adds. “In this,
there will be change.”
The leftwing is splintered and the
emergence of dozens of
subject to change through the political
process. “The danger is there will be a
Meanwhile, supporters of the current “There has not been a radicalisation in Heiss agrees the constitutional proc- independents has flummoxed Chile’s lot of frustration,” she warns, given that
constitution point out that it has driven
the country’s vigorous growth and lifted
Chile but there is a huge demand for
greater participation of the state [in the
ess is unlikely to produce a new eco-
nomic model, but says it will become
political forecasters
Reuters
progress may be slow. “And there isn’t
much patience right now.”
millions out of poverty.
Polls show support for this view and
predict that the unified rightwing, led
by President Sebastián Piñera, will
comfortably secure more than a third
of the delegates to the constitutional
assembly. This will allow it to block the
most radical proposals.
“The outlook for the progressive and
leftwing sectors is not very encourag-
ing . . . fragmentation is very negative
for [our] transformational goals,” says
Camila Vallejo, a member of Chile’s
Communist party.
Jorge López, who runs Ipsos Chile,
compares Chileans’ demands to a “bag
of cats” because they are so varied.
“They were synthesised in a magic
word: dignity,” he says. “Everyone just
wants a bit more dignity . . . this magic
word is what led to consensus over the
need for constitutional reform.”
More equality and economic redistri-
bution, with stronger social rights in
health, education, housing and pen-
sions, are a priority. But reformers also
want better representation for women,
indigenous groups and disabled people.
They seek a less presidentialist system,
too, in which local governments wield
greater power and citizens have more
influence over spending.
In addition, those pushing for a
shake-up want the state to be more
active in promoting activity to help
Chile move away from its dependence
on copper, which accounts for nearly
half of the country’s exports.
The proposal for each article of the
new constitution must be approved by a
majority of two-thirds. This means that
the left’s more controversial demands —
such as the abolition of both central
bank independence and the fiscal rule
guaranteeing macroeconomic prudence
— are unlikely to succeed.
Whether conservatives can instead
write these institutions into the new
constitution remains to be seen.
The fear is that social demands could
create a fiscal burden. Rodrigo Cerda,
Chile’s finance minister, believes that a
new constitution is a “great opportunity
to lay down stable rules for the next 30
years”.
If public spending must rise “we will
also have to look for a larger permanent
income” — but this should be gradual,
Cerda says.
He points to two possible solutions:
restoring strong economic growth and
seeking new income, possibly in the
form of taxes.
Fears that Chile’s economic model
could suffer irreparable damage from a
constitutional change appear to be over-
played, though. López of Ipsos says that
most Chileans are centrists. “It’s a myth
that Chileans want to throw away the
model, they just want it to work,” he
says. “Ultimately, they want to improve
wellbeing.”
For advertising details, contact:
Rene Perez, +1 917 551 5150 and
rene.perez@ft.com, or your usual
FT representative.
All editorial content in this report
is produced by the FT. Our advertisers
have no influence over or prior sight
of the articles.
All FT Reports are available at ft.com/
reports
Follow us on Twitter @ftreports
4 ★ FINANCIAL TIMES Tuesday 27 April 2021

Investing in Chile

Energy Blessed with the best solar power conditions on the planet, Chile is deciding how to capitalise on its carbon-free capability, writes Benedict Mander

Renewables
inspire dream
of exporting
green energy
F
ernando González relishes the
shade given by the 140 sq m
mirror that bounces the sun’s
beams to a “receiver” on a
250m-high tower in the Ata-
cama Desert. But he is more proud of
what the technology is achieving in
northern Chile. “We are making history
here,” he says.
The mirror dwarfs his 4x4 truck yet it
is just one of 10,600 heliostats — to give
them their technical name — that
spread for 1.5km in all directions.
