Chile’s President-Elect Gabriel Boric will take office next month. His platform is strong on the environment.
The constituent convention, which is charged with writing a new constitution, continues to make related proposals. These include proposals to nationalize natural resources of the country and to enshrine rights to nature in the draft magna charta. After clearing the committee stage, proposals need to be approved by the full convention. Next, half of the draft constitution will be up for vote in a national exit referendum.
A new constitution or, more specifically, rights enshrined could have myriad consequences for leftist Borics’ incoming government and its legislative plans, also expected with thick green threads. Investors are asking big questions in this context: What’s next? How will the rules change?
BNamericas spoke to Fernando Molina, a lawyer and partner at Chiles Grupo Evans. This legal firm is staffed by engineers and lawyers. Its practice areas include energy, environment, sustainability, mining, water rights, and regulations.
BNamericas: Gabriel Borics campaign was founded on the principle of environmental protection. What do you think Boric will do to fulfill this promise? What are the challenges he might face along the way
Molina:Gabriel Boric’s government faces the main challenge of addressing the environmental problem with urgency. It must adapt to the impacts of climate change by taking measures such as drought, growing loss of biodiversity, pollution control and water scarcity. These issues affect both urban centers and fragile ecosystems.
This means that emblematic bills like the climate change framework bill and the one that establishes biodiversity and protected area service must be approved. But, dictating rules isn’t enough. In today’s social- and environmental context, tangible and verifiable outcomes will be required.
The decarbonization plan, and the tensions between those who want to bring forward its closure, can be clearly seen in the foregoing. [coal-fired]The practical difficulties of thermoelectric plants due to the absence of baseload power sources to sustain the national energy matrix. It will be the same with what are known as sacrifice zones. These are areas that have suffered especially from fallout from mining or industrial activities and where state action is necessary.
BNamericas: How do you address the expectations of this new, environment-focused government
Molina:As mentioned, expectations are high as visible changes are not expected in the immediate future. This is why the circular economy agenda, for instance, must be developed and implemented effectively in the next years.
This urgency will also be highlighted by the need to secure new investments and clarify the rules that govern their development. Borics government plan, the president-elect’s, has indicated an intention to encourage extractive activities, such as mining. However, this program will be based on a new approach that is more sustainable, and more environmentally responsible. This expectation will focus on how the declaration of intent will be implemented in practice. Will it be able to establish clear rules and make decisions that balance the development of sustainable project with environmental protection? If it is able to establish clear rules and adopt decisions that allow for the development of sustainable projects while protecting the environment, it will undoubtedly have to shoulder certain costs. It is possible for players to feel hurt, or that they have unrealistic expectations. This is something that the government must address.
As such, the first signs of decarbonization and environmental evaluation of relevant investment projects are highly indicative.
BNamericas: In Chile, there is a proposal that the magna Carta would enshrine nature rights in the context of constitutional rewrite. What implications could approval of such rights have for companies looking to develop projects in Chile, such as in mining or infrastructure?
Molina: Rights over nature are not a new topic. It has a long history and has been studied in several countries, including New Zealand, Ecuador, and the United States.
The fundamental aspect of this vision is to change the way humans relate to nature. It can be as simple as looking at nature and recognizing its interdependence.
This new paradigm is not a problem. It responds to a modern trend in environmental law. There are rules that can be found that reflect this vision, such the right to live, develop, and protect endangered species. Rights over nature do not mean that nature has the same rights as humans. It means to protect them in order to ensure their survival and development.
It is a problem if the regulation is unclear or prevents the exploitation natural resources. This corresponds to the foundation for Chile’s income. The extent and scope of the eventual consecration will ultimately determine its effects. It will increase environmental law cases significantly if it is not clear about its limits and who has the right to file actions in nature’s name.
There are many legal formulas that include this new understanding of the relationship between humans and nature that go beyond the utilitarian vision. They also do not recognize rights over the natural world. For example, the so-called custody of nature concept has been proposed, where the burden of this protection is shouldered by the state, which must conserve and maintain it for the common benefit of current and future generations; all concepts incorporated in the new trends of sustainable development.
BNamericas: In regulatory matters, such as environmental, do you think that the new government will bring greater changes than a new Constitution, or vice versa, or both?
Molina: The main change could be attributed to the new constitution, rather than the government. The new political constitution that fails to include the protection of the environment as well as economic development in a balanced way and the certainties that these require, will have significant effects on environmental management.
This does not negate the high expectations placed on elected governments. They must demonstrate effective measures to protect the environment and ensure clarity in the rules for new investment development.
BNamericas: Concerning the new government, and the process for drafting a constitution, do you feel there is concern among the private sector over possible new rules? Do you think this uncertainty is having an effect on investment plans? Is there a company that is in a “wait and see” mode?
Molina: There are certain changes that could be relevant and potentially cause uncertainty, which can affect investments. This is demonstrated by the fact that in 2021 records were set for mutual funds in international currencies and research that confirms capital fleeing.
This is a typical example of a process that has seen profound changes.
This perspective makes it important to consider the signals the future government will send to ensure the country’s regulatory and economic stability. This includes the appointment of the chairman at the central bank to the Finance Ministry and other important positions such as Maisa Rosas in the Ministry of the Environment.
The key to success in the constitutional process will be how it develops and the display of respect for the rule law and minimum guarantees.
BNamericas: What can you say about recent regulatory or rule change, such as the modification of the mining code?
Molina: Our law firm is made up of engineers and lawyers who are experts in environmental and energy issues. This has a significant impact on large-scale energy projects and large energy mining operations. We monitor both the recent regulatory changes and those that will follow.
It is hard to choose between the two. The modification of the mining code is a good example of a general tendency to end mining speculation. The regulations in the environmental area are moving in the right directions. They address issues like climate change, biodiversity, and important steps towards a more sustainable nation, such the single-use plastics laws, extended producer responsibility laws, and the pending modifications to the regulation related with green taxes.
All the changes suggest a shift of vision in Chile and indicate a concern for adapting Chilean legislation to international standards, emphasizing sustainable growing as the axis. It is clear that the country is going through profound changes. It is important to anticipate these changes in order to be ready to face them.
BNamericas: What regulatory changes does Chile need in energy, environment, and natural resources matters?
Molina: It seems to me crucial to give the greatest urgency to the climate bill framework bill and to the bill that establishes a biodiversity and protected area service.
Another matter of importance is to include a modernization in the environmental impact evaluation system. This will allow for the development, with higher levels, of certainty, the requirements that investment projects within our country must comply with. It is a difficult task. Past governments have failed to modernize the instrument.
Finally, there is still a pending agenda. It has not been able tackle the complexities of pollution. This can be seen in the precarious environment institutional framework that has not been able to effectively deal with the so-called “sacrifice zones”. This is due to a lack effective technical instruments that can be integrated in a comprehensive way, adequate participation and governance in decision-making. These phenomena require a new institutional framework.