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Mining giant Chile flush with cash as copper price soars

FILE PHOTO: A worker monitors a process at the Codelco Ventanas copper smelter in Ventanas, Chile

SANTIAGO (Reuters) – Chile expects the soaring price of its main export copper to boost growth and underwrite the nearly $16 billion in stimulus the country expects to have handed out to its citizens during the coronavirus pandemic.

Finance Minister Rodrigo Cerda told lawmakers during a presentation of the government’s quarterly public finance report that Chile expects the copper price to average $3.99 per pound in 2021, a big increase over its January prediction of $3.35.

Sky-rocketing copper prices, combined with a major bump in economic activity expected as a result of its fast-paced vaccination drive could see Chile’s gross domestic product jump 6% in 2021, up from a previous estimate of 5%, Cerda said.

The world’s biggest copper producer reaps an additional $60 million in taxes and royalties for every penny the copper price rises, based on official estimates.

The minister said Chile could also thank copper revenues for helping to stabilize debt in 2021 despite rising expenditures.

“The price of copper, now much higher, gives us more income, and permits us, of course, to more rapidly contain debt levels,” Cerda said in the presentation.

Chile’s copper output has continued without much disruption during much of the pandemic as most of its large mining companies adjusted early, stepping up sanitary measures and working with limited staff.

The country is also far ahead of regional neighbors in its vaccination drive, an advantage it hopes will prime the economy for a major rebound in the second half of 2021, Cerda said.

Domestic demand is expected to grow 10.7% in 2021, up from a previous estimate of 8.8%, amid expectations that the pandemic will soon subside as more Chileans are innoculated.

Health ministry statistics show that more than half of a target population of 15 million Chileans has been vaccinated.

The finance report also noted that consumer prices would rise 3.4%, up slightly from a prior forecast of 3.0%.

(Reporting by Dave Sherwood and Fabian Cambero; Editing by Chizu Nomiyama and Jane Merriman)

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