“This is the first solar energy plant of
its kind in Latin America,” explains
González, gesturing at the pipes that
take molten salt up to the receiver. The
salt is already at 290C but when it meets
the combined power of the heliostats,
the temperature almost doubles to
565C. It is then pumped down to power a
steam turbine to generate electricity.
In total, the concentrated solar tech-
nology at the $1.4bn Cerro Dominador
project can produce 110MW of power.
Together with a nearby photovoltaic
plant that provides 100MW, it became
operational this month. It joins five
other such plants: two in China and one
each in the US, Spain and Morocco.
González runs the plant for EIG Glo-
bal Energy Partners, which has owned it
since its founder and designer, the Span-
ish renewables group Abengoa, hit
financial problems in 2016. He believes
the trailblazing technology means it can
avoid the drawback of solar energy: that
it only works when the sun shines.
Blessed with the best solar radiation
on the planet, in the past five years
northern Chile has become a renewa-
bles powerhouse — especially as mass
production meant the price of solar pan-
els plummeted.
Last year, Chile hit its 2025 target of
producing a fifth of its energy from
renewables. So far this year, at least 25
per cent of its energy — and more than
twice that at peak hours — is being cre-
ated from solar and wind plants.
“That is only going to increase,” says
Darío Morales, the research director at us to dream of many things”, says of green hydrogen a year, which is Chile’s shining unlikely to have to rely on gas to comply
the Chilean Association of Renewable Rodrigo Palma, an energy specialist at what the country earns from copper example? Cerro with the Paris Agreement, as many
Energies and Storage. He says that, in the University of Chile in Santiago. He exports today. Dominador, the other countries intend to. Also, Chile no
each of the past five years, Chile has says the debate today is whether the “What is needed is a reduction of costs first thermosolar longer has to import energy, which used
added up to 1,000MW of renewables country can channel its renewable [for producing green hydrogen] just as power plant in to sap $10bn a year from national
capacity. In 2021, this figure could be resources to create associated industries. happened with photovoltaic energy,” Latin America, is accounts. The government has set a date
5,000MW as new projects come online. This would add diversity to an economy says Palma. “Solar energy only took off under of 2040 to close the coal plants that it
The problem, he says, is that projects that has long relied on copper exports. in the past decade even though the tech- construction built quickly and cheaply to resolve its
to deliver new energy to consumers are Some suggest that solar panel or bat- nology has existed since the seven- AFP via Getty Images problems before renewables arrived.
running behind schedule and “this must Solar panel tery manufacture would link Chile into ties . . . something similar could hap- Cerro Dominador is clean and pro-
be fixed quickly”. or battery global supply chains. The country could pen with hydrogen.” vides energy 24 hours a day at a compet-
Morales argues that new technolo- also export energy through transmis- “Today, [green hydrogen] is fashiona- itive price, emphasises González, point-
gies are also needed to create a better production sion lines, perhaps even to North Amer- ble. It’s all we’re talking about, just as ing out that the cost of the molten-salt
balance between supply and demand — could link ica, or use cheap energy to entice foreign three years ago all we were talking about technology has more than halved since
such as large scale energy storage sys- companies to build factories. was lithium, and before that solar. The the project began seven years ago. EIG
tems or clean energy plants that run 24 Chile into But the hottest topic is green hydro- only thing that is absolutely clear is our plans three more such plants nearby.
hours a day. The molten-salt technol- global gen, which is made by using electricity potential to produce renewable energy. González hopes the success of the
ogy used at Cerro Dominador is one from renewable energy to electrolyse Chile’s strategy should be based on how project will encourage other companies
such example but geothermal energy is supply water and separate hydrogen from to export green energy.” to invest in the region. “We may be the
being harnessed in Chile, too. chains oxygen. Government officials hope However it shapes up, fossil fuels are first but we don’t want to be the only
Chile’s renewables revolution “allows that, by 2050, Chile will export $30bn on the way out and the country is ones. There is room for everyone.”

