Chile Nitrates Exports (NITRATE)

     CASE NUMBER:   292
     CASE MNEMONIC: NITRATE
     CASE NAME:     Chile Nitrates Trade

A.   INDENTIFICATION

1.   The Issue

       Chile is the world's major producer of copper, but what many
people do not know is that Chile is also the world's leading
producer of Nitrates.  By being  also the world's supplier of
nitrates, many environmental problems can arise from this practice. 
Nitrates are only found underground, so extraction from  the soil
has to occur, thus creating soil erosion and removal, pollution of
the  soil and water streams by the use of chemicals and machinery
used for the  mining and also by the dumping of soil in the waters. 
Health problems are  major concerns that miners face every day and
the surrounding fauna and  flora also shares the effect of such
practices.  The Chilean Government has  recognized these problems
and has pushed and passed legislation and  policies that deal
solely with the protection of the environment and with the 
regulation of the mining companies activities.

2.   Description

     The word nitrates is a daily part of our vocabulary.  We see
it in  the labels of soda cans, in vitamin supplements and as the
main ingredient  in the making of gun powder, essential for
ammunition.  The world's primary producer of nitrates is Chile.  It
produces about 69%  of the world's supply of these minerals.  This
means that the mining of nitrates for Chile represents one of its
most important industry (only surpassed by copper) and is a means
of obtaining capital for the countries's  growth.  Nitrates in
Chile are found to be located in the northern part of the country,
especially in the Atacama Desert and the western part of the Andes. 
Huge mining complexes exist in this area for the sole  purpose of
extracting nitrates.  This huge industry provides jobs for almost 
100,000 people (directly and indirectly) and has a total net profit
of $50 million from a total of $300 million in sales.  The net
profit is not that much compare to other industries, but one has 
to realize that to reach that amount in sales almost 1,000,000
tones of nitrates had to be removed from the soil yearly, thus
creating a major depletion of soil in the Atacama region.

     Nitrates are used for a wide range of purposes.  They are used 
for the production of gun powder, as construction materials, as
conductors of electricity, and in some cases they are used as 
mineral supplement (very small quantities) in diets and healt
consciuos food.  Nitrates are a vital part of the construction
companies, due to their nescessity for mixing and fortifying
concrete.

     Chile depends heavily on its mining industries and has 
acknowledged that this practice has caused severe damage to the
environment, such as the erosion of the soil in the desert and in
the Andes, pollution of land and water near this mining sectors. 
This is due to the use of chemicals for extraction and to the
dumping of million of tons of sand and rocks that contain certain
amounts of nitrates into the water streams that supply water for
the adjacent regions and to the major cities of Santiago (the
capital) and Valparaiso (the main port where the nitrates are
shipped to the rest of the world). Studies  have shown that high
amounts of nitrates in an organisms bloodstreams can be fatally
harmful causing birth defects and in some cases death (by means  of
poisoning).  These high amounts of nitrates can reach the
bloodstream by  means of drinking contaminated waters.  This kind
of environmental damage is not only to the surrounding habitats of
the nitrates industries but it also affects the human beings that
work in the industry and the ones that depend on these water
streams for the consumption of water and for sanitary reasons.

     The Government of Chile, under the administration of president
Patricio  Alwyn (the first democratically elected president in
Chile in 17 years), undertook the task of providing Chile with one
of the more complete and strict environmental  law in the Americas. 
Law No. 19.300 was passed by the Chilean Congress on  March 9,
1994, with Articles IV and VI directed at the mining industry.
          
     The Ministry of Mining (surprisingly a major force behind the
environmental  movement), under the new regulations of the 19.300
law, considers that the  environmental protection is fundamental
aspect in Chile's mining development,  without this protection
there will be no sustainable development, or security for 
investment, or solution to pollution problems existing at present.

     The most important components of the environmental management
in the  mining of nitrates and copper are:


o    The existence of a mining environmental policy with the
visible commitment of the Ministry's authorities to resolve the
most important environmental problems in mining this decade.

o    The elaboration of diagnosis on the sector environmental
impact. 

o    All new mining and metallurgical investments must submit,
before their performance, studies of the projects environmental
impact, for evaluation by the regional authorities.

o    Every mining company not abiding by the provisions on 
environmental protection, must submit decontamination plans to the
competent authorities.  Those plans should measure, cost and time
limits to obey the environmental regulations.

