Unassociated Document

3.A. Selected Financial Data

The following table presents selected consolidated financial information for SQM and one or more of its subsidiaries, as applicable, for each of the periods indicated. This information should be read in conjunction with, and is qualified in its entirety by reference to, the Audited Consolidated Financial Statements of the Company as of December 31, 2007 and 2006 and for each of the three years in the period ended December 31, 2007. The consolidated financial statements as of December 31, 2004 and 2003 and for the years then ended are not included herein. The Company's Consolidated Financial Statements are prepared in accordance with Chilean GAAP, which differs in certain material respects from U.S. GAAP. Note 29 to the Consolidated Financial Statements as of December 31, 2007 and 2006 and for each of the three years in the period ended December 31, 2007 provides a description of the principal differences between Chilean GAAP and U.S. GAAP and a reconciliation of net income for the years ended December 31, 2007, 2006 and 2005 and total shareholders' equity as of December 31, 2007 and 2006 to U.S. GAAP.

	Year ended December 31,
	2007			2006			2005			2004			2003
Income Statement Data	(in millions of US$) (1)

Chilean GAAP
Total Revenues		1,187.5			1,042.9			896.0			788.5			691.8
Operating Income		259.5			219.9			181.2			124.1			87.3
Non-operating results, net		(27.1	)		(36.1	)		(34.4	)		(17.6	)		(21.2	)
Net income		180.0			141.3			113.5			74.2			46.8
Net earnings per share (2)		0.68			0.54			0.43			0.28			0.18
Net earnings per ADS (2) (3)		0.68			0.54			0.43			0.28			0.18
Dividend per share (4)(5)		0.44			0.349			0.279			0.182			0.088
Weighted average shares outstanding (000s) (2)		263,197			263,197			263,197			263,197			263,197

U.S. GAAP
Total Revenues		1,187.5			1,042.9			896.0			788.5			691.8
Operating Income		237.0			205.5			163.9			114.6			76.7
Non-operating results, net (6)		1.7			(14.1	)		(6.1	)		(1.6	)		(4.3	)
Equity participation in income (loss) of related companies, net		3.6			2.0			2.6			1.8			2.2
Net income		192.7			154.3			125.2			86.8			57.8
Basic and diluted earnings per share		0.73			0.59			0.48			0.33			0.22
Basic and diluted earnings per ADS (3)		0.73			0.59			0.48			0.33			0.22
Weighted average shares outstanding (000s)(2)		263,197			263,197			263,197			263,197			263,197

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	As of December 31,
	2007		2006		2005		2004		2003
Balance Sheet Data:	(In millions of US$)
Chilean GAAP:
Total assets		1,986.3		1,871.2		1,640.6		1,361.4		1,363.5
Long-term debt		486.7		480.7		100.0		200.0		260.0
Total shareholders' equity		1,182.4		1,085.9		1,020.4		948.6		890.0
Capital stock		477.4		477.4		477.4		477.4		477.4
U.S. GAAP:
Total assets		1,959.6		1,846.0		1,609.0		1,318.5		1,319.4
Long-term debt		485.0		478.7		100.0		200.0		260.0
Total shareholders' equity		1,084.1		994.5		923.4		856.9		794.7
Capital stock		479.3		479.3		479.3		479.3		479.3

Note: The Company is not aware of any material differences between Chilean and U.S. GAAP that are not addressed in Note 29 to the Consolidated Financial Statements of December 31, 2007.

(1) Except shares outstanding, dividend and net earnings per share and net earnings per ADS.

(2) There are no authoritative pronouncements related to the calculation of earnings per share in accordance with Chilean GAAP. For comparative purposes the calculation has been based on the same number of weighted average shares outstanding as used for the U.S. GAAP calculation.

(3) The ratio of ordinary shares to Series A ADSs was 10:1 for all periods reflected in the table. The Series A ADSs were delisted from the New York Stock Exchange on March 27, 2008. The ratio of ordinary shares to Series B ADSs changed from 10:1 to 1:1 on March 28, 2008. The calculation of earnings per ADS is based on the ratio of 1:1.

(4) Dividends per share are calculated based on 263,196,524 shares for the periods ended December 31, 2003, 2004, 2005, 2006 and 2007.

(5) Dividends may only be paid from net income before amortization of negative goodwill as determined in accordance with Chilean GAAP; see Item 8.A.8. Dividend Policy. For dividends in Ch$ see Item 8.A.8.Dividend Policy — Dividends.

(6) Does not include equity participation in income (loss) of related companies, net.

EXCHANGE RATES

Chile has two currency markets, the Mercado Cambiario Formal, or Formal Exchange Market, and the Mercado Cambiario Informal, or Informal Exchange Market. The Formal Exchange Market comprises banks and other entities authorized by the Chilean Central Bank. The Informal Exchange Market comprises entities that are not expressly authorized to operate in the Formal Exchange Market, such as certain foreign exchange houses and travel agencies, among others. The Chilean Central Bank is empowered to determine that certain purchases and sales of foreign currencies be carried out on the Formal Exchange Market.

Both the Formal and Informal Exchange Markets are driven by free market forces. Current regulations require that the Chilean Central Bank be informed of certain transactions and that they be effected through the Formal Exchange Market. For the purposes of the operation of the Formal Exchange Market, the Chilean Central Bank sets a dólar acuerdo, or Reference Exchange Rate. The Reference Exchange Rate is reset daily by the Chilean Central Bank, taking into account internal and external inflation and variations in parities between the Chilean peso and each of the U.S. dollar, the euro and the Japanese yen at a ratio of 80:15:5, respectively. In order to keep the average exchange rate within certain limits, the Chilean Central Bank may intervene by buying or selling foreign currency on the Formal Exchange Market.

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The dólar observado, or Observed Exchange Rate, which is reported by the Chilean Central Bank and published daily in the Chilean newspapers, is computed by taking the weighted average of the previous business day’s transactions on the Formal Exchange Market. On September 2, 1999, the Chilean Central Bank eliminated the band within which the Observed Exchange Rate could fluctuate, in order to provide greater flexibility in the exchange market. Nevertheless, the Chilean Central Bank has the power to intervene by buying or selling foreign currency on the Formal Exchange Market to attempt to maintain the Observed Exchange Rate within a desired range.

On April 10, 2008, the Chilean Central Bank decided to intervene in the Formal Exchange Market by increasing the level of international reserves by US$8 billion. This intervention program is scheduled to take place between April 14, 2008 and December 12, 2008. The Central Bank decided to implement this program in order to strengthen the international liquidity of the Chilean economy, in the face of recent uncertain in the global financial markets. In addition, the Central Bank considered that world economic conditions had caused the exchange rate between the Chilean peso and the U.S. dollar to fall below the level that should prevail under normal economic conditions.

The Informal Exchange Market reflects transactions carried out at an informal exchange rate, or the Informal Exchange Rate. There are no limits imposed on the extent to which the rate of exchange in the Informal Exchange Market can fluctuate above or below the Observed Exchange Rate.

The following table sets forth the annual low, high, average and year-end Observed Exchange Rate for U.S. dollars for each year starting in 2003 as reported by the Chilean Central Bank. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.

On May 31, 2008, the Observed Exchange Rate was Ch$479.66 = US$1.00.

Observed Exchange Rate (1)

Ch$ per US$

Year/Month	Low (1)		High (1)		Average (2)(3)		Year/Month End
2003		593.10		758.21		687.50		599.40
2004		559.21		649.45		612.13		559.83
2005		509.70		592.75		559.27		514.21
2006		511.44		549.63		531.03		534.43
2007		493.14		548.67		521.95		495.82
Dec-07		495.49		506.79		499.28		495.82
Jan-08		463.58		498.05		480.90		465.30
Feb-08		458.02		476.44		467.22		458.02
Mar-08		431.22		454.94		442.94		439.09
Apr-08		433.98		459.16		446.43		459.16
May-08		461.49		479.66		470.10		479.66

Source: Central Bank of Chile

(1)

Observed exchange rates are the actual high and low on a day-to-day basis, for each period.

(2)

The yearly average rate is calculated as the average of the exchange rates on the last day of each month during the period.

(3)

The monthly average rate is calculated on a day-to-day basis for each month.

3.B. Capitalization and Indebtedness

Not applicable.

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3.C. Reasons for the Offer and Use of Proceeds

Not applicable.

3.D. Risk Factors

Our operations are subject to certain risk factors that may affect SQM's financial condition or results of operations. In addition to other information contained in this Annual Report on Form 20-F, you should consider carefully the risks described below. These risks are not the only ones we face. Additional risks not currently known to us or that are known but we currently believe are not significant may also affect our business operations. Our business, financial condition or results of operations could be materially affected by any of these risks.

Risks Relating to our Business

Our sales to emerging markets expose us to risks related to economic conditions and trends in those countries

We sell our products in more than 100 countries around the world. In 2007, approximately 43% of our sales were made to emerging market countries: (i) approximately 14% in Central and South America, excluding Chile; (ii) approximately 19% in Chile; and (iii) approximately 10% in Asia, excluding Japan. We expect to expand our sales in these and other emerging markets in the future. The results of and prospects for our operations in these countries and other countries in which we establish operations can be expected to be dependent, in part, on the general level of political stability and economic activity and policies in those countries. Future developments in the political systems or economies of these countries or the implementation of future governmental policies in those countries, including the imposition of withholding and other taxes, restrictions on the payment of dividends or repatriation of capital or the imposition of new environmental regulations or price controls, could have a material adverse effect on our sales or operations in those countries.

Volatility of world fertilizer and chemical prices and changes in production capacities could affect our business, financial condition and results of operations

The prices of our products are determined principally by world prices, which in some cases have been subject to substantial volatility in recent years. World fertilizer and chemical prices vary depending upon the relationship between supply and demand at any given time. Furthermore, the supply of certain fertilizers or chemical products, including certain products that we provide, varies principally depending upon the production of the major producers (SQM included) and their respective business strategies.

In particular, during 2007 world prices of potassium-based commodity fertilizers increased steadily, and these price increases have been even more pronounced during the first five months of 2008. These global price increases should result in increases in the prices of our potassium-based specialty plant nutrients and on the prices of the potassium chloride we sell to third parties. We cannot assure you that this trend will continue.

During the last two decades, world iodine prices have displayed volatility in response to supply and demand conditions. Iodine prices have followed an upward trend since late 2003, reaching an average price of approximately US$23.60 per kilogram in 2007. We cannot assure you that this trend will continue.

We started production of lithium carbonate from the brines of the Salar de Atacama in October 1996 and started selling lithium carbonate commercially in January 1997. Our entry into the market created an oversupply of lithium carbonate, resulting in a drop in prices from over US$3,000 per ton before our entry to less than US$2,000 per ton. At the end of 2007, prices were higher than US$6,000 per ton. We believe the increase in prices was mainly due to the high growth in demand, which had not been fully balanced by the supply of lithium carbonate. However, during 2007, new producers entered the market, helping to balance supply and demand, and therefore we believe prices may decrease.