Investors hungry for AI-derived

alternatives to meat and milk
Food and drink
Plant food start-up NotCo is
pushing for a $1bn valuation,
writes Michael Stott

Food, says Matías Muchnick, is having a

subprime moment.
The former JPMorgan banker’s
damning verdict on the global nutrition
industry is informed by his experience
of watching Wall Street during the
global financial crisis in 2008.
“Whenever I started digging into the
food industry, it had exactly the same
red flags,” he says. “Very few companies
selling overly complex products to very
disconnected consumers, where
regulators became the regulated.”
Muchnick’s answer was to start
NotCo, a company that sells plant-based
substitutes for meat and dairy products.
Now one of Chile’s most innovative new
companies, NotCo sets itself apart from
its alternative food competitors by using
a computer algorithm to suggest
unusual plant combinations that mimic
meat and dairy sensations. Cabbage and
pineapple, for example, are part of a
counter-intuitive recipe that helps
NotMilk to taste and look as close as
possible to cow’s milk.
“Taste is king — and is the first,
second and third priority of this
industry,” Muchnick says.
After an initial experiment with
vegan food in 2012, Muchnick founded
NotCo in Santiago in 2016 with two
partners. “Chile is a country that, even
though it’s in Latin America, behaves
really like an American environment,
where contracts are generally met,
where the law really protects you as an
entrepreneur,” he says.
His first product was NotMayo, a
plant-based substitute for mayonnaise
that sold briskly, helped by the little-
known fact that Chileans are the world’s
third biggest per capita consumers of
mayonnaise. The recipe included
chickpeas and lupin flowers — the latter
“had the amino acid extraction that
replaced eggs in the emulsion”, explains
Muchnick. “Very good-tasting mayo.”
Funding from Kaszek Ventures, Latin
America’s largest venture capital firm,
quickly followed.
“As soon as we met Matías and he
shared with us his vision, we were
completely bought,” says Nicolás
Szekasy, Kaszek’s co-founder, recalling
that NotCo achieved a 10 per cent share
‘Taste is king’: Muchnick says using AI gives him the edge on competition — amolvel
of Chile’s mayonnaise market with only
seven employees and a few hundred
thousand dollars in seed capital. “That
was proof to us that these guys could not
only dream big, but they could also get
things done.”
With the extra money, NotCo quickly
scaled up its manufacturing capacity
and attacked the Chilean mass market.
It then launched additional products
such as NotBurger, used by Burger King
to make the vegan Rebel Whopper sold
in Chile, and NotMilk — whose eye-
catching packaging features a drawing
of a cow with a thick black line across it.
Dairy farmers were so alarmed by this
new competitor that they launched a
lawsuit trying to prevent the use of
“milk” in NotMilk’s name.
Jeff Bezos’ family office was
among investors who
raised $30m and helped
expansion into the US
The plant-based business has even
ventured into Argentina — home of the
juicy, grass-fed steak.
NotCo does not disclose sales or
profitability data but it says its revenue
has never grown by less than three
times, year-on-year, and Muchnick
expects it to quadruple this year.
This sort of growth has whetted
investors’ appetites over three funding
rounds. Amazon billionaire Jeff Bezos’s
family office was among the investors in
a 2019 round, which raised $30m and
helped to pay for expansion into the US,
where NotCo has started selling
NotMilk in stores in the WholeFoods
chain, owned by Amazon.
Muchnick has moved to New York to
oversee the US expansion and,
towards the end of this year, NotCo
hopes to become Chile’s first start-up
valued at more than $1bn — although
it is not seeking additional funding at
present.
Such a valuation would not be
exceptional in the alternative food
sector. Swedish plant-milk maker Oatly
aims for a $10bn flotation this year and,
in 2020, venture capitalists, angel
investors and big food companies
placed $3.1bn of bets on 170 alternative
protein start-ups, according to the Good
Food Institute, a US lobby group.
While rivals such as BeyondMeat are
also trying to make plant-based
substitutes for meat and dairy products,
NotCo believes that its patented AI
technology will give it an edge.
