In Chile, copper is king.

Multicolored veins of the super-conductive metal – vital for electronics, plumbing, transport, machinery and renewable energy – ripple through the Andes mountain range and the Atacama Desert, giving the country the world’s largest copper reserves.

The Chilean economy rests heavily on these natural riches, which have been nicknamed ‘Chile’s salary.’ Copper makes up over half of the country’s exports and about 13.6 percent of GDP, making it the global leader in copper production.

That makes the governance of this sector particularly critical, especially in a Latin American context.

Across the region, high-value natural resources have been extracted by colonial powers since the 17th century, often by exploiting local communities – a pattern so pervasive that some development economists called it the ‘paradox of plenty’ or the ‘resource curse.’

“Everything from the discovery until our times has always been transmuted into European – or later United States – capital, and as such has accumulated on distant centers of power,” wrote Uruguayan writer Eduardo Galeano in his 1971 treatise Open Veins of Latin America.

“Everything: the soil, its fruits and its mineral-rich depths, the people and their capacity to work and to consume, natural resources and human resources.”

Chile’s copper industry was a key focus of Galeano’s thesis. Its mineral wealth, he explained, was being sapped up by foreign countries – particularly the United States, which controlled almost all of Chile’s large-scale copper production in the early 20th century, leaving the country underdeveloped.

But the same year that book was published, something changed: the Chilean government, led by democratic socialist Salvador Allende, nationalized the copper industry.

This move didn’t come out of nowhere: it followed steps taken by the previous government to acquire majority stakes in the country’s mines through a new state-owned company, the National Corporation of Chilean Copper (Codelco).

Do Chileans support copper mining?

Two years later, U.S.-backed military general Augusto Pinochet seized power in a coup and ran the country as a dictatorship for the next 17 years.

Pinochet made vast changes to the country’s economy, privatizing hundreds of state-owned firms as part of a neoliberal economic doctrine.

Yet even he left Allende’s copper policy largely intact – showing the strategic importance of keeping hold of the country’s most valuable resource.

However, Pinochet did ringfence copper funds for the military that upheld his regime, and he also opened new deposits and operations for private investment.

More than 35 years on, and despite considerable political polarization during and following the dictatorship, most Chileans agree with keeping copper in public hands.

“Mining is almost part of the DNA of Chileans,” says Felipe Sanchez Llancan, a Chilean industrial and mining engineer and a current PhD student at the University of Leoben in Austria.

“There’s a strong mining identity in most of the country, and it’s a big source of pride – so long as people see that things are being done right and that communities get the benefits.”

However, the financial benefits are likely not as striking as most people assume, says Sanchez Llancan.

He recently co-authored a study assessing the net financial outcome of copper nationalization for Chile, which concluded that the process was only “marginally positive for the government.”

Mining, Sanchez Llancan explains, is a risky industry that requires large capital investment.

“It had a price, and it was significant – so significant that [by] the 2000s, the state hadn’t fully recovered. We wanted to give numbers to this discussion that sometimes is more emotional.”

How Chile avoided the ‘resource curse’

Perhaps more important than net benefits, however, are the ways in which those benefits are gathered, shared and reinvested.

“Unlike many resource-rich countries that fall into the ‘resource curse,’ Chile has managed to convert its geological endowment into broader development outcomes,” note the authors of a recent African Union policy brief that seeks to find key lessons from the country’s experience for other nations.

The co-authors credit Chile’s “strong institutions, balanced state/private model, and prudent macro rules” with this success.

One such institution – which predates copper nationalization, having been founded in 1960 – is the National Mining Enterprise (ENAMI), another state-owned company.

ENAMI acts as a buyer, processor and financier for small- and medium-sized miners, providing them with crucial access to market prices despite their low production levels.

It helps them navigate regulations and survive price volatility – thus “helping to develop this industry that has really important local impact,” says Sanchez Llancan.

The Chilean Copper Commission (Cochilco) also plays an important role: it’s a state-owned technical advisory body that supports the development of mining by providing research and statistics and acting as a watchdog to ensure mining projects comply with regulations.

“The mining companies trust Cochilco, so they give it a lot of information, and Cochilco returns this with very valuable insights about the industry,” Sanchez Llancan explains.