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We expect that prices for the products we manufacture will continue to be influenced, among other things, by supply and demand factors and the business strategies of major producers. Some of the major producers (including SQM) have increased or have the ability to increase production. As a result, the prices of our products may be subject to substantial volatility. A substantial decline in the prices of one or more of our products could have a material adverse effect on our business, financial condition and results of operations.

Our exposure to unrecoverable accounts receivable may significantly increase

The strong increases observed in world fertilizer prices during the first few months of 2008 have resulted in increases in our accounts receivable. Should this trend continue, our exposure to uncollectible accounts receivable may increase. Although we take steps to minimize the risk of losses from bad debt, such as the use of credit risk insurance and letters of credit for a portion of our accounts receivable, a substantial increase in such losses could have a material adverse effect on our business, financial condition and results of operations.

New production of lithium carbonate in China

Currently there are several projects for the expansion of lithium carbonate production capacity being developed by Chinese competitors. As there is limited information on the status of these projects we cannot make accurate projections regarding their capacities and the dates on which they will become operational. However, should significant new production volumes enter the market in the near term, we believe there could be a reduction in prices and volumes that could have a significant negative impact on the Company's business, financial condition or results of operations.

We have an ambitious capital expenditure program that is subject to significant risks and uncertainties

Our business is capital intensive. Specifically, the exploration and exploitation of reserves, mining and processing costs, the maintenance of machinery and equipment and compliance with applicable laws and regulations require substantial capital expenditures. We must continue to invest capital to maintain or to increase our exploitation levels and the amount of finished products we produce. We require environmental permits for our new projects. Obtaining permits in certain cases may cause significant delays in the execution and implementation of such new projects and, consequently, may require us to reassess the related risks and economic incentives. No assurance can be made that we will be able to maintain our production levels or generate sufficient cash flow, or that we will have access to sufficient investments, loans or other financing alternatives to continue our exploration, exploitation and refining activities at or above present levels, or that we will be able to implement our projects or receive the necessary permits required for them in time. Any or all of these factors may have a material adverse impact on our business, financial condition and results of operations.

Currency fluctuations may have a negative effect on our financial results

The Chilean peso has been subject to large devaluations and revaluations in the past and may be subject to significant fluctuations in the future. We transact a significant portion of our business in U.S. dollars, and the U.S. dollar is the currency of the primary economic environment in which we operate and is our functional currency for financial statement reporting purposes. A significant portion of our operating costs, however, are related to the Chilean peso. Therefore, an increase or decrease in the exchange rate between the Chilean peso and the U.S. dollar would affect our costs of production. As of December 31, 2007, the Chilean peso had appreciated approximately 7.2% against the U.S. dollar with respect to December 31, 2006, and this trend has continued during the first few months of 2008. As a result, our peso-denominated costs have increased, and this trend may continue in the future.

Additionally, as an international company operating in Chile and several other countries, we transact a portion of our business and have assets and liabilities in Chilean pesos and other non-U.S. dollar currencies, such as the euro and the South African Rand, among others. As a result, fluctuations in the exchange rates of such foreign currencies to the U.S. dollar may affect our business, financial condition and results of operations.

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Sustained high raw materials and energy prices could continue to increase our production costs and cost of goods sold

We rely on certain raw materials and various sources of energy (diesel, electricity, natural gas, fuel oil and others) to manufacture our products. Purchases of raw materials that we do not produce and energy constitute a significant part of our cost of sales (approximately 13.5% in 2007). To the extent we are unable to pass on increases in raw materials and energy prices to our customers, our business, financial condition and results of operations could be adversely affected.

Our reserves estimates could significantly vary

Our mining reserves estimates are prepared by our geologists. Estimation methods involve numerous uncertainties as to the quantity and quality of the reserves, and these could change, up or down. A downward change in the quantity and/or quality of our reserves could affect future volumes and costs of production and therefore have a negative impact on our business, financial condition and results of operations.

Quality standards in markets where we sell our products could become stricter over time

In the markets where we do business, customers may impose quality standards on our products and/or governments may enact stricter regulations for the distribution and/or use of our products. As a result, we may not be able to sell our products if we cannot meet such standards. In addition, our cost of production may increase in order to meet any such newly promulgated standards. Failure to sell our products in one or more markets or to important customers could materially affect our business, financial condition or results of operations.

Our business is subject to many operating and other risks for which we may not be fully covered in our insurance policies

Our facilities located in Chile and abroad are insured against losses, damages or other risks by insurance policies that are standard for the industry and that would reasonably be expected to be sufficient by prudent and experienced persons engaged in a business or businesses similar to ours. Nonetheless, we may be subject to certain events that may not be covered under the insurance policies, and that could materially affect our financial condition or results of operations.

We face significantly higher energy costs as a result of the natural gas shortage in Chile

As part of a cost reduction effort, in 2001 we connected our facilities to a natural gas network. The natural gas, which originates in Argentina and is subject to a 10-year agreement, is used mainly for heat generation at our industrial facilities. Due to energy shortages in Argentina, in 2004 local authorities began to restrict exports of natural gas to Chile in order to increase the supply to their domestic markets. Additionally, even though we have long-term price agreements related to natural gas, the Argentinean government has increased taxes on gas exports and there can be no assurance that they will not do so again in the future.

We suffered partial shortages of natural gas during 2004, 2005 and 2006, and during 2007, we received practically no natural gas. We believe this situation will continue and that during 2008 we will likely receive little or no natural gas from Argentina. Most of our industrial equipment that uses natural gas can also operate on fuel oil, and the remaining equipment can operate on diesel. However, the cost of fuel oil and diesel is significantly higher than the cost of natural gas, and therefore we have recently faced significantly higher energy costs. We expect this situation to continue, and therefore we expect the reduction in our natural gas supply to continue to have an adverse effect on our business, financial condition and results of operations.

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Decline in the supply of natural gas is negatively affecting the supply of electricity in the Northern Power Grid

The natural gas supply crisis discussed above has placed the Northern Power Grid (Sistema Interconectado del Norte Grande or “SING”) under significant stress. The combination of the lack of natural gas received from Argentina during 2007 and additional events, such as damages from an earthquake in November 2007, have made this situation even more critical. Continued stress on the Northern Power Grid could lead to a system failure that would then affect the supply of electricity. Restrictions on the Company’s electricity consumption could affect our operations, potentially decreasing our production volumes and increasing our production costs.

Decline in the supply of natural gas and increasing global oil prices could negatively affect our electricity contracts

As the supply of natural gas continues to be uncertain, as discussed above, and oil prices continue to increase, we are faced with the potential early termination, partial amendment or temporary suspension of our long-term electricity supply contracts. We maintain contracts with two main utilities in Chile, Electroandina S.A. and Norgener S.A., and both have sought relief from the terms of their electricity supply agreements, arguing that certain unforeseen events have restricted the supply and increased the price of gas from Argentina. As a result of the requests, we entered into negotiations resulting in new tariffs that have a negative effect on our results of operations. Further increases in the cost of energy could prompt these companies to once again seek to modify, terminate or suspend these contracts. If that were to happen, and these companies were to prevail in any resulting arbitration proceedings, our business, financial condition and results of operations could be materially adversely affected.

During 2007, purchases of electricity represented approximately 4.1% of our cost of sales.

We are exposed to labor strikes and liabilities that could impact our production levels and costs

Of our permanent employees in Chile, 70% are represented by 31 labor unions, which represent their members in collective bargaining negotiations with the Company. Accordingly, we are exposed to labor strikes that could impact our production levels. Should a strike occur and extend for a sustained period of time, we could be faced with increased costs and even disruption in our product flow that could have a material adverse effect on our business, financial condition or results of operations.

In 2006, the Chilean Congress amended the Labor Code, and effective January 15, 2007, certain changes were made, affecting companies that hire subcontractors to provide certain services. This new law, known as the “Law on Subcontracting”, establishes a new requirement that applies in the event of accidents in the workplace. The law states that when a serious accident occurs, the company must halt work at the site where the accident took place until authorities from the National Geology and Mining Service inspect the site and prescribe the measures the company must take to prevent future risks. Work may not be resumed until the company has taken the prescribed measures, and the period of time before work may be resumed may last for a number of hours, days, or longer. The effects of this new law could have a material adverse effect on our business, financial condition or results of operations.

Pending lawsuits could adversely impact us

We are party to lawsuits and arbitrations involving commercial matters. Although we intend to defend our positions vigorously, our defense of these actions may not be successful. Judgment in or settlement of these lawsuits may have an adverse effect on our financial condition or results of operations. See Item 8.A.7. Legal Proceedings and Note 23 to the Consolidated Financial Statements. Furthermore, our strategy of being a world leader includes entering into commercial and production alliances, joint ventures and acquisitions to improve our global competitive position. As these operations increase in complexity and are carried out in different jurisdictions, our Company might be subject to legal proceedings that, if settled against us, could have a significant impact on the Company's business, financial condition or results of operations.

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Risks Relating to Chile

As we are a Chilean-based company, we are exposed to Chilean political risks

The prospects and results of operations of the Company could be affected by changes in policies of the Chilean government, other political developments in or affecting Chile, and regulatory and legal changes or administrative practices of Chilean authorities, over which the Company has no control.

Changes in mining and water rights laws or in regulations affecting port concessions could affect our operating costs

We conduct our mining (including brine extraction) operations under exploitation and exploration concessions granted in accordance with provisions of the Chilean Constitution, and the Constitutional Mining Law and related statutes. Our exploitation concessions essentially grant a perpetual right to conduct mining operations in the areas covered by the concessions, provided that we pay annual concession fees (with the exception of the Salar de Atacama rights, which have been leased to us until 2030). Our exploration concessions permit us to explore for mineral resources on the land covered thereby for a specified period of time, and to subsequently request a corresponding exploitation concession.

In addition, we operate port facilities at Tocopilla, Chile, for the shipment of our products and the delivery of certain raw materials, pursuant to concessions granted by Chilean regulatory authorities. These concessions are renewable provided that we use such facilities as authorized and pay annual concession fees.

Any significant changes to any of these concessions could have a material adverse impact on our business, financial condition and results of operations.

We hold water rights that are key to our business development. These rights were obtained from the Chilean Water Authority for a supply of water from rivers and wells near our production facilities, which we believe are sufficient to meet current operating requirements. However, the Water Code is subject to changes, which could have a material adverse impact on our business, financial condition and results of operations. Law No. 20,017, published on June 16, 2005, modified the Chilean laws relating to water rights. Under certain conditions, these modifications allow the constitution of permanent water rights of up to 2 liters per second for each well built prior to June 30, 2004, in the locations where we conduct our mining operations. Such rights may be constituted in favor of parties that requested water rights prior to January 1, 2000, when such request had not yet been processed as of June 16, 2005. In constituting these new water rights, the law does not factor in the availability of water, or how the new rights may affect holders of existing rights. Therefore, the amount of water we can effectively extract based on our existing rights could be reduced if these additional rights are exercised. These and other potential future changes to the Water Code could have a material adverse impact on our business, financial condition and results of operations.