According to Muchnick, there are
400,000 species of plants waiting to be
exploited. The algorithm has been
trained to search a vast database of
edible plants to find combinations that
replicate meat and dairy products —
both the taste and the look and feel.
“What we develop is the real
understanding of food,” says Muchnick.
How far can the algorithm extend the
product range? He smiles. “I tasted a
[replica] soft ice-cream. It is just
unbelievable. And that was created [in]
only two or three months, it’s crazy.
What is the limit? I don’t know.”
Tuesday 27 April 2021
A new dawn in Mapuche fight for equality
Social unrest
Public support and
change to constitution
may help the
indigenous group,
writes Benedict Mander
P
rince Frédéric I, the exiled
monarch of the so-called
Kingdom of Araucanía and
Patagonia, admits that Chil-
ean authorities did not take
kindly to his 2019 letter to the Interna-
tional Criminal Court in The Hague.
The kingdom is an unrecognised
state, covering more than a third of
modern-day Chile and Argentina. But in
the letter, the prince complained of
human rights abuses against the indige-
nous Mapuche people, who are fighting
for autonomy.
Prince Frédéric, who lives near Tou-
louse, has been a pretender to the
throne since the death of his predeces-
sor, Prince Antonio IV, in 2017. It is a
title that dates from 1860, when the
eccentric French lawyer Orélie-Antoine
de Tounens was appointed by the
Mapuches in the south of Chile as their
king, before he was captured and then
exiled by the newly independent Chil-
ean government.
“My role is very humble,” confesses
Prince Frédéric, a French aristocrat who
speaks a little Spanish but not the
Mapuche tongue, and has never been to
Chile. “I am keeping up tradition, mem-
ory . . . This could be important in the
fight of the Mapuche people, as a piece
of history and an international legal
argument for their autonomy.” He was
elected by a council of 15 people — eight
of whom were Mapuches living abroad.
The Mapuches themselves regard
Prince Frédéric with “a lot of curiosity
and distance”, says Pedro Cayuqueo, a
Mapuche leader and historian who is
based in Chile. The letter is unlikely to
make much of a difference to the
Mapuche cause, admits Cayuqueo, but
it will raise greater international aware-
ness. The prince is a “symbolic” figure in
their fight for autonomy and self-deter-
mination, Cayuqueo argues, seeing sim-
‘Policies have clearly failed.
No one has taken [the
issue] seriously enough’
Pablo Ortúzar
ilarities with struggles by indigenous
communities in North and South Amer-
ica, as well as countries such as Australia
and New Zealand.
Mapuche communities had their ter-
ritories annexed by the Chilean state in
the 1860s. And the outburst of social
unrest in Chile in 2019 — when the
Mapuche flag was adopted by protesters
demanding greater economic equality
— has breathed life into the indigenous
people’s cause. So, too, have interna-
tional human rights movements, such
as Black Lives Matter.
Chile’s 2019 demonstrations have
triggered a decision to rewrite the con-
stitution. Elections to choose people to
sit on a constitutional assembly are to be
held next month and 17 Mapuche repre-
sentatives will be among the 155 people
chosen to draw up the new document.
“Until recently, there was no institu-
tional solution in sight but, miracu-
Royal duty: Prince Frédéric I backs the Mapuche cause — NICOLAS TUCAT/AFP via Getty Images
★ FINANCIAL TIMES 5
Investing in Chile
lously, constitutional reform has led to both the left and the right have failed to by an outgoing government facing an Hopes are rising: protests in 2020; a port for the Mapuche people’s plight, as
the possibility of change,” says Cayu- fix the problem, unable to leave their opposition more focused on winning Mapuche woman casts her vote in the well as the process of constitutional
queo. “I’m optimistic that [it] could lead differences aside. presidential elections in November. referendum (above) reform, are reasons for renewed hope:
to a qualitative leap in the recognition of With strong leadership required, the Nevertheless, the official says that Reuters “After the darkest hour comes the
indigenous rights.” situation appears unlikely to be helped “tremendous” newfound popular sup- dawn.”
