The economy prosecutor’s office looks into Tianqi-SQM deal

SANTIAGO – The economy prosecutor’s office in Chile opens an investigation in Chinese manufacturing company Tianqi’s acquisition of 24% of lithium producer SQM shares. The measure responds to complaints from the Production Development Corporation CORFO and Senator Alejandro Guillier.

Chinese manufacturing company Tianqi has bought 24% of lithium producer SQM’s shares. The sale sparked an investigation by the economy prosecutor’s office to look into the consequences the deal could carry for the free market in Chile. Tianqi’s participation in SQM is relevant for the economy since the Chinese company controls more than half of global lithium production.

The economy prosecutor’s office received two complaints, one from Production Development Corporation CORFO, and the other from senator and former presidential candidate Alejandro Guillier. The case passed through the admissibility stage, in which an enquiry of facts about markets involved will determine if the case is relevant enough to open an official investigation. During the current phase all the public information available is analyzed, while background presentation and declarations are voluntary.

Senator Guillier expressed his concern about the situation, as it could result in the creation of a lithium monopoly, since more than the 70% of lithium production would be in the hands of the two companies. “Lithium belongs to all Chileans, the state is supposed to control this resource. But in fact, it’s in private hands and they sell it as they want. But now the Chilean law contemplates lithium as an extraordinary resource for the economy’s development. Because of that, only in very exceptional circumstances the president should authorize any kind of trade with the private industry.”

In May, Tianqi and Canadian fertilizer company Nutrien LTD (formerly Potash Corp) made a deal in which Tianqi would buy Nutrien’s SQM shares. The quantity negotiated represents 24% of total shares. The reason for the deal was to comply with conditions by Indian and Chinese authorities to approve the fusion between Potash Corp and the retail supplier of agricultural products in North-America, Agrium Inc. No detailed information about the agreement and the lithium market has been available.

During the formal investigation, authorities can request declarations of the parties involved and of any entity that can be somehow related with the case. During this stage declarations are mandatory, different from the admissibility stage. If the investigation doesn’t reveal any risk for free competition in Chile, the case can be closed. If risks are seen as possible, the prosecutor can either start a legal process at the Free Market Defense Court, or get an extra-official agreement between the parties involved.

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