The Chilean government could levy additional taxes on corporations operating in Chile

In 2005, the Chilean Congress approved Law No. 20,026 (also known as the “Royalty Law”) establishing a royalty tax to be applied to mining activities developed in Chile. We cannot assure you that the way in which the Royalty Law is interpreted and applied will not change in the future. In addition, the Chilean Government may decide to levy additional taxes on mining companies or other corporations in Chile. Such changes could have a material adverse impact on our business, financial condition and results of operations.

Environmental laws and regulations could expose us to higher costs, liabilities, claims and failure to meet current and future production targets

Our operations in Chile are subject to a variety of national and local regulations relating to environmental protection. The main environmental laws in Chile are the Health Code and Law No. 19,300, which we refer to as the “Chilean Environmental Framework Law.” The Chilean Environmental Framework Law created the Comisión Nacional del Medio Ambiente (“National Environmental Commission” or “CONAMA”), which is the government agency in charge of supervising the due compliance with the Chilean Environmental Framework Law. Under this law, we are required to conduct environmental impact studies of any future projects or activities (or their significant modifications) that may affect the environment. CONAMA evaluates environmental impact studies submitted for its approval and oversees the implementation of projects. The Chilean Environmental Framework Law also enables private citizens, public agencies or local authorities to challenge projects that may affect the environment, either before these projects are executed or once they are already operating. Enforcement remedies available include fines and temporary or permanent closure of facilities.

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Chilean environmental regulations have become increasingly stringent in recent years, both with respect to the approval of new projects and in connection with the implementation and development of projects already approved. This trend is likely to continue. Furthermore, recently implemented environmental regulations have created uncertainty because rules and enforcement procedures for these regulations have not been fully developed. Given public interest in environmental enforcement matters, these regulations or their application may also be subject to political considerations that are beyond our control.

We continuously monitor the impact of our operations on the environment and have, from time to time, made modifications to our facilities to minimize any adverse impact. Except for particulate matter levels exceeding permissible levels in María Elena facilities (see Item 4.B. Business Overview—Safety, Health and Environmental Regulations), we are currently in compliance in all material respects with applicable environmental regulations in Chile of which we are aware. Future developments in the creation or implementation of environmental requirements, or in their interpretation, could result in substantially increased capital, operation or compliance costs or otherwise adversely affect our business, financial condition and results of operations.

In connection with our current investments at the Salar de Atacama we have obtained approval for an environmental impact assessment study that allows us to increase brine and water extraction, subject to a rigorous environmental monitoring system. The success of these investments is dependent on the behavior of the ecosystem variables being monitored over time. If the behavior of these variables in future years does not meet environmental requirements, our operation may be subject to important restrictions by the authorities on the maximum allowable amounts of brine and water extraction.

In connection with our future investments in nitrate and iodine operations, we have submitted and expect to submit several environmental impact assessment studies. The success of these investments is dependent on the approval of such submissions by the pertinent governmental authorities.

Furthermore, the future development of the Company depends on our ability to sustain future production levels, which require additional investments and the submission of the corresponding environmental impact assessment studies. If we fail to obtain approval, our ability to maintain production at specified levels will be seriously impaired, thus having a material adverse effect on our business, financial condition or results of operations.

Our worldwide operations are also subject to environmental regulations. Since laws and regulations in the different jurisdictions in which we operate may change, we cannot guarantee that future laws, or changes to existing laws, will not materially impact our business, financial condition or results of operations.

Our financial statements are reported, and our dividends are declared, based on Chilean GAAP, which generally differs from U.S. GAAP

There are important differences between Chilean GAAP and U.S. GAAP. As a result, Chilean financial statements and reported earnings generally differ from those that are reported based on U.S. GAAP. In particular, our earnings and the amount of dividends that we declare under Chilean GAAP may be subject to a higher degree of fluctuation as compared to U.S. GAAP, due to accounting pronouncements or other modifications required under Chilean GAAP. Note 29 to the consolidated Financial Statements includes a description of differences and a reconciliation of the net income and shareholders’ equity amounts reported under Chilean GAAP to U.S. GAAP.

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Risks related to our financial activities

Interest rate fluctuations may have a material impact on our financial results

We maintain short and long-term debt priced at LIBOR, plus a spread. As we do not have derivative instruments to hedge the LIBOR, we are subject to fluctuations in this rate. As of December 31, 2007, we had approximately 36% of our financial debt priced at LIBOR, and therefore significant increases in the rate could impact our financial condition.

Risks related to our shares and to our ADSs

The price of our ADSs and the U.S. dollar value of any dividends will be affected by fluctuations in the U.S. dollar/Chilean peso exchange rate

Chilean trading in the shares underlying our ADSs is conducted in Chilean pesos. The depositary will receive cash distributions that we make with respect to the shares in pesos. The depositary will convert such pesos to U.S. dollars at the then prevailing exchange rate to make dividend and other distribution payments in respect of ADSs. If the value of the peso falls relative to the U.S. dollar, the value of the ADSs and any distributions to be received from the depositary will decrease.

Developments in other emerging markets could materially affect the value of our ADSs

The Chilean financial and securities markets are, to varying degrees, influenced by economic and market conditions in other emerging market countries or regions of the world. Although economic conditions are different in each country or region, investor reaction to developments in one country or region can have significant effects on the securities of issuers in other countries and regions, including Chile and Latin America. Events in other parts of the world may have an adverse effect on Chilean financial and securities markets and on the value of our ADSs.

The volatility and low liquidity of the Chilean securities markets could affect the ability of our shareholders to sell our ADSs

The Chilean securities markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. The volatility and low liquidity of the Chilean markets could increase the price volatility of our ADSs and may impair the ability of a holder to sell our ADSs into the Chilean market in the amount and at the price and time he wishes to do so.

Our share price may react negatively to future acquisitions and investments

As world leaders in our core businesses, part of our strategy is to constantly look for opportunities that will allow us to consolidate and strengthen our competitive position. Pursuant to this strategy, we may from time to time, evaluate and eventually carry out acquisitions relating to any of our businesses or to new businesses in which we believe we may have sustainable competitive advantages. Depending on our capital structure at the time of such acquisitions, we may need to raise significant debt and/or equity which will affect our financial condition and future cash flows. Any change in our financial condition could affect our results of operations, negatively impacting our share price.

You may be unable to enforce rights under U.S. Securities Laws

Because we are a Chilean company subject to Chilean law, the rights of our shareholders may differ from the rights of shareholders in companies incorporated in the United States, and you may not be able to enforce or may have difficulty enforcing rights currently in effect under U.S. Federal or State securities laws.

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Our Company is a "sociedad anónima abierta" (open stock corporation) incorporated under the laws of the Republic of Chile. Most of SQM's directors and officers reside outside the United States, principally in Chile. All or a substantial portion of the assets of these persons are located outside the United States. As a result, if any of our shareholders, including holders of our ADSs, were to bring a lawsuit against our officers or directors in the United States, it may be difficult for them to effect service of legal process within the United States upon these persons. Likewise, it may be difficult for them to enforce judgments obtained in United States courts based upon the civil liability provisions of the federal securities laws of the United States against them in United States courts.

In addition, there is no treaty between the United States and Chile providing for the reciprocal enforcement of foreign judgments. However, Chilean courts have enforced judgments rendered in the United States, provided that the Chilean court finds that the United States court respected basic principles of due process and public policy. Nevertheless, there is doubt as to whether an action could be brought successfully in Chile in the first instance on the basis of liability based solely upon the civil liability provisions of the United States federal securities laws.

As preemptive rights may be unavailable for our ADS holders, they have the risk of their holdings being diluted if we issue new stock

Chilean laws require companies to offer their shareholders preemptive rights whenever selling new shares of capital stock. Preemptive rights permit holders to maintain their existing ownership percentage in a company by subscribing for additional shares. If we increase our capital by issuing new shares, a holder may subscribe for up to the number of shares that would prevent dilution of the holder's ownership interest.

If we issue preemptive rights, United States holders of ADSs would not be able to exercise their rights unless a registration statement under the Securities Act were effective with respect to such rights and the shares issuable upon exercise of such rights or an exemption from registration were available. We cannot assure holders of ADSs that we will file a registration statement or that an exemption from registration will be available. We may, in our absolute discretion, decide not to prepare and file such a registration statement. If our holders were unable to exercise their preemptive rights because SQM did not file a registration statement, the depositary would attempt to sell their rights and distribute the net proceeds from the sale to them, after deducting the depositary's fees and expenses. If the depositary could not sell the rights, they would expire and holders of ADSs would not realize any value from them. In either case, ADS holders' equity interest in SQM would be diluted in proportion to the increase in SQM's capital stock.

If the Company were classified as a Passive Foreign Investment Company there could be adverse consequences for U.S. investors

We believe that we were not classified as a passive foreign investment company, or PFIC, for 2007. Characterization as a PFIC could result in adverse U.S. tax consequences to you if you are a U.S. investor in our shares or ADSs. For example, if we (or any of our subsidiaries) are a PFIC, our U.S. investors may become subject to increased tax liabilities under U.S. tax laws and regulations and will become subject to burdensome reporting requirements. The determination of whether or not we (or any of our subsidiaries or portfolio companies) are a PFIC is made on an annual basis and will depend on the composition of our (or their) income and assets from time to time. See Item 10. E Taxation – United States Tax Considerations – Passive Foreign Investment Company Considerations.

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ITEM 4. INFORMATION ON THE COMPANY

4.A. History and Development of the Company

Historical Background

Sociedad Química y Minera de Chile S.A. "SQM" is an open stock corporation (sociedad anónima abierta) organized under the laws of the Republic of Chile. The Company was constituted by public deed issued on June 17, 1968 by the Notary Public of Santiago, Mr. Sergio Rodríguez Garcés. Its existence was approved by Decree No. 1.164 of June 22, 1968 of the Ministry of Finance, and it was registered on June 29, 1968 in the Registry of Commerce of Santiago, on page 4.537 No. 1.992. SQM's headquarters are located at El Trovador 4285, Piso 6, Las Condes, Santiago, Chile. The Company's telephone number is +56 2 425-2000.

Commercial exploitation of the caliche ore deposits in northern Chile began in the 1830s, when sodium nitrate was extracted from the ore for use in the manufacturing of explosives and fertilizers. By the end of the nineteenth century, nitrate production had become the leading industry in Chile and the country was the world's leading supplier of nitrates. The accelerated commercial development of synthetic nitrates in the 1920s and the global economic depression in the 1930s caused a serious contraction of the Chilean nitrate business, which did not recover significantly until shortly before the Second World War. After the war, the widespread commercial production of synthetic nitrates resulted in a further contraction of the natural nitrate industry in Chile, which continued to operate at depressed levels into the 1960s.