When President Sebastián Piñera
returned to power in 2018, he made
solving the Mapuche problem a priority.
Initial advances were set back when
security forces accidentally killed the
Mapuche Camilo Catrillanca as part of
an operation intended to capture
alleged Mapuche terrorists, and police
tried to cover up the incident.
Some of the violence in southern Chile
has been described as terrorism,
because it involved the burning of
churches, schools and lorries, the theft
of cattle and timber, and the deaths of
some, including Mapuches. Incidents
have become more frequent since 1993.
In that year, Chile’s first democratic
government after the fall of the military
dictator Augusto Pinochet created a
fund to finance the return of the dis-
puted land. But while land worth about
$1.5bn has been given back — including
hundreds of thousands of hectares pre-
viously in the hands of forestry compa-
nies and other private landowners con-
trolling critical water resources — the
Mapuches’ status as one of the most dis-
advantaged groups in Chile has hardly
improved.
Giving back the land without doing
anything else is not enough, says Pablo
Ortúzar, a Chilean anthropologist.
“The attempt to improve their situa-
tion over the past 30 years has yielded
little; [policies] have clearly failed,” says
Ortúzar, who recognises a need for repa-
rations but criticises the use of violence
to that end. “No one has taken [the
issue] seriously enough . . . Those
efforts require a level of attention that —
not only among the Chilean elite, but at
a more general level among the popula-
tion — we are far from conceding.”
Marcel Oppliger, the author of a book
about the victims of Mapuche violence
in Araucanía, is also pessimistic. He
argues that politicians are hamstrung
by twin problems. First, the difficulty in
treating violence in Araucanía as a secu-
rity matter that has little to do with the
legitimate Mapuche cause; and second,
a fear of using force to quell the violence,
especially after the traumas of the bru-
tal Pinochet dictatorship.
The problem is also complicated by its
magnitude. About 1.9m of Chile’s 19m
population identify as Mapuche, even if
only half of those live in the mountain-
ous and forested ancestral land of Arau-
canía, in southern Chile. The rest mostly
live in the metropolitan area of San-
tiago, the capital city.
“It is a nightmare,” says Oppliger.
“There is a fear that any move to recover
public order will be expressed in those
terms; that it is about political repres-
sion and not security. With those two
conditioning factors, it is very hard to
advance. [Whoever solves this situa-
tion] will have to be a very bold politi-
cian prepared to pay political
costs . . . but no one is even remotely
willing to do that.”
A senior official in the Piñera admin-
istration says that, so far, politicians on
6 ★
Miners fear struggle to meet copper demand
Mining A copper-led
recovery may lie ahead
post Covid, if lawmakers
and taxes allow, writes
Henry Sanderson
A
s the world turns to electric
cars and renewable energy,
Chile, the largest copper
producer by far, would
expect to benefit from a
surge in appetite for the conductive
metal. Copper prices rose to a near ten-
year high in February as investors bet on
increased demand for it in wiring for
electric grids, car-charging stations and
wind turbines.
But miners warn that Chilean politics
could delay investment in the country’s
rich resources of both copper and lith-
ium. A combination of social unrest,
Covid-19 and plans to rewrite the coun-
try’s Pinochet-era constitution risks
deterring financial backers, according
to Diego Hernández, the president of
Sonami, Chile’s national mining society.
“If you are an investor, you probably
will want to wait to see what is the result
of this process instead of making invest-
ment decisions now,” he says.
There is no doubt about the world’s
growing hunger for copper. Wind tur-
bines, solar farms and their networks
use up to 12 times as much of the metal
as non-renewable energy systems.
Meanwhile, an electric car contains
80kg of the metal — which is at least four
times that of a fossil-fuelled vehicle, as
noted in a report from Morgan Stanley
in January. The bank predicts that
demand for copper from the power and
automotive sectors will increase at a
compound annual growth rate of 7 per
cent, to 5.2m tonnes, by 2030.