     At the very beginning of his administration, President Aylwin
created an interministerial advisory commission to formulate and
coordinate environmental policy.  This commission and its technical
secretariat, together known as CONAMA (Comision Nacional del Medio
Ambiente), is now attempting to broaden its understanding of the
ways that human activity affects the environment and identify ways
to mitigate the damage without sacrificing goals for economic
development.  The concept of sustainable development is receiving
support from the highest levels of government.  This was  expressed
by President Aylwin himself in a speech to the Chilean National 
Congress: " We believe that true development entails the
conservation of nature  and enhances the quality of human life, and
therefore growth ought to occur in such way that it does not harm
the environment".

     These steps taken by the Chilean Government and the Mining
Sector can be classified as positive and in the right direction,
but maybe it is a little  too late.  The extraction of nitrates in
Chile has being going on for almost  150 years.  This year alone
more than 800,000 tones of nitrates were extracted from Chilean
soil, but Nitrates was a much bigger industry at the turn of the 
century, so one can only imagine how many tons of nitrates have
being extracted  and how much erosion and pollution to the air,
land and water have occur during  the last 150 years.  These
policies and laws will at least be directed to better ensure the
future of the Chilean people and its environment.  Nitrates will
still be in high demand and as long as there is a demand, Chile
will continue to extract  and export this product, but know the
mining industries, especially nitrates will have a new set of
guidelines and rules to follow.

3.   Related Cases

Chile Log Export Subsidy case       
Chile Air Pollution case
Brazil Gold Minning case
Geddes Copper Mine/Canada case
Guano Trade case

     Key Word Clusters:

       (1): Trade Product          : Nitrates
       (2): Bio Geography          : Dry
       (3): Domain                 : South America
       (4): Environmental Problem  : Pollution of Land and Water

4.   Draft Author:  Adrian Muniz (May, 1996)
B.   LEGAL CLUSTER

5.   Discourse and Status:    Agreement and InProgress

     The extraction of nitrates from the Northern Desert in Chile
is known  to cause serious damage to the environment that surrounds
the area, such as  the removal of millions of tons of sand and
rocks from the desert and the dumping of these sands, rocks and
chemicals into the water streams that supply much of the drinking
and sanitoria waters for the populations of Santiago and
Valparaiso.   These sands and rocks contain many kinds of nitrates,
which have being found to cause harmful effects to the  organisms
that consume the polluted waters  (it also includes humans).  The
Chilean Environmental Law, especially Articles IV and VI "The Cause
of Action for Environmental Restoration Damages" and "Mining
Responsibilities to the Environment" provides that any person or 
corporation who negligently or intentionally causes environmental
damage is responsible for the restoration of the damage or liable
in damages for the cost of restoration or harmful effects to
animals or persons.

6.   Forum and Scope:         Chile and Unilateral

7.   Decision Breadth:        1

     This Environmental Law is specifically directed at the
protection of the environment in Chile and to control the damage of
the mining industries to the environment.  It is a law designed to
provided Chile with a first-class protection of its environment,
but also it helps project a positive image to the United States, in
seriously considering Chile as the next partner in the NAFTA group> 
However, these policies are facing pressure from environmental
groups for stricter  environmental policies and laws for the NAFTA
members.

8.   Legal Standing:          Law

     Law no. 19.300, the " Ley de Bases del Medio Ambiente" was
ratified  and passed by the Chilean Congress in March 9, 1994, and
law no. 18.097  " Ley Organica Constitucional sobre Concesiones
Mineras".

C.   GEOGRAPHIC FILTERS

9.   Geographic Locations

        A. Geographic Domain: South America
        B.  Geographic Site:  Western South America
        C.  Geographic Impact:     Chile

10.  Sub-National Factors:    NO

11.  Type of Habitat:         DRY

D.   TRADE CLUSTERS      

12.  Type of Measure:         Regulatory Standard

     The government of Chile and the Nitrates Mining Sector;
SOQUIMICH  have created a program of incentivating and
strengthening the environmental  management in the mining sector
through the action of the Environmental Unit  and the National
Environmental Commission created by Law 19.300.   The Commission is
actively working to come to reasonable, technically based 
regulations for the improvement of the handling of the environment.