How copper mining polluted Chilean communities

Yet not everyone in Chile gives the copper industry such glowing reviews. Regardless of whether they’re state-owned or privately owned, extractive industries like copper mining have a detrimental effect on the environment.

Chilean copper mines use vast amounts of water in extremely arid regions, pollute groundwater, rivers and coastlines, emit greenhouse gases, destroy habitats and cause serious health issues in neighboring communities – many of which are Indigenous and systemically marginalized.

Those health impacts have been in the spotlight recently. The Antofagasta region, which produces more than half of the country’s copper, has the highest cancer mortality rate in Chile, with lung cancer rates almost triple the national average.

Local medical practitioners are also reporting high rates of cancers and neurological disorders among children in the area, though large-scale research on this has yet to be done.

Meanwhile, researchers have found evidence of toxic metals such as arsenic collecting in tree rings up to 70 kilometers from copper mines. This shows that while these metals do occur naturally in the area, mining considerably exacerbates their reach and impact.

The findings, they say, suggest that Chile’s environmental legislation is “underestimating” the impacts of its mines on the health and wellbeing of Indigenous communities in the area.

Citizens of Calama – a city in the Atacama Desert that sits close to several of the country’s largest copper mines – are now taking Codelco to court for environmental contamination. They’re also calling for a thorough suite of studies to quantify the health impacts of the mines and compensate those affected.

“Nobody here can be against copper mining,” said lead trial lawyer Sergio Chamorro, in an interview for Dialogue Earth.

“That is not where we stand. We understand its importance, both for the region and for the country and the world. What we are against is this model to which we are subjected. Of resigning ourselves to live and die contaminated.”

These concerns echo those of others in resource-rich areas around the world that can be considered ‘green sacrifice zones’ – providing the raw materials for a clean energy transition, but suffering environmental damage in the process.

Copper demand is surging with this transition: its high conductivity makes it especially useful for things like solar panels, electric vehicles and wind turbines.

That means it will be critical for Chile to find ways to keep the sector’s environmental and health impacts in check. A key stepping stone will be collecting the data to understand the extent of those impacts so far.

Lithium: the next ‘Chilean salary’?

In 2023, the Chilean government again made headlines with a plan to nationalize its lithium industry, which currently operates through just two companies, Chile’s SQM and the U.S.’s Albemarle.

Lithium is another key component of clean energy systems, which is used widely in renewable batteries – and another metal for which Chile has the largest reserves.

“This is the best chance we have at transitioning to a sustainable and developed economy,” said President Gabriel Boric in a televised address. “We can’t afford to waste it.”

Unlike the full nationalization that took place in the copper sector in the 1970s, new lithium contracts will be issued as public–private partnerships under state control.

“From my point of view, this is a good middle point,” says Sanchez Llancan: “having significant involvement from the state to drive in the industry, making the most of the boom in lithium prices and market for the benefit of the state, and, at the same time, not discouraging private participation.”

Like copper, lithium extraction has considerable environmental and human impacts – water use, pollution, emissions and habitat loss.

Two endemic species of flamingo, for example, are threatened by the rising saltiness of lakes in lithium mining sites in Chile.

Boric pledged to transform the industry to run on new environmentally-friendly technology and to engage personally with local Indigenous communities about their concerns.

But many of these communities, burned by centuries of neglect and exploitation, are skeptical.

“We’re in the most arid desert and to exchange what we have in water and vegetation for a lithium battery is going to leave us with nothing,” Francisco Mondaca, a civil engineer and head of the environmental unit of the Atacama Indigenous Council, told Reuters.

Boric’s term ends in March. His successor, far-right leader José Antonio Kast, has pledged to change course and put private companies at the center of the country’s lithium industry, as well as giving them a greater role in copper production.

As Chile turns its attention to lithium, the history – and present – of the copper sector looms large.

That story shows how nationalizing high-value natural resources can bring economic and social benefits, but those benefits need to be fairly shared – and impacts on communities and ecosystems need to be carefully and transparently assessed.

Chile’s challenge – past, present and future – is to channel its mineral wealth for the good of its people and places, not just those to which it sends its metals.