Chile, however, is struggling to
expand production with few new
projects planned. It still produces more
copper than the next three countries
combined but its share of production
slipped by 1.6 percentage points in 2020
compared with the previous 12 months.
Its attractiveness to mining compa-
nies has also fallen by more than 10
points in the latest Investment Attrac-
tiveness Index of territories, a ranking
Timber industry’s balancing
act in bid for greener wood
Timber
There is a delicate trade-off
between sustainability and
profit, says Benedict Mander
The trade-off between profitability and
sustainability is a sensitive issue for
Chile’s booming timber industry. It
accounts for $2.3bn in exports a year but
faces many challenges — including com-
petition for water, forest fires and a loss
of biodiversity. Still, Francisco Ruiz-Ta-
gle, the chief executive of forestry com-
pany CMPC, insists that he can deliver
value to shareholders as well as contrib-
ute to Chile’s environmental plans.
“We don’t see this business being sus-
tainable without being 100 per cent
committed to the [UN climate goals],”
he explains.
Ruiz-Tagle argues that the activities
of CMPC — the world’s second-largest
wood pulp producer — are “a win-win”
for Chile, given the capacity of its forests
to capture carbon dioxide and the coun-
try’s aim to be the first in South America
to reach targets to cut emissions in line
with the Paris climate agreement.
However, while the industry inevita-
bly has a role in helping Chile to reach its
target of carbon neutrality by 2050, the
closure of coal-fired power stations and
policies to boost renewable energy will
be more important.
A recent paper published in the
Nature Sustainability journal even
questions how much forestry can con-
tribute. It points to a state subsidy for
tree-planting, in place from 1974 to
2012, that had an adverse effect on bio-
diversity — because new plantations
were made up of just one or two species,
mainly eucalyptus and pine. This also
did little to increase the forests’ capacity
to capture greenhouse gases.
Although the size of Chile’s planta-
tions more than doubled between 1986
and 2011 — and native forests shrank by
13 per cent — the carbon stored in vege-
tation increased by less than 2 per cent
in that time.
“Chile provides a lesson about how we
can advance towards sustainable devel-
opment in a way that doesn't have an
undesirable impact on climate change,
the ecology and society,” says Cristian
Echeverria, a professor at Chile’s
Concepción university and co-author of
the paper.
Rich resources: the Codelco
Chuquicamata open pit copper mine
near Calama in northern Chile
Bloomberg
Burnt out: The army helps put out a forest fire in Galvarino, central Chile
AFP via Getty Images
He notes that while Chile has been
eliminating its insurance against cli-
mate change — its native forests — there
are plans to increase commercial plan-
tations by about a third, to 4m hectares.
“The question is where, and what con-
sequences, that expansion will have,”
Echeverria says. “Stronger regulation is
required. So far, it hasn’t been effective.”
Part of the problem, he believes, is that
small landowners lack the economic
muscle to manage and maintain native
forests given “measly state assistance”.
Pablo Marquet, an ecologist at Chile’s
Institute of Ecology and Biodiversity,
says companies have improved their
practices since Chile committed itself to
climate goals. “The question is whether
State subsidised tree
planting from the 1970s
until 2012 had an adverse
effect on biodiversity
solutions are scalable and will generate
a transformation of the sector,” he says.
“Time will tell.”
But concerns that forestry companies
may be helping the country to “green-
wash” its environmental credentials are
misplaced, says Horacio Gilabert, an
agronomist at the Pontifical Catholic
University of Chile. “It’s fair to say that
[companies such as CMPC] are an asset
FINANCIAL TIMES
Investing in Chile
that is compiled by the Fraser Institute
think-tank.
Such data sows doubt. There is, how-
ever, optimism that the current review
of Chile’s constitution will not impact
mining. The legal system has ensured a
level of stability that has allowed mining
investment to take place, says Ivan
Arriagada, chief executive of FTSE 100
miner Antofagasta.