13.  Direct vs. Indirect      Indirect

14.  Relation of Measure to Environmental Impact
        A. Directly Related to the Product:  YES Nitrate
        B. Indirectly Related to Product:    NO
        C. Not Related to Product:           NO
        D. Related to Process:               YES (Pollution Land)

15.  Trade Product Identification:      Nitrates

16.  Economic Data

     In 1994, nitrate mining net profit was reported by the Chilean 
government to be at $50 million on about $300 million in sales. 
The nitrate output for that year was estimated to be at 825,000
tones and consisted  of 5.7% of the export sector in Chile (1994). 
The nitrate mining industry is  estimated to employ about 50,000
people directly and about 20,000 people indirectly (services,
transportation and shipment).

17.  Impact of Measure on Trade Competitiveness: LOW

     Chile is still one of the major producer of nitrates in the
world and regulations that are directed to the environmental
effects of mining will not affect its position or value in the
world markets.

18.  Industry Sector:         Mineral

19.  Exporter and Importers:  Chile  and Many

E.   ENVIRONMENTAL CLUSTERS

20.  Environmental Problem Type:   Pollution Land

     Pollution of Land and Water streams and the dumping of
chemicals into the land and water.

21.  Name, Type, and Diversity of Species

     Name:          Many
     Type:          Many
     Diversity:     1,269 higher plants per 10,000 km/sq (Chile)

     The following animal and fish species live near the Atacama
Desert and the Andean mountains.
          Animals:
             Llama:           (Lama glama)
             Alpaca:          (Lama pacos)
             Condor:
             Vicuna:          (Vicugna vicugna)
             Humans:          (Homo sapiens)
          Fish:
             Albacoro:        (Thunus alalunga)
             Ancoveta:        (Engraulis ringens)
             Bonito:          (Sarda sarda)
             Erizo:           (Loxechinus albus)
             Pulpo:           (Octupus vularis)
             Sardina araucana:(Stragomera bentincki)

22.  Impact and Effect:        Medium and Regulatory

23.  Urgency and Lifetime:    Medium and 100s of years

     Erosion of the Atacama desert and the area located in the
western  part of the Andes has taken place during the last 150
years, a lot of damage has been done, but studies of the region
have shown that with a new set of  guidelines and processes, the
damage can be repair and further exploitation of the area can be
achieve in new and more effective ways.

24.  Substitutes:             Conservation

     To this day, many attempts to find synthetic alternatives to
nitrates  have failed and those nitrates that have been duplicated
in laboratories do not meet the standards and qualities of natural
nitrates.  So for now the only viable solution is to try to deal
with the problem in hand and create mechanism for the  conservation
of the habitats in which these nitrates are found.

F.   OTHER FACTORS

25.  Culture:            NO

26.  Trans-Border:       NO

27.  Rights:             Yes

     The habitat from the Northern part of Chile is slowly been
destroyed  and health problems to miners and people that depend on
the water streams are on the rise.  The enaction of the
environmental law of 1994, especially  article VI not only protects
the environment but also protects the people affected directly or
indirectly of the activities concerning the extraction of these
minerals.

28.  Relevant Literature

Bosworth, Barry P., Dornbusch, Rudiger, and Laban, Raul.  Chilean 
Economy: Policy Lessons and the Challenges, Washington, D.C.: The
Brookings Institute, 1994.

Dr. Crozier, R.D.: Mining Annual Review.  Mining Journal, London,
July 1995.

Loveman, Brian.  Chile: The legacy of Hispanic Capitalism, 2nd
edition.  New York: Oxford University Press, 1988.

Ministerio de Mineria: Directorio Minero de Chile.  1995-1996. 
Organizacion Punto Diez, S.A.

Ministerio de Mineria: Ley Organica Constitucional Sobre
Concesiones Mineras, Junta de Gobierno de la Republica de Chile. 
Diario Oficial No. 31.171, de 21 de enero de 1982.

National and Local Policies and Institutions: Environmental
Planning in Chile.  World Resources 1994-1995.

Schlauch, J. Paul, Jensen, J. Lawrence: Chilean Environmental
Framework Law;  

United States Department of the Interior: Mineral Industries of
Latin America and Canada. 1991 International Review.  Minerals
Yearbook Volume III.

United States Department of the Interior: Mineral Industries of
Latin America and Canada. 1988.  International review.  Minerals
Yearbook Volume II.

                         REFERENCES