SQM was formed in 1968 through a joint venture between Compañía Salitrera Anglo Lautaro S.A. (“Anglo Lautaro”) and Corporación de Fomento de la Producción (“Production Development Corporation” or “Corfo”), a Chilean government entity. Three years after our formation, in 1971, Anglo Lautaro sold all of its shares to Corfo and we were wholly owned by the Chilean Government until 1983. In 1983, Corfo began a process of privatization by selling our shares to the public and subsequently listing such shares on the Santiago Stock Exchange. By 1988, all of our shares were publicly owned. Our Series B ADRs have traded on the NYSE under the ticker symbol “SQM” since 1993.

Since its inception, in addition to producing nitrates, the Company has produced iodine, which is also found in the caliche ore deposits in northern Chile.

Between the years 1994 and 1999, we invested approximately US$300 million in the development of the Salar de Atacama project in northern Chile. The project involved the construction of a potassium chloride plant, a lithium carbonate plant, a potassium sulfate plant, and a boric acid plant.

To help finance the above projects, we accessed the international capital markets by issuing additional Series B ADRs on the New York Stock Exchange in 1995. In 1999 we issued additional Series A shares, which were also listed on the New York Stock Exchange as ADRs. Effective March 27, 2008, the Company voluntarily delisted its Series A ADR (“SQM-A”) from the New York Stock Exchange.

During the period from 2000 through 2004 we principally consolidated the investments carried out in the preceding five years. We focused on reducing costs and improving efficiencies throughout the organization.

Since 2005, we have strengthened our leadership in our main businesses by increasing our capital expenditure program and making appropriate acquisitions and divestitures. During this period we acquired Kefco in Dubai and the iodine business of DSM. We also sold our stake in the Italian subsidiary Impronta S.R.L. and the Mexican Subsidiary Fertilizantes Olmeca; these sales allowed SQM to concentrate its efforts on its core products. In 2007, we completed the construction of a new prilling and granulating plant. We also started construction of our lithium carbonate capacity expansion and began work on the engineering stage of a new potassium nitrate plant.

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Capital Expenditure Program

We are constantly reviewing different opportunities to improve our production methods, increase production capacity of existing products and develop new products and markets. Additionally, significant capital expenditures are required every year in order to sustain our production capacity. We are focused on developing new products in response to identified customer demand, as well as new products that can be derived as part of our existing production or other products that could fit our long-term development strategy. Our capital expenditures in the past five years were mainly related to the acquisition of new assets, construction of new facilities and renewal of plant and equipment.

SQM's capital expenditures in the 2005-2007 period were the following:

	2007		2006 (2)		2005 (3)
	(in millions of US$)
Capital Expenditures (1)		185.0		290.5		198.1

(1)

For purposes of this item, capital expenditures include investments aimed at sustaining, improving or increasing production levels, including acquisitions and investments in related companies. Amounts set forth in this table do not match the consolidated statements of cash flows, as the Company does not consolidate development stage companies.

(2)

Includes acquisition of DSM’s Iodine business for a total of US$72 million, plus all the cash, accounts receivable and final product inventories minus the total liabilities of the Chilean and Dutch companies considered in the transaction.

(3)

Includes acquisition of Kefco in Dubai (US$9.3 million)

We have developed a capital expenditure program calling for investments totaling approximately US$320 million for the year 2008 and a total of approximately US$680 million during 2009 and 2010. The main purpose of our capital expenditure program is to increase the production capacities of several of our products, including the completion of the lithium carbonate expansion (by approximately 30%), as well as expansions in natural nitrates (by approximately 25%), potassium-based products from the Salar de Atacama (by approximately 25%) and iodine (by approximately 25%).

During 2007, the Company had total capital expenditures of approximately US$185.0 million, primarily relating to:

the María Elena project including a new crushing facility;

completion of the new prilling and granulating facility located at Coya Sur;

expansion of lithium carbonate facility;

construction of new evaporation ponds at the Salar de Atacama;

upgrade of our railroad system to handle expanded capacity; and

various projects designed to maintain capacity, increase yields and lower costs.

The Company has budgeted for 2008 total capital expenditures of approximately US$320 million, primarily relating to:

completion of lithium carbonate facility expansion;

new potassium nitrate production facility at Coya Sur;

start-up of investments related to increase production capacity of potassium-based products at the Salar de Atacama;

upgrade of our railroad system to handle expanded capacity;

construction of a new mining camp at María Elena; and

various projects designed to maintain capacity, increase yields and reduce costs.

For 2009 and 2010, we estimate total capital expenditures of approximately US$680 million, primarily for (i) the completion of the potassium nitrate production facility at Coya Sur; (ii) the increase in the production capacity of potassium-based products; (iii) a portion of the investments necessary to increase iodine and nitrates production capacity; (iv) upgrade of our railroad system to handle expanded capacity; (v) various projects designed to maintain capacity, increase yields and lower costs.

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4.B. Business Overview

The Company

We believe we are the world’s largest integrated producer of potassium nitrate, iodine and lithium carbonate. We also produce other specialty plant nutrients (such as potassium sulfate), potassium chloride, iodine and lithium and their derivatives, and certain industrial chemicals, including industrial nitrates, and we import and commercialize other commodity fertilizers in Chile. Our products are sold in over 100 countries through our worldwide distribution network and we generate approximately 81% of our revenues from countries outside Chile. Our products are mainly derived from mineral deposits found in northern Chile, specifically in the Tarapacá and Antofagasta Regions, where we mine and process caliche ore and brine deposits. The caliche ore in northern Chile contains the largest known nitrate and iodine deposits in the world and is the world’s only commercially exploited source of natural nitrates. The brine deposits of the Salar de Atacama, a salt-encrusted depression within the Atacama Desert in northern Chile, contain high concentrations of lithium and potassium as well as significant concentrations of sulfate and boron.

From our caliche ore deposits, we produce a wide range of nitrate-based products used for specialty plant nutrition and industrial applications, as well as iodine and iodine derivatives. At the Salar de Atacama, we extract brines rich in potassium, lithium, sulfate and boron, in order to produce potassium chloride, potassium sulfate, lithium solutions, boric acid and bischofite (magnesium chloride). We produce lithium carbonate and lithium hydroxide at a plant near the city of Antofagasta, Chile, from the solutions brought from the Salar de Atacama. We market all of these products through an established worldwide distribution network.

Our products are divided into five main categories: specialty plant nutrients, iodine and its derivatives, lithium and its derivatives; industrial chemicals; and potassium chloride and other commodity fertilizers. Specialty plant nutrients are fertilizers that enable farmers to improve yields and quality of certain crops. Iodine, lithium and their derivatives are used in human nutrition, pharmaceuticals and other industrial applications. Specifically, iodine and its derivatives are mainly used in the x-ray contrast media and biocides industries and a growing application is in the production of polarizing film, which is an important component in liquid crystal display (“LCD”) screens. Lithium and its derivatives are mainly used in batteries, greases and frits for production of ceramics. Industrial chemicals have a wide range of applications in certain chemical processes such as the manufacturing of glass, explosives and ceramics, and more recently, industrial nitrates are being used in solar energy plants as a means for energy storage. Potassium chloride is a commodity fertilizer that is produced and sold by the Company, primarily in the Chilean market. In addition, we complement our portfolio of plant nutrients in Chile by importing other commodity fertilizers.

For the year ended December 31, 2007, we had revenues of US$1,187.5 million, operating income of US$259.5 million and net income of US$180.0 million.

Specialty Plant Nutrition: We produce five principal types of specialty plant nutrients: potassium nitrate, sodium nitrate, sodium potassium nitrate, potassium sulfate and specialty blends. All of these specialty plant nutrients are used in either solid or liquid form mainly on high value crops such as fruits, vegetables, industrial crops, cereals and cotton, and they are widely used in crops that employ modern agricultural techniques such as hydroponics, greenhousing, fertigation (where fertilizer is dissolved in water prior to irrigation) and foliar application. According to the type of use or application the products are marketed under the brands: Ultrasol™ (fertigation), Qrop™ (field application), Speedfol™ (foliar application), Allganic™ (organic farming) and Nutrilake™ (aquaculture). Specialty plant nutrition has certain advantages over commodity fertilizers, such as rapid and effective absorption (without requiring nitrification), superior water solubility, alkaline pH (which reduces soil acidity) and low chlorine content. These advantages, plus customized specialty blends that meet specific needs along with technical service provided by us, allow us to create plant nutrition solutions that add value to crops through higher yields and better quality production. Because our products are natural or derived from natural nitrate compounds or natural potassium brines, they have certain advantages over synthetically produced fertilizers, including the presence of certain beneficial trace elements and their organic nature, which makes them more attractive to customers who prefer products of natural origin. As a result, our specialty plant nutrients enable our customers to achieve higher yields and better quality crops. Consequently, specialty plant nutrients are sold at a premium price.

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Iodine: We are the world's leading producer of iodine and iodine derivatives, which are used in a wide range of medical, pharmaceutical, agricultural and industrial applications, including x-ray contrast media, antiseptics, biocides and disinfectants, in the synthesis of pharmaceuticals, herbicides, electronics, pigments, dye components and heat stabilizers.

Lithium: We are the world's leading producer of lithium carbonate, which is used in a variety of applications, including batteries, frits for the ceramic and enamel industries, heat-resistant glass (ceramic glass), primary aluminum, lithium bromine for air conditioner equipment, continuous casting powder for steel extrusion, pharmaceuticals, and lithium derivatives. We are also a leading supplier of lithium hydroxide, which is used primarily as a raw material in the lubricating grease industry.

Industrial Chemicals: We produce four industrial chemicals: sodium nitrate, potassium nitrate, boric acid and potassium chloride. Sodium nitrate is used primarily in the production of glass, explosives, charcoal briquettes and metal treatment. Potassium nitrate is used in the manufacture of specialty glass, and it is also an important raw material for the production of frits for the ceramics and enamel industries. Also, a combination of potassium nitrate and sodium nitrate is used as a thermal storage medium in solar-based electricity generating plants. Boric acid is used in the manufacture of frits for the ceramics and enamel industries, liquid crystal displays (LCD), glass, and fiberglass. Potassium chloride is used as an additive in oil drilling as well as in the production of carragenine.

Potassium Chloride and Other Commodity Fertilizers: We produce and market potassium chloride, which in Chile is distributed through our subsidiary Soquimich Comercial S.A. We have close to 100% of the market share for this product in Chile. In addition, we import fertilizers that are distributed through Soquimich Comercial S.A. in Chile, offering complete fertilization services to our customers.

The following table sets forth the percentage breakdown of our revenues in the 2003-2007 period according to our product lines:

	2007			2006			2005			2004			2003
Specialty Plant Nutrition		49	%		48	%		54	%		54	%		52	%
Iodine and Derivatives		18	%		21	%		17	%		14	%		12	%
Lithium and Derivatives		15	%		12	%		9	%		8	%		7	%
Industrial Chemicals		7	%		7	%		8	%		9	%		10	%
Potassium Chloride and Other Commodity Fertilizers		11	%		12	%		12	%		15	%		19	%
Total		100	%		100	%		100	%		100	%		100	%

Business Strategy

Our general business strategy is to:

(1)

participate in businesses where we are or will be a cost leader supported by strong fundamentals;

(2)

differentiate ourselves from commodity producers by manufacturing, marketing and distributing specialty products that sell at high value;

(3)

continually increase the efficiency of our production processes and reduce costs;

(4)

maintain leadership in our core business areas – specialty plant nutrition, iodine and lithium – in terms of installed capacity, costs, production, pricing and development of new products; and

(5)

pursue vertical integration into value-added markets.