The state also plays an important role
in the industry, in the form of Codelco —
the top copper producer — which is
government-owned and last year
for plans for the decarbonisation of
Chile,” he observes, pointing out that
the loss of native species has been
caused mostly by agroindustry and
urbanisation, rather than forestry.
Vast areas of native forests, which
included oaks and giant redwoods, were
cleared as immigrants began to settle in
the mid-19th century. Soil erosion then
led to the tree-planting subsidy pro-
gramme but this created forests that are
more vulnerable to fire.
Nevertheless, analysts at Fitch Rat-
ings recently noted “the nearly ideal
conditions for growing trees in the
region, [making] plantations extremely
efficient by global standards and [pro-
viding] a sustainable advantage in
terms of cost of fibre and transportation
costs between forest and mills.”
In addition, the companies that domi-
nate Chile’s forestry sector have
increased innovation. Since the pan-
demic, CMPC has digitalised its busi-
ness. It has maximised the use of data,
increased production of natural fibre to
replace plastics, and is using less waste
in industrial processes, says Ruiz-Tagle.
“Sustainability is our biggest chal-
lenge, [and I] mean being perfect in our
operations,” says Ruiz-Tagle, who
points out that there is “zero tolerance”
of the company’s mistakes among com-
munities and activists.
That’s why state of the art production
is all important. “We need to be a good
business for our shareholders, but we
also need to be a good neighbour.”
turned out 1.73m tonnes of the metal.
“There are likely to be some changes
here and there,” says Arriagada, “but, in
the end, if this model has been success-
ful from the point of view of developing
investment in the mining industry, and
therefore growth, most components of it
will be retained and kept.”
Chile became the largest copper pro-
ducer after a wave of private invest-
ment in the 1990s but, since then, the
amount of metal found in its deposits
has declined.
Production rose from 1.6m tonnes in
Tuesday 27 April 2021
1991 to 5.5m tonnes in 2004 but the
decline in ore grades — the proportion of
copper in rock — has meant that the
industry has had to double investment
simply to sustain production.
Hernández says the grade of copper in
Chile has fallen from 1 per cent in 2004
to 0.67 per cent in 2019.
Against such a background, he says a
clear legal framework is imperative in
order to attract investment. “The legal
framework has become more important
than before,” he says. “If your grade is
average, your payback is longer and you
will need more confidence in the legal
framework of the country.”
At the same time, copper miners in
Chile face higher taxes as the govern-
ment seeks to fund a post-pandemic
economic recovery.
The industry sustained production at
5.8m tonnes last year despite the disrup-
tion caused by Covid-19. “This was the
only industry that kept moving and kept
investment,” says Arriagada. But, last
month, Chile’s parliament approved a
proposal to raise taxes on copper and
lithium miners.
If the plan goes ahead, the tax on large
producers will increase from 3 per cent
to 10 per cent, and up to 100 per cent of
additional income if copper prices hit
US$4.50/lb.
“We believe some sort of revision to
the current mining fiscal regime in Chile
is likely,” say analysts at BMO Capital
Markets — but they add that “actual
implementation” may be delayed until
the approval of the new constitution,
due to be voted on next year.”
Higher taxes could hinder Chile’s
chance of becoming a producer of
“green copper”, produced using renewa-
ble energy, says Arriagada. It is a process
that would be powered by the sunlight
of the Atacama Desert, which has one of
the world’s highest levels of solar radia-
tion.
“That’s a very significant advantage,
Chile providing green copper to the
world,” he adds. “That’s a tremendous
opportunity for the industry.”
This was the only industry According to Arriagada, the country’s
that kept moving and kept taxation of its mining industry is
already high and second only to Aus-
investment [during Covid] tralia’s. “It’s important the industry
Ivan Arriagada develops and taxation does not become
a burden,” he says.