SANTIAGO Chile's presidential election front-runner, Michelle Bachelet, is unlikely to radically shake up the giant copper industry in the short-term but there are signs that some of the favorable terms miners have enjoyed in past decades could be watered down.
Bachelet, a center-leftist who led Chile from 2006 to 2010, is poised to crush her rivals in this year's election, thanks to her affable style and a vow to hike corporate taxes to fund an educational overhaul.
That raised concerns that her government might seek to tap the profitable metals industry in the world's No. 1 copper producer, though aides say the sector will not be significantly affected by her reform blitz beyond a planned across-the-board corporate tax increase to 25 percent from 20 percent.
Her program is scant on details but some suggested constitutional changes could pave the way for a greater state role in the industry and an end to miners' sweet deals on water use in the future, mining industry executives and local analysts say.
Still, Bachelet has emphasized that Chile must "recover" its competitive edge in mining, chiefly by taming high power prices and improving the concessions system to facilitate the creation of new mines and encourage exploration.
There has been no mention of higher mining royalties or hints that Bachelet - a moderate in her first term although with a more left-leaning agenda this time around - will take a firm stand against controversial mining and power projects.
"There's no fear of a big change in mining," a high-level mining industry executive told Reuters, speaking on condition of anonymity to avoid ruffling the feathers of Bachelet's team.
Around 47 percent of Chileans said they would vote for Bachelet, while 14 percent backed right-wing candidate Evelyn Matthei, a CEP poll showed last month.
It suggested that Bachelet may win enough votes to triumph in the first round on November 17. If she fails to pocket more than 50 percent of votes, the election will go to a second round runoff on December 15. Even then, she would be a hot favorite to win.
Chile produces around 5.7 million tonnes of copper a year and roughly $112 billion in mining investments are planned in the country over the next eight years.
Beyond its coveted ore, Chile has also attracted mining investment due to its political stability, business-friendly tax terms for foreign companies and generous water usage rights.
LONG TERM CHANGES?
While mining firms are confident that they will dodge the bullet for now, some worry that Bachelet may be laying the ground for some more sweeping changes in the long-term.
Her program mentions that a planned new constitution, slated to replace one drawn up under a military dictatorship, will "recognize full, absolute, exclusive, unalienable and unlimited public control over water (and) mining".
"The state has the right to royalties for the exploitation of natural resources, especially mineral ones," it says.
Outgoing President Sebastian Pinera, a conservative, increased royalties to help pay for rebuilding after a devastating earthquake in 2010. The rate was set at between 4 and 9 percent on companies' margins on a sliding scale and was set to reach 5 to 14 percent starting in 2018.
The industry fought back at first, before agreeing to the increase in late 2010. With metal prices down and costs creeping up, miners would likely have been fiercely averse to a fresh hike under Bachelet.
Water, meanwhile, is a major issue after a series of annual droughts, with much mining taking place in the Atacama, the world's driest desert, where communities often feel they have to compete with mines for their water supply.
Mining firms currently have the right to use any water found during their work, according to Chile's water code, which dates from General Augusto Pinochet's 1973-90 military rule. Critics say this is a form of privatizing water.
Bachelet also wants to strike down so-called 'Decreto Ley 600' for future investments. The law, another Pinochet-era creation, seeks to give foreign companies certain tax guarantees to spur investments.
Bachelet says the statute is antiquated and that Chile has proven over the last two decades that it doesn't suddenly change the rules of the game. Investors say the regulation helps shield them from tax changes.
Enshrining new natural resources rules in the constitution could pave the way for a stronger state presence in the mining sector, costlier water or higher taxes, some say, though significant doubt persists over the fine print of Bachelet's plan.
"This opens a massive door, which can be very well administered or can be completely screwed up. It would allow the state to do many things it can't do today," said Gustavo Lagos, mining professor at the Universidad Catolica. "(But) it's unclear what they want. To me it appears to be a program that is seeking votes instead of precision. The program is very vague."
Foreign miners have little political leverage in Chile, which produces a third of the world's red metal. Many in the economically unequal country are frustrated that the spoils of the mining boom haven't reached them, and feel mega mining has had a high toll on the environment and health.
Around 83 percent of Chileans are in favor of nationalizing copper, according to the CEP poll released last month, which one of the other eight presidential candidates, Marcel Claude, an underdog left-wing economist popular with students, has proposed.
Her closest opponent, however, the ruling Alianza bloc's Matthei, is in favor of continuity in mining.
Bachelet's mining program-- outlined in about two of the roughly 200 pages of the broader manifesto-- actually prompts more questions than it answers, said some in the industry.
For instance, the program says that her government would continue to fund cash-strapped state miner Codelco CODEL.UL. However, it does not mention how.
World No.1 copper miner Codelco hands all its money over to the state, which then decides how much to award back to fund its investments. After the government returned less money than Codelco wanted this year, many in the company are lobbying for more structured, predictable financing.
"Codelco will be financed, but I think the funding mechanism will be discussed during the beginning of her government," said Juan Carlos Guajardo, the head of mining think tank CESCO.
Much rests on how much clout Bachelet's diverse coalition, which ranges from the Communist Party to the more conservative Democracia Cristiana party, has in Congress.
Most of her political capital will likely be spent wrestling with opposition lawmakers over her flagship education and tax reforms, leaving little time to make sweeping changes in other areas.
Many of the mining industry problems in Chile go beyond politics - namely dwindling ore grades and lower metal prices.
That said, miners are clamoring for lower power costs and clearer regulation to avoid unexpected, dramatic setbacks to multi-billion dollar investments. Communities, on the other hand, are demanding stronger environmental safeguards.
Last week, Barrick Gold Corp (ABX.TO) shelved its roughly $8.5 billion Pascua-Lama gold project. Chile had suspended work on the unpopular mine due to environmental harm after a nearby indigenous group said the project had contaminated a local river and harmed glaciers.
A nebulous regulatory framework has also left several major energy generation projects in limbo.
Bachelet will likely make liquefied natural gas the backbone of her energy policy to ease the mounting power crunch, though some mix of coal, hydropower and renewables will probably also be used.
(Writing by Alexandra Ulmer; Editing by Kieran Murray and Alden Bentley)