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Chile’s campaign finance scandal fells fertilizer firm’s CEO

Canada's PotashCorp holds one-third stake in top lithium, iodine producer

Santiago | Reuters — Fertilizer company SQM has fired its CEO after it became embroiled in an election campaign financing scandal that has rocked the Chilean establishment, tainting business leaders and politicians with close links to the 1973-1990 dictatorship of Augusto Pinochet.

SQM, which has the rights to some of the world’s largest reserves of nitrates and lithium, said after a board meeting on Monday night that it had “agreed to terminate” the contract of CEO Patricio Contesse, who was with the company for more than 25 years.

Shortly after the announcement, SQM said it would voluntarily comply with a demand this month by Chile’s internal revenue service to hand over tax information for the last six years. Contesse had tried to block the move but he was rejected by the courts.

Authorities are investigating whether money from SQM and other companies was channeled illicitly to electoral campaigns for the Independent Democratic Union (UDI), Chile’s biggest conservative party.

The head of the UDI resigned last Wednesday. UDI is part of a right-wing coalition with 44 seats in the lower house of parliament, compared with President Michelle Bachelet’s ruling left wing coalition’s 67 seats. UDI has eight senators and Bachelet’s coalition 21.

The owners of financial firm Banco Penta have already been charged with bribery and tax evasion in a scandal that has angered Chileans, proud of their reputation for being one of the least corrupt and most investor-friendly economies in Latin America.

Prosecutors say they have evidence that fake receipts used by Penta’s owners to dodge taxes were used to make illegal campaign finance contributions.

“Market worries”

SQM is no stranger to scandal. Last year, Chile’s financial regulator fined brokers and company executives including chairman Julio Ponce, Pinochet’s former son-in-law, over market manipulation.

SQM’s deputy CEO and company veteran Patricio de Solminihac will take over from Contesse, the firm said. Brokers at BanChile said in a note that the appointment was “good news” and “a first step towards confronting market worries linked to the company’s corporate governance.”

SQM has struggled with lower iodine prices and seen its shares fall around 10 per cent in March. On Tuesday they were trading flat at 14,200 pesos, valuing the company at around US$6 billion.

Saskatoon-based fertilizer giant PotashCorp owns about a 32 per cent stake in SQM’s dual-share structure and appoints three of the eight board seats.

— Rosalba O’Brien is the senior correspondent for Reuters’ bureau in Santiago, Chile. Additional reporting for Reuters by Antonio de la Jara.

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