We have identified market demand in each of our major product lines, both within our existing customer base and in new markets, for existing products and for additional products that can be extracted from our natural resources. In order to take advantage of these opportunities, we have developed a specific strategy for each of our product lines, as set forth below:

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Specialty Plant Nutrition

Our strategy in our specialty plant nutrition business is to: (i) continue expanding our sales of natural nitrates by continuing to leverage the advantages of our specialty products over commodity-type fertilizers; (ii) increase our sales of higher margin specialty plant nutrients based on potassium and natural nitrates, particularly soluble potassium nitrate and NPK-soluble blends; (iii) pursue investment opportunities in complementary businesses to increase production, reduce costs, and add value to and improve the marketing of our products; (iv) develop new specialty nutrient blends produced in our mixing plants that are strategically located in or near our principal markets, in order to meet specific customer needs; (v) focus primarily on the markets for plant nutrients in soluble and foliar applications in order to establish a leadership position; (vi) further develop our global distribution and marketing system directly and through strategic alliances with other producers and global or local distributors; and (vii) reduce our production costs through improved processes and higher labor productivity so as to compete more effectively.

Iodine

Our strategy in our iodine business is to (i) maintain our leadership in the iodine market by encouraging demand growth and expanding our production capacity in line with such demand growth; (ii) develop new iodine derivatives and participate in iodine recycling projects; and (iii) reduce our production costs through improved processes and higher labor productivity in order to compete more effectively.

Lithium

Our strategy in our lithium business is to (i) maintain our leadership in the lithium industry as the largest producer and distributor of lithium carbonate and lithium hydroxide; (ii) selectively pursue downstream opportunities in the lithium derivatives business; and (iii) reduce our production costs through improved processes and higher labor productivity in order to compete more effectively.

Industrial Chemicals

Our strategy in our industrial chemical business is to (i) maintain our leadership position in sodium nitrate and potassium nitrate; (ii) develop new industrial markets for our current products; (iii) target sales of boric acid to industrial niche markets; and (iv) reduce our production costs through improved processes and higher labor productivity in order to compete more effectively.

New Business Ventures

From time to time we evaluate opportunities to expand our business in our current core businesses or within new businesses in which we believe we may have sustainable competitive advantages, both within and outside Chile, and we expect to continue to do so in the future. We may decide to acquire part or all of the equity of, or undertake joint ventures or other transactions with, other companies involved in our businesses or in other businesses.

Production Process

Our integrated production process can be classified according to our natural resources:

• Caliche ore deposits: contain nitrates and iodine.

• Salar brines: contain potassium, lithium, sulfate and boron.

Caliche Ore Deposits

We mine caliche ore from open pit deposits located in northern Chile. Caliche deposits are the largest known source of natural nitrates in the world. The geological origin of caliche ore deposits in northern Chile is uncertain, with a number of possible geological formation theories. The consensus is that a volcanic formation of deposits was followed by water runoff, leaching and depositing in existing sediments.

Caliche deposits are located in northern Chile, where we currently operate four mines: Pedro de Valdivia, María Elena, Pampa Blanca and Nueva Victoria.

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Caliche ore is found under a layer of barren overburden in seams with variable thickness from twenty centimeters to five meters, and with the overburden varying in thickness from half a meter to one and a half meters.

Before proper mining begins, a full exploration stage is carried out, including full geological reconnaissance and drilling of dust recovery drill holes to determine the features of each deposit and its quality. Drill-hole samples properly identified are tested at our chemical laboratories. With the exploration information on a closed grid pattern of drill holes, the ore evaluation stage provides information for mine planning purpose. Mine planning is done on a long-term basis (10 years), medium-term basis (3 years) and short-term basis (1 year). A mine production plan is a dynamic tool that details daily, weekly and monthly production plans. After drill holes are made, information is updated to offer the most accurate ore supply schedule to the processing plants.

Generally, bulldozers first rip and remove the overburden in the mining area. This process is followed by production drilling and blasting to break the caliche seams. Front-end loaders load the ore on off-road trucks. In the Pedro de Valdivia mine, trucks deliver the ore to stockpiles next to rail loading stations. The stockpiled ore is later loaded on to railcars that take the mineral to the processing facilities. In the María Elena mine, trucks haul the ore and dump it directly at a primary crushing installation, after which a 14-kilometer-long overland conveyor belt system delivers the ore to the processing facilities.

At the Pedro de Valdivia and María Elena facilities, the ore is crushed and leached to produce concentrated solutions carrying the nitrate, iodine and sodium sulfate. The crushing of the ore produces a coarse fraction that is leached in a vat system and a fine fraction that is leached by agitation. These are followed by liquid-solid separation, where solids precipitate as sediment and liquids containing nitrate and iodine are sent to be processed.

In Pampa Blanca and Nueva Victoria the run of mine ore is loaded in heaps and leached to produce concentrated solutions.

Caliche Ore-Derived Products

Caliche ore-derived products are: sodium nitrate, potassium nitrate, sodium potassium nitrate, iodine and iodine derivatives.

Sodium Nitrate

Sodium nitrate for both agricultural and industrial applications is produced at the María Elena and Pedro de Valdivia facilities using the Guggenheim method, which was originally patented in 1921. This closed circuit method involves adding a heated leaching solution to the crushed caliche in the vats to selectively dissolve the contents. The concentrated solution is then cooled, causing the sodium nitrate to crystallize. Part of the unloaded solution is then recycled to the leaching vats. The other part of the solution is stripped of its iodine content at the treatment plants. The crystallized sodium nitrate is separated from the remaining solution by centrifuging. The residue resulting from the crushing of the caliche ore is leached at ambient temperature with water, producing a weak solution that is pumped to solar evaporation ponds at our Coya Sur facilities, near María Elena, for concentration. While the process of extracting sodium nitrate from caliche ore is well established, variations in chemical content of the ore, temperature of the leaching solutions and other operational features require a high degree of know-how to manage the process effectively and efficiently.

The remaining materials from the sodium nitrate crystallization process are vat leach tailings and a weak solution. The ore tailings are unloaded from the leaching vats and deposited at sites near the production facilities. The weak solution is re-cycled for further leaching and for the extraction of iodine.

Our current crystallized sodium nitrate production capacity at Pedro de Valdivia and María Elena is approximately 770,000 metric tons per year. Crystallized sodium nitrate is processed further at Coya Sur and María Elena to produce prilled sodium nitrate, which is transported to our port facilities in Tocopilla for shipping to customers and distributors worldwide. A significant part of the sodium nitrate produced at María Elena and Pedro de Valdivia is used in the production of potassium nitrate at Coya Sur, sodium potassium nitrate at María Elena and a highly refined industrial grade sodium nitrate at Coya Sur.

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Potassium Nitrate

Potassium nitrate is produced at our Coya Sur facility using production methods we have developed. The solutions from the leaching of the fine fraction of the ore, once the iodine is extracted, are pumped to the Coya Sur facilities. These solutions loaded with nitrate are concentrated in solar evaporation ponds. Once an adequate level of concentration is reached, the solution is combined with potassium chloride to produce potassium nitrate and discard sodium chloride. The resulting solution, which is rich in potassium nitrate, is crystallized using a cooling and centrifuging process. The crystallized potassium nitrate is either processed further to produce prilled potassium nitrate or used for the production of sodium potassium nitrate. The weak solution of the process is re-used for further production of potassium nitrate. A portion of the potassium nitrate is used in the production of a high purity technical grade potassium nitrate.

Concentrated nitrate salts are produced at Pampa Blanca by leaching caliche ore in heaps in order to extract solutions that are rich in iodine and nitrate. These solutions are sent to plants where iodine is extracted and subsequently the solutions are sent to solar evaporation ponds where the solutions are evaporated and rich nitrate salt is produced. These concentrated nitrate salts are sent to Coya Sur or another of our salt processing facilities where they are leached and the resulting rich nitrate solution is used in the production of potassium nitrate.

Our current potassium nitrate production capacity at Coya Sur is approximately 650,000 metric tons per year, including 260,000 metric tons per year of technical grade potassium nitrate. We expect to increase that capacity by approximately 300,000 metric tons per year by early 2010. The effective production of the new facility will depend on the availability of nitrate salts to feed the facility.

Crystallized or prilled potassium nitrate produced at Coya Sur and María Elena is transported to Tocopilla for shipping to customers and distributors worldwide.

Sodium Potassium Nitrate

Sodium potassium nitrate is a mixture of approximately two parts sodium nitrate per one part potassium nitrate. We produce sodium potassium nitrate at our María Elena facilities using standard, non-patented production methods we have developed. Crystallized sodium nitrate is mixed with the crystallized potassium nitrate to make sodium potassium nitrate, which is then prilled. The prilled sodium potassium nitrate is transported to Tocopilla for bulk shipment to customers.

The production process for sodium potassium nitrate is basically the same as that for sodium nitrate and potassium nitrate.

Our aggregate current production capacity for nitrate salts is 1,100,000 metric tons per year. With certain production restraints and following market conditions we may supply sodium nitrate, potassium nitrate or sodium potassium nitrate either in prilled or crystallized form.

Iodine and Iodine Derivatives

We produce iodine at our Pedro de Valdivia and Nueva Victoria facilities, extracting it from the solutions resulting from the leaching of caliche ore at the Pedro de Valdivia, María Elena, Nueva Victoria and Pampa Blanca facilities. As in the case of nitrates, the process of extracting iodine from the caliche ore is well established, but variations in the iodine and other chemical contents of the treated ore and other operational parameters require a high level of know-how to manage the process effectively and efficiently.

The solutions from the leaching of caliche carry iodine in iodate form. Part of the iodate solution is reduced to iodide using sulfur dioxide, which is produced by burning sulfur. The resulting iodide is combined with the rest of the untreated iodate solution to release elemental iodine. The solid iodine is then refined through a smelting process and prilled. We have obtained patents in Chile and in the United States for our iodine prilling process.

Prilled iodine is tested for quality control purposes, then packed in 20-50 kilogram drums or 350-700 kilogram maxibags and transported by truck to Antofagasta or Iquique for export. Our iodine and iodine derivative production facilities have qualified under the ISO-9002 program, providing third-party certification – by TÜV Rheinland – of the quality management system and international quality control standards that we have implemented.

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Our total iodine production in 2007 was approximately 8.1 thousand metric tons: approximately 2.3 thousand metric tons from Pedro de Valdivia, 1.1 thousand metric tons from María Elena, 1.0 thousand metric tons from Pampa Blanca, and 3.7 thousand metric tons from Nueva Victoria. The Nueva Victoria facility is also used for tolling iodine delivered from Pampa Blanca and María Elena. We have the flexibility to adjust our production according to market conditions. Our current iodine production capacity is approximately 11,000 metric tons per year, considering one facility in Nueva Victoria that is not currently in operation.

