Chile signals Codelco governance overhaul amid debt concerns

Chile’s new right-wing government is signaling an overhaul of Codelco’s corporate governance to ensure greater scrutiny of decision making at the heavily indebted state copper giant.

“We have governance problems there that need to be tackled,” Finance Minister Jorge Quiroz said in a weekend interview from New York. “We need to have more transparency.”

The administration of President José Antonio Kast is looking to take a more profit-driven approach to Codelco after delays, missteps and cost overruns at major projects saw production drop and debt surge. While Quiroz didn’t elaborate on changes, he pointed to checks and balances to better control the company’s sprawling operations.

A 2009 governance reform was designed to reduce political interference and boost stability at Codelco. But analysts, including those at prominent think tank Cesco, say the company has suffered from high management turnover and an overly centralized structure, with results reported mostly at the corporate level rather than by division. Cesco has recommended looking into whether Codelco should move toward a holding-company model with more autonomous divisions to improve accountability.

To be sure, outgoing chairman Maximo Pacheco says the company has already adopted a stronger focus on capital discipline and operational stability, adding that high debt is largely the result of having to catchup after decades of underinvestment and the fact it hands over its profits and 10% of its revenue to the government.

Quiroz raised concern over Chile’s over-reliance on copper — it makes up about half of national exports — adding the government needs to “seriously think” about Codelco’s future role.

(By Carolina Gonzalez and James Attwood)