Chile's comptroller general office (CGR) will audit "certain operations associated with" the SQM-Codelco agreement to form a lithium production joint venture, following complaints by some of the country's parliamentarians and indigenous communities, further delaying the deal.
CGR on 18 December said its scope is limited to verifying whether government actions follow the law and to audit public spending. The agency said that it is forbidden from judging whether a policy or administrative decision is a good idea or convenient.
CGR does not have the power to veto the deal, because the main legal challenges to the agreement are either in court, where the watchdog has been ordered not to comment, have already been resolved by judges, or involve policy judgments that Chilean law does not allow CGR to review.
As a result, its role is limited to reviewing the agreement for potential irregularities. It can flag legal inconsistencies and delay the deal's effective date until any identified issues are rectified.
CGR's audit will focus on the state-owned company Codelco's financial advisory contract with investment bank Morgan Stanley, as well as Codelco's operations, to determine whether public resources are being used appropriately.
The audit will also examine claims from a congressional investigative commission regarding the transparency of the negotiation process, SQM's tax situation, and a clause that relates to Codelco's obligation to sell 100pc of extracted potassium to SQM under the partnership. The Atacama desert's brines, from which the joint venture will produce lithium, contain potassium that is precipitated and extracted alongside lithium.
Additionally, CGR will review whether the companies' directors acted lawfully and examine Chile's economic development agency Corfo's approval of the contracts that underpin the partnership. These include Corfo's contracts with SQM, which allow lithium extraction in the Atacama salt flats through December 31, 2030, and its contracts with Codelco's lithium subsidiary Minera Tarar, which enables operations at the site from 2031 to 2060.
Corfo's mining lease and project contracts are a key legal step in allowing Codelco to partner with a private company — SQM, in this case — to mine lithium in that area under the national lithium strategy of President Gabriel Boric, who leaves office in March.
Although the SQM-Codelco agreement, which was struck in May 2024 and would extend SQM's authorization to continue extracting lithium in the Atacama salt flats from January 2031 to 31 December 2060, does not have a hard deadline to close, it is still running against the clock.
If the deal is not sealed by 31 December 2025, a contract clause in the partnership agreement allows any party to void the deal if they so choose. If this deadline is not met, Chile would also reduce SQM's lithium extraction quota by 300,000 metric tonnes of lithium carbonate equivalent for the remaining period until 31 December 2030, when the company's current mining permit ends.
The joint-venture also faces opposition from Chile's newly elected president Jose Antonio Kast. The far-right politician said he would honor the deal if it is sealed before he takes office, but risk of an overturn would grow if that condition is not met before he is sworn in on 11 March 2026.