We use a portion of the produced iodine to manufacture inorganic iodine derivatives, which are intermediate products used for manufacturing agricultural and nutritional applications, at facilities located near Santiago, Chile, and also produce inorganic and organic iodine derivative products together with Ajay North America L.L.C., "Ajay," a U.S.-based Company that purchases iodine from us. We have in the past primarily marketed our iodine derivative products in South America, Africa and Asia, while Ajay and its affiliates have primarily sold their iodine derivative products in North America and Europe.

Salar de Atacama Brine Deposits

The Salar de Atacama, located approximately 250 kilometers east of Antofagasta, is a salt-encrusted depression within the Atacama Desert, within which lies an underground deposit of brines contained in porous sodium chloride rock fed by an underground inflow of water from the Andes Mountains. The brines are estimated to cover a surface of approximately 2,900 square kilometers and contain commercially exploitable deposits of potassium, lithium, sulfates and boron. Concentrations vary at different locations throughout the salar. Our production rights to the Salar de Atacama are pursuant to a contract with the Chilean government, expiring in 2030.

Brines are pumped from depths between 1.5 and 60 meters below surface, through a field of wells that are located in areas of the salar that contain relatively high concentrations of potassium, lithium, sulfate, boron and other minerals.

We process these brines to produce potassium chloride, lithium carbonate, lithium hydroxide, potassium sulfate, boric acid and bischofite (magnesium chloride).

Potassium Chloride

We use potassium chloride in the production of potassium nitrate. Production of our own supplies of potassium chloride provides us with substantial raw material cost savings.

In order to produce potassium chloride, brines from the Salar de Atacama are pumped to solar evaporation ponds. Evaporation of the brines results in a complex crystallized mixture of salts of potassium chloride and sodium chloride. One portion of this mixture is harvested and stored, and the other portion is reprocessed and the remaining salts are transferred by truck to a processing facility where the potassium chloride is separated by a grinding, flotation, and filtering process. Potassium chloride is sent approximately 300 kilometers to our Coya Sur facilities via a dedicated dual transport system (truck/rail), where it is used in the production of potassium nitrate. We sell potassium chloride produced at the Salar de Atacama and in excess of our needs to third parties. Our production facilities currently have a production capacity up to 650,000 metric tons per year. Actual capacity will depend on volumes and quality of the mining resources pumped from the salar. During 2007 actual production was higher than in 2006 and we expect that 2008 production will be higher than in 2007.

The by-products of the potassium chloride production process are (i) brines remaining after removal of the potassium chloride, which are used to produce lithium carbonate as described below, and the amount in excess of our needs is reinjected into the Salar de Atacama; (ii) sodium chloride, which is similar to the surface material of the Salar de Atacama and is deposited at sites near the production facility; and (iii) other salts containing magnesium chloride.

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Lithium Carbonate

A portion of the brines remaining after the production of potassium chloride is sent to additional solar concentration ponds adjacent to the potassium chloride production facility. Following additional evaporation, the remaining concentrated solution of lithium chloride is transported by truck to a production facility located near Antofagasta, approximately 250 kilometers from the Salar de Atacama. At the production facility, the solution is purified and treated with sodium carbonate to produce lithium carbonate, which is dried and then, if necessary, compacted and finally packaged for shipment. The production capacity of our lithium carbonate facility is approximately 30,000 metric tons per year. A project is currently under way to increase our production capacity to 40,000 metric tons per year, and this project should be completed by the second half of 2008. Future production will depend on the actual volumes and quality of the lithium solutions sent by the Salar de Atacama operations, as well as prevailing market conditions.

Lithium Hydroxide

Lithium carbonate is sold to customers, and we also use it as a raw material for our lithium hydroxide monohydrate facility, which started operating at the end of 2005. This facility has a capacity of 6,000 metric tons per year and is located in the Salar del Carmen, adjacent to our lithium carbonate operations. In the production process, lithium carbonate is reacted with a lime solution to produce lithium hydroxide brine and calcium carbonate salt, which is filtered and piled in reservoirs. The brine is evaporated in a multiple effect evaporator and crystallized to produce the lithium hydroxide monohydrate, which is dried and packaged for shipment to customers.

Potassium Sulfate and Boric Acid

Approximately 12 kilometers northeast of the potassium chloride facilities at the Salar de Atacama, we use the brines from the Salar de Atacama to produce potassium sulfate and boric acid. The plant is located in an area of the salar where higher sulfate and potassium concentrations are found in the brines. Brines are pumped to preconcentration solar evaporation ponds where waste sodium chloride salts are removed by precipitation. After further evaporation, the sulfate and potassium salts are harvested and sent for treatment at the potassium sulfate plant. Potassium sulfate is produced using flotation, concentration and reaction processes, after which it is crystallized, dried and packaged for shipment. Production capacity for potassium sulfate is approximately 200,000 metric tons per year. Boric acid is produced in crystallized form by acidulation of the final concentrated brines, and then it is dried and packaged for shipment at the same facility. Production capacity for boric acid is approximately 10,000 metric tons per year.

The principal by-products of the production of potassium sulfate are: (i) non-commercial sodium chloride, which is deposited at sites near the production facility, and (ii) remaining solutions, which are reinjected into the Salar de Atacama or returned to the evaporation ponds. The principal by-products of the boric acid production process are remaining solutions that are treated with sodium carbonate to neutralize acidity and then are reinjected into the Salar de Atacama.

Specialty Plant Nutrition

We believe we are the world's largest producers of potassium nitrate. We also produce the following specialty plant nutrients: sodium nitrate, potassium nitrate, sodium potassium nitrate, potassium sulfate, urea phosphate and specialty blends (containing various combinations of nitrogen, phosphate and potassium and generally known as "NPK blends"). These specialty plant nutrients have specific characteristics that increase productivity and enhance quality when used on certain crops and soils. Additionally, these plant nutrients are well suited for high-yield agricultural techniques such as hydroponics, fertigation, greenhousing and foliar applications. High-value crop farmers are prompted to invest in specialty plant nutrients due to their technical advantages over commodity fertilizers (such as urea and potassium chloride). These advantages translate into products and crops with higher yields and added quality. Our specialty plant nutrients have significant advantages for certain applications over commodity fertilizers based on nitrogen and potassium, such as the aforementioned urea and potassium chloride.

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In particular, our specialty plant nutrients:

are fully water soluble, allowing their use in hydroponics, fertigation, foliar applications and other advanced agricultural techniques;

are absorbed more rapidly by plants because they do not require nitrification, unlike ammonia-based fertilizers;

are free of chlorine content, reducing the risk of scorching roots and other problems caused by chlorine;

do not release hydrogen after application, thereby avoiding increased soil acidity;

possess trace elements, which promote disease resistance in plants and have other beneficial effects;

are more attractive to customers who prefer products of natural origin; and

are more efficient than commodity fertilizers because they deliver more nutrients per unit of product applied.

In 2007, our revenues from specialty plant nutrients were approximately US$580.8 million, representing approximately 49% of our total revenues for that year. The main reasons for these results were the increase in sales volumes and the increase in prices during 2007 compared with the previous year.

Specialty Plant Nutrition: Market

The target market for our specialty plant nutrients is high-value crops such as fruits, vegetables, and crops grown using modern agricultural techniques. Since 1990, the international market for specialty plant nutrients has grown at a faster rate than the international market for commodity-type fertilizers. This is mostly due to: (i) the application of new agricultural technologies such as fertigation and hydroponics and increasing use of greenhousing; (ii) the increase in the cost of land, which has forced farmers to improve their yields; (iii) the scarcity of water; (iv) the increase of consumption of fresh fruits and vegetables per capita, and (v) the increasing demand for higher quality crops.

Worldwide scarcity of water and weather changes force farmers to develop new agricultural techniques such as fertigation that minimize water requirements. These applications require fully water-soluble plant nutrients.

Increasing land costs near urban centers also force farmers to maximize their yield per surface area. Specialty plant nutrients, when applied to certain crops, help to increase productivity for various reasons. In particular, since our nitrate-based specialty plant nutrients provide nitrogen in nitric form, crops absorb them faster than they absorb urea- or ammonium-based fertilizers, which provide nitrogen in ammonium form. This is because crops absorb nitrogen in nitric form; thus nitrogen in ammonium form has to be converted into nitric form in the soil first. This process does not occur immediately (it takes time and requires special soil conditions), and it releases hydrogen into the soil, increasing soil acidity, which in most cases is harmful to the soil and the crop. Nitric nitrogen application facilitates a more efficient application of nutrients to the plant, thereby increasing the crop's yield and improving its quality.

Our potassium-based specialty plant nutrients are chlorine free, unlike potassium chloride, which is the most commonly used potassium-based commodity fertilizer. In certain crops, chlorine has negative effects that translate into lower yield and quality.

The most important agricultural applications of sodium nitrate, potassium nitrate, potassium sulfate and sodium potassium nitrate plant nutrients are: industrial crops, vegetables, fruits, sugar beet, cotton and other high-value crops.

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Specialty Plant Nutrition: Our Products

Potassium nitrate, sodium potassium nitrate and specialty blends are higher margin products derived from, or consisting of, sodium nitrate, and they are all produced in crystallized or prilled form. Specialty blends are produced using our own specialty plant nutrients and other components at blending plants operated by the Company or its affiliates and related companies in Chile, the United States, Mexico, United Arab Emirates, Belgium, the Netherlands, South Africa, Turkey and Egypt.

The following table shows our sales volumes of and revenues from specialty plant nutrients during the 2003-2007 period.

	2007		2006		2005		2004		2003
Sales Volume (in metric tons)
Sodium nitrate		45,900		43,300		63,300		58,900		62,500
Potassium nitrate and sodium potassium nitrate		695,300		615,000		690,200		707,600		696,500
Potassium sulfate		172,000		172,400		178,600		157,700		143,200
Blended and other specialty plant nutrients(1)		378,600		393,800		350,700		374,400		377,100
Revenues (in US$ millions)		580.8		503.1		487.8		426.8		362.8

(1)	Includes blended and other specialty plant nutrients. It also includes Yara's products sold pursuant to our commercial agreement.

Specialty Plant Nutrition: Marketing and Customers

In 2007, we sold our specialty plant nutrients in close to 90 countries. During the same year, approximately 90% of the Company's specialty plant nutrients sales were exported: approximately 28% were sold to customers in Central and South America, 23% to customers in North America, 19% to customers in Europe and 20% to customers in other regions. Without considering any sales to related parties, no single customer represented more than 5.2% of SQM's specialty plant nutrient sales during 2007, and our 10 largest customers accounted in the aggregate for approximately 24.8% of sales during that period.

