President Gabriel Boric’s decision to nationalize Chile’s lithium industry could undermine the dominant position of SQM, a firm born during the 1973-1990 Pinochet dictatorship that has been at the center of scandals involving insider trading and illegal campaign contributions.
Though the conglomerate remains a leading producer of potash, fertilizers, and other products, SQM has become increasingly focused on the extraction of lithium from the Atacama Salt Flats in northern Chile, the world’s third-largest reserve of the white metal.
SQM is second only to Albemarle, based in the United States, as a provider of lithium, a vital component of batteries for electric vehicles.
While the scandals forced Julio Ponce Lerou to step down as chairman of the board in 2015, the former son-in-law of the late Gen. Augusto Pinochet has retained effective control of SQM, even after China’s Tianqi Lithium Corp acquired a 23-percent stake in the company.
Under contracts signed in the mid-1990s, SQM’s privileged access to the Atacama deposit is set to continue until 2030.
“SQM was and continues to be the pampered pet of the Santiago Stock Exchange, the one that reports the great revenues and profits,” business journalist Carlos Tromben told EFE.
Originally state-owned, SQM was privatized in the early 1980s in a process directed by Ponce in his capacity as director of the relevant government agency and he assumed leadership of the remodeled enterprise.
“The workers themselves became, in part, owners of the firm through the policy of so-called popular capitalism, pushed by the regime under the motto: ‘stop being a proletarian and become an owner,’” according to investigative reporter Sergio Jara.
But within a few years, Ponce and other company executives bought up many of the workers’ shares and set about creating a complex web of “cascada” (waterfall) companies that enabled them to control SQM with a small amount of capital.
“The cascadas are paper corporations, with a pyramidal structure that has its chain of control in the Cayman Islands,” Jara told EFE, adding that the scheme allowed Ponce to borrow to buy more shares and pack the board of directors with cronies such as Hernan Büchi, a Cabinet minister under Pinochet.
Some in Chile hail Ponce, estimated by Forbes magazine to have a net worth of $3.5 billion, as a visionary who built SQM into a powerful company and grasped the potential of the Andean nation’s lithium reserves, but Jara cast doubt on that notion.
“We need to demythologize somewhat these great entrepreneurs who present themselves as if they were the only ones capable of succeeding with that level of natural resources. You don’t need to be a genius to do it,” the journalist said.
Through his stakes in several cascada companies, Ponce has the authority to appoint three of SQM’s eight directors, a former senior executive told EFE on condition of anonymity.
In the wake of the scandals over financial manipulation and illegal payments to politicians, SQM’s prestige suffered another blow in the form of convictions for violations of labor laws that included payoffs to corrupt union leaders.
With the continuance of its lucrative lithium concession on the line, SQM recently launched a public relations campaign to burnish its image. EFE mfm/dr
Source : La Prensa Latina Media