Sales Breakdown	2007			2006			2005			2004			2003
Central and South America		28	%		29	%		29	%		29	%		26	%
North America		23	%		22	%		22	%		22	%		18	%
Europe		19	%		19	%		20	%		19	%		20	%
Others		20	%		21	%		20	%		20	%		27	%
Chile		10	%		9	%		9	%		10	%		9	%

The amounts set forth in the table above reflect sales of SQM’s specialty plant nutrition products and do not include sales by SQM of third-party specialty plant nutrition products. We sell our specialty plant nutrition products outside Chile mainly through our own worldwide network of representative offices and through our distribution affiliates.

In November 2001, we signed an agreement with Yara International ASA (“Yara”, formerly Norsk Hydro ASA). This agreement allows us to make use of Yara’s distribution network in countries where its presence and commercial infrastructure are larger than ours. Similarly, in those markets where our presence is larger, both our specialty plant nutrients and Yara International ASA's are marketed through our offices. Both parties, however, maintain an active control over the marketing of their own products.

We also signed a joint venture agreement with Yara and Israel Chemicals Limited at the end of 2001. Under this joint venture agreement, SQM, Yara, and Israel Chemicals Limited are developing the liquid and soluble plant nutrient blends business through their participation in a Belgian company called NU3 N.V. (“NU3”), to which SQM and Israel Chemicals Limited contributed their blending facility in Belgium, and Yara International ASA contributed its blending facility in the Netherlands. With this joint venture agreement, important synergies have been achieved, particularly in production costs, administration and the marketing of soluble blends, strengthening the development of new products and improving customer services.

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In 2005, SQM and Yara International ASA formed a joint venture, called MISR Specialty Fertilizers (MSF), for the production of tailor-made liquid NPK (nitrogen-phosphate-potassium) fertilizers. The plant is located in Egypt and has a production capacity of 80,000 metric tons per year.

In 2005 SQM also acquired 50% of the shares of Kemira Emirates Fertilizers Company (Kefco), which has a urea phosphate plant located in Dubai. Urea phosphate is a specialty plant nutrient that is used primarily in drip irrigation systems. The plant has an annual production capacity of 30,000 tons.

In May 2008 we signed a joint venture agreement with Migao Corporation (“Migao”) for the production and distribution of specialty plant nutrients in China. Through the joint venture, we will construct a potassium nitrate plant with a production capacity of 40,000 metric tons per year. We expect this plant to be ready during the first quarter of 2009. In addition, the joint venture will distribute the potassium nitrate produced by Migao in China and imports of SQM’s specialty plant nutrients to China, and it will also handle any exports of potassium nitrate produced by the joint venture or by Migao. This joint venture will enable us to increase our presence in China, which represents one of the most important and fastest-growing markets for the fertilizer industry.

We maintain stocks of our specialty plant nutrients in the main markets of the Americas, Asia, Europe, the Middle East and Africa, in order to facilitate prompt deliveries to customers. In addition, we sell specialty plant nutrients directly to some of our large customers. Sales are made pursuant to spot purchase orders and short-term contracts.

In connection with our marketing efforts, we provide technical and agronomical assistance and support to our customers. By working closely with our customers, we are able to identify new, higher-value-added products and markets. Our specialty plant nutrition products are used on a wide variety of crops, particularly value-added crops, where the use of our products enables our customers to increase yield and command a premium price.

Our customers are located in the northern and southern hemispheres. Consequently, there are no material seasonal or cyclical factors that can materially affect the sales of our specialty plant nutrient products.

Specialty Plant Nutrition: Fertilizer Sales in Chile

We market specialty plants nutrients in Chile through Soquimich Comercial S.A. which sells these products either alone or in blends with other imported products, mainly triple super phosphate (TSP) and diammonium phosphate (DAP), among others. Soquimich Comercial sells imported fertilizers to farmers in Chile mainly for application in the production of sugar beets, cereals, industrial crops, potatoes, grapes and other fruits. Most of the fertilizers that Soquimich Comercial imports are purchased on a spot basis from different countries in the world.

We believe that all contracts and agreements between Soquimich Comercial and third party suppliers, with respect to imported fertilizers, contain standard and customary commercial terms and conditions. During the preceding ten years, Soquimich Comercial has experienced no material difficulties in obtaining adequate supplies of such fertilizers at satisfactory prices, and we expect continuing to do so in the future.

We estimate that Soquimich Comercial's sales of fertilizers represented approximately 36% of total fertilizer sales in Chile during 2007. No single customer represented more than 5% of Soquimich Comercial’s total fertilizer sales revenues, and its 10 largest customers in total represented less than 9% of revenues.

Revenues generated by Soquimich Comercial represented 17.2% of the Company's 2007 consolidated revenues. Soquimich Comercial's consolidated revenues were approximately US$203 million, US$142 million, and US$144 million in 2007, 2006 and 2005, respectively.

Specialty Plant Nutrition: Competition

We believe we are the world's largest producer of sodium and potassium nitrate for agricultural use. Our sodium nitrate products compete indirectly with specialty and commodity-type substitutes, which may be used by some customers instead of sodium nitrate depending on the type of soil and crop to which the product will be applied. Such substitute products include calcium nitrate, ammonium nitrate and calcium ammonium nitrate.

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In the potassium nitrate market our largest competitor is Haifa Chemicals Ltd., in Israel, which is a subsidiary of Trans Resources International Inc. We estimate that sales of potassium nitrate by Haifa Chemicals accounted for approximately 35% of total world sales during the year 2007 (excluding the Chinese market, where most of the production is consumed domestically).

S.C.M. Virginia, a Chilean iodine producer, ultimately controlled by Inverraz S.A., also produces potassium nitrate from caliche ore and potassium chloride.

ACF, another Chilean producer, mainly oriented to iodine production, began production of potassium nitrate from caliche ore and potassium chloride during 2005. Kemapco, a Jordanian producer owned by Arab Potash, produces potassium nitrate in a plant located close to the Port of Aqaba, Jordan. In addition, there are several potassium nitrate producers in China, the largest of which are Wentong and Migao; most of the Chinese production is consumed by the domestic market.

In June 2008, Atacama Minerals Corp., a Canadian company with iodine operations in Chile, announced plans to build a plant in order to produce sodium nitrate, potassium nitrate, and sodium potassium nitrate. According to statements made by the company, the plant should have production capacity of 70,000 tons per year and be operational by the second half of 2010.

The principal means of competition in the sale of potassium nitrate are product quality, customer service, location, logistics, agronomic expertise, and price.

In the potassium sulfate market, we have several competitors of which the most important are K+S KALI GmbH (Germany), Tessenderlo Chemie (Belgium) and Great Salt Lake Minerals Corp. (United States). We believe that those three producers account for a majority of the world production of potassium sulfate.

Through a partially owned facility, NU3, we also produce soluble and liquid fertilizers using our potassium nitrate as a raw material. Through this activity, we have acquired production technology and marketing know-how, which we believe will be useful for selling our products to greenhouse growers and for use in certain high-technology processes such as fertigation and hydroponics.

We believe we are the largest Chilean producer of bulk specialty blends. In Chile, our products mainly compete with imported fertilizer blends that use calcium ammonium nitrate or potassium magnesium sulfate. Our specialty plant nutrients also compete indirectly with lower-priced synthetic commodity-type fertilizers such as ammonia and urea, which are produced by many producers in a highly price-competitive market. Our products compete on the basis of advantages that make them more suitable for certain applications as described above.

Iodine

We believe we are the world's largest producer of iodine. In 2007, our revenues from iodine and iodine derivatives amounted to approximately US$215.1 million, representing approximately 18 % of our total revenues in that year. We estimate that our sales accounted for approximately 29% of world iodine sales by volume in 2007.

Iodine: Market

Iodine and iodine derivatives are used in a wide range of medical, agricultural and industrial applications as well as in human and animal nutrition products. Iodine and iodine derivatives are used as raw materials or catalysts in the formulation of products, such as x-ray contrast media, biocides, antiseptics and disinfectants, pharmaceutical intermediates, polarizing films for liquid crystal displays (LCD), chemicals, herbicides, organic compounds and pigments. Iodine is added in the form of potassium iodate or potassium iodide to edible salt to prevent iodine deficiency disorders.

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Iodine: Our Products

We produce iodine and, through a joint venture with Ajay, organic and inorganic iodine derivatives. SQM through Ajay or alone, is also actively participating in the iodine recycling business using iodinated side-streams from a variety of chemical processes in Europe, the United States and Asia.

Ajay-SQM Group (ASG) was formed in the mid 1990s, as a joint venture between SQM and Ajay Chemicals, a U.S.-based company. ASG currently has production plants in the United States, Chile and France and is the world's leading inorganic and organic iodine derivatives producer. In 2007, approximately 27% of SQM's iodine sales were made to ASG.

Consistent with our business strategy, we are constantly working on the development of new applications for our iodine-based products, pursuing a continuing expansion of our businesses and maintaining our market leadership.

We manufacture our iodine and iodine derivatives in accordance with international quality standards and have qualified our iodine facilities and production processes under the ISO-9001:2000 program, providing third party certification of the quality management system and international quality control standards that we have implemented.

The following table sets forth our total sales and revenues from iodine and iodine derivatives in the 2003-2007 period:

	2007		2006		2005		2004		2003
Sales Volume (thous. metric tons)
Iodine and iodine derivatives		9.1		9.8		8.1		7.7		6.6
Revenues (in US$ millions)		215.1		217.7		149.1		110.5		84.6

Iodine: Marketing and Customers

In 2007, we sold our iodine products to around 350 customers in more than 70 countries. During the same year, most of our iodine production was exported: approximately 31% was sold to customers in Europe, 38 % to customers in North America, 5% to customers in Central and South America and 26% to customers in Asia, Oceania and other regions. Not considering sales to related parties, no single customer accounted for more than 10 % of the Company's iodine sales in 2007, and our ten largest customers accounted in the aggregate for approximately 40% of sales.

Sales Breakdown	2007			2006			2005			2004			2003
Europe		31	%		34	%		30	%		27	%		34	%
North America		38	%		40	%		37	%		38	%		40	%
Central and South America		5	%		5	%		13	%		13	%		6	%
Others		26	%		21	%		20	%		22	%		20	%

We sell iodine through our own worldwide network of representative offices and through our sales, support and distribution affiliates. We maintain inventories of iodine at our facilities throughout the world to facilitate prompt delivery to customers. Iodine sales are made pursuant to spot purchase orders and short, medium and long-term contracts. Sales agreements generally specify annual minimum and maximum purchase commitments, and prices are adjusted on periodically, according to prevailing market prices.

Iodine: Competition

SQM and several producers in Chile, Japan and the United States are the world's main iodine producers.

Japanese producers extract iodine from underground brines, which are mainly obtained together with the extraction of natural gas. Several Japanese producers also have recycling facilities where they recover iodine and iodine derivatives from iodine waste streams. Iodine recycling, mainly related to LCD consumption, has increased over the past few years and currently represents approximately 13% of world iodine sales. It is estimated that around 70% of the world recycling was done by Japanese iodine producers.

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We estimate that eight Japanese iodine producers accounted for approximately 24% of world virgin iodine sales in the year 2007. We estimate that the largest Japanese producer, Ise Chemicals Ltd., accounted for approximately 8% of the world virgin iodine sales.

We estimate that iodine producers in the United States (one of which is owned by Ise Chemicals) accounted for approximately 5% of world iodine sales in the year 2007, while four Chilean companies, including SQM iodine business, accounted for approximately 55% of such sales (29% by SQM and 26% by the other Chilean producers).

The prices of our iodine and iodine derivative products are determined by world iodine prices, which are subject to market conditions. World iodine prices vary depending upon, among other things, the relationship between supply and demand at any given time. The supply of iodine varies principally depending upon the production of the few major iodine producers (including us) and their respective business strategies. As a result of a steady growing demand, iodine prices have been increasing since the end of 2003. While prices were around US$13 per kilogram in 2003, they reached an average of approximately US$24 per kilogram in 2007.

Demand for iodine varies depending upon overall levels of economic activity and the level of demand in the medical, pharmaceutical, industrial and other sectors that are the main users of iodine and iodine derivative products. Prices for iodine and iodine derivative products in the future are expected to be influenced by similar supply and demand factors and the business strategies of major producers, a few of whom either have or can acquire additional production capacity. SQM has total production capacity of approximately 11,000 tons, which exceeds our current production levels.

The main factors of competition in the sale of iodine and iodine derivative products are reliability, price, quality, customer services and the price and availability of substitutes. We believe we have competitive advantages compared to other producers due to the size of our mining reserves, the installed capacity and relatively lower production costs (as most part of our iodine is produced as part of a process for other products -mainly sodium nitrate and potassium nitrate for agricultural and industrial purposes). We believe our iodine is competitive with that produced by other manufacturers in certain advanced industrial processes. We also believe we have benefited competitively from the long-term relationships we have established with our larger customers. While there are substitutes for iodine available for certain applications, such antiseptics and disinfectants, there are no cost-effective substitutes currently available for the main nutritional, pharmaceutical, animal feed, and main chemical uses of iodine, which together account for most iodine sales.

Lithium

We believe we are the world's largest producer of lithium carbonate and one of the world’s largest producers of lithium hydroxide. In 2007, our revenues from lithium sales amounted to approximately US$179.8 million, representing approximately 15% of our total revenues. We estimate that our sales accounted for approximately 31% of world's lithium units used in production of lithium chemicals. Lithium is also available in the form of lithium minerals. However, there is virtually no overlap of the markets demanding lithium minerals and lithium chemicals.

Lithium: Market

Lithium carbonate is used in a variety of applications, including batteries, frits for the ceramic and enamel industries, heat resistant glass (ceramic glass), primary aluminum, air conditioning chemicals, continuous casting powder for steel extrusion, pharmaceuticals, and lithium derivatives. Lithium hydroxide is primarily used as a raw material in the lubricating grease industry, as well as in the dyes and battery industries. Butyllithium is used as a catalyst in the synthetic rubber and pharmaceutical industries.

Lithium: Our Products

We produce lithium carbonate at the Salar del Carmen facilities, near Antofagasta, Chile, from solutions with high concentrations of lithium coming from the potassium chloride production at the Salar de Atacama. The technologies we use, together with the high concentrations of lithium we obtain from the Salar de Atacama, allow us to be one of the lowest cost producers worldwide.

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SQM used to produce lithium hydroxide through tolling operations in the United States and Russia. During the second half of 2005, we began to produce it at our lithium hydroxide facility, at the Salar del Carmen next to our lithium carbonate facility in Antofagasta. The lithium hydroxide facility has a production capacity of 6,000 TM/per year and is one of the largest plants in the world.

SQM produces butyllithium in its own plant located in Pasadena, Texas. This product is sold in North America, Europe and Asia.

The following table sets forth our total sales and revenues from lithium carbonate and derivatives in the 2003-2007 period:

	2007		2006		2005		2004		2003
Sales Volume (thous. metric tons)
Lithium carbonate and derivatives		28.6		30.4		27.8		31.2		27.4
Revenues (in US$ millions)		179.8		128.9		81.4		62.6		49.7

Lithium: Marketing and Customers

In 2007, we sold our lithium products to approximately 290 customers in approximately 50 countries. Virtually all of our lithium products were sold overseas: approximately 34% to customers in Europe, 21% to customers in North America, 38% to customers in Asia and Oceania and 7% to customers in other regions. No single customer accounted for more than 12% of the Company's sales in 2007, and our ten largest customers accounted in the aggregate for approximately 43% of sales.

Sales Breakdown	2007		2006		2005		2004		2003
Europe	34	%	32	%	33	%	32	%	31	%
North America	21	%	24	%	25	%	26	%	29	%
Asia and Oceania	38	%	36	%	31	%	37	%	37	%
Others	7	%	8	%	11	%	5	%	3	%

Lithium: Competition

Our main competitors in the lithium carbonate and lithium hydroxide businesses are Chemetall GmbH (“Chemetall”, subsidiary of Rockwood Specialties Group Inc.) and FMC Corporation (“FMC”). In addition, a number of Chinese producers together accounted for approximately 26% of the world market in 2007. We estimate that they together sold approximately 42% of lithium in the lithium chemicals market (excluding lithium minerals) in 2007. Chemetall produces lithium carbonate in its operations located in Chile (Sociedad Chilena del Litio Limitada) and Nevada, USA. Its production of downstream lithium products is mostly performed in the United States, Germany and Taiwan. FMC has production facilities in Argentina (Minera del Altiplano), where they produce lithium chloride and lithium carbonate. Production of its downstream lithium products is mostly performed in the United States and the United Kingdom.

Additionally, lithium carbonate is being produced in China and we believe this production will increase in the near future.

We estimate that worldwide sales of lithium chemicals expressed as lithium carbonate equivalent (excluding lithium minerals) amounted to approximately 93,000 metric tons in 2007.

Industrial Chemicals

In addition to producing sodium nitrate for agricultural applications, we produce three grades of sodium nitrate for industrial applications: industrial, technical and refined grades. The three grades differ mainly in purity. Our industrial grades of potassium nitrate also differ from agricultural grade potassium nitrate in its degree of purity. We enjoy certain operational flexibility when producing industrial potassium nitrate because it is produced from the same process as its equivalent agricultural grade, needing only an additional step of purification. We may, with certain constraints, shift production from one grade to the other depending on market conditions. This flexibility allows us to maximize yields as well as to reduce commercial risk. In addition to producing industrial nitrates, we produce boric acid. Boric acid is a by-product of the production of potassium sulfate. In 2007, our revenues from industrial chemicals were approximately US$81.2 million, representing approximately 7% of our total revenues for that year.

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Industrial Chemicals: Market

Industrial sodium nitrate and potassium nitrate are used in a wide range of industrial applications, including the production of glass, ceramics, explosives, charcoal briquettes and various chemical processes and metal treatments. In addition, industrial nitrates are being used as a medium for heat storage in solar energy projects. Boric acid is mainly used in glass, ceramics, fiberglass, enamels and as a raw material in the fabrication of screens for LCDs.

We estimate that our sales of industrial sodium nitrate (excluding production in China and India, which is consumed internally) and potassium nitrate in 2007 accounted for 58%, and 31%, respectively, of worldwide sales in that period.

Industrial Chemicals: Our Products

We produce technical potassium nitrate and three grades of industrial sodium nitrate in crystallized and prilled form. We market our refined grade sodium nitrate under the brand name "Niterox." We produce boric acid in crystalline form.

The following table sets forth our sales volumes of industrial chemicals and total revenues in the 2003-2007 period:

	2007		2006		2005		2004		2003
Sales Volume (metric tons)
Industrial nitrates		175,200		162,000		176,300		192,800		193,200
Boric Acid		9,200		9,700		6,300		6,120		10,700
Revenues (in US$ millions)		81.2		71.3		70.5		68.8		66.7

Our aggregate current sodium nitrate production capacity is approximately 740,000 metric tons per year (agricultural and industrial grades). Within certain production constraints, we may use our production capacity to produce either agricultural or industrial sodium nitrate. We have a plant capacity to produce approximately 260,000 metric tons per year of technical potassium nitrate and 10,000 metric tons per year of boric acid.

Industrial Chemicals: Marketing and Customers

We sold our industrial nitrate products in more than 50 countries in 2007. Approximately 40% of our sales of industrial chemicals were made to customers in North America, 34% to customers in Europe, 17% to customers in Central and South America and 9% to customers in Asia, Oceania and other regions. No single customer accounted for more than 6% of the Company's sales of industrial chemicals in 2007, and our ten largest customers accounted in the aggregate for approximately 31% of such sales.

Sales Breakdown	2007		2006		2005		2004		2003
North America	40	%	41	%	42	%	38	%	39	%
Europe	34	%	29	%	28	%	23	%	25	%
Central and South America	17	%	17	%	17	%	24	%	12	%
Others	9	%	13	%	13	%	15	%	24	%

We sell our industrial chemical products mainly through our own worldwide network of representative offices and through our sales and distribution affiliates. We maintain inventories of our industrial sodium nitrate and technical potassium nitrate products at our facilities in Europe, North America, South Africa and South America to achieve prompt deliveries to customers. Industrial sodium nitrate and technical potassium nitrate sales are made pursuant to spot purchase orders. Our Research and Development department, together with our foreign affiliates, provide technical support to our customers and continuously work with them to develop new products or applications for our products.

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Industrial Chemicals: Competition

We believe we are the world's largest producer of industrial sodium nitrate. We estimate that our production satisfied 58% of world demand for industrial sodium nitrate in 2007 (excluding China and India internal demand, for which reliable estimates are not available). Our competitors are mainly in Europe and Asia. These producers together represent 42% of total production and produce sodium nitrate as a by-product of other production processes. In refined grade sodium nitrate, Badische Anilin und Soda Fabrik AG (BASF), a German corporation, and several producers in Japan (the largest of which is Mitsubishi & Co. Ltd.), are highly competitive in the European and Asian markets. Our industrial sodium nitrate products also compete indirectly with substitute chemicals, including sodium carbonate, sodium hydroxide, sodium sulfate, calcium nitrate and ammonium nitrate, which may be used in certain applications instead of sodium nitrate and are available from a large number of producers worldwide.

Our main competitor in the technical potassium nitrate market is Haifa Chemicals Ltd., which we estimate has a 30% market share in the industrial sector. We estimate our market share at approximately 31% for 2007.

Producers compete in the market for industrial sodium nitrate and technical potassium nitrate based on reliability, product quality, price and customer service. We believe that we are a low cost producer of industrial sodium nitrate and are able to produce high quality products.

Raw Materials

The main raw material that SQM requires in the production of nitrate and iodine is caliche ore, which is obtained from our surface mines. The main raw material in the production of potassium chloride, lithium carbonate, potassium sulfate and boric acid is the brine extracted from our operations at the Salar de Atacama.

Other important raw materials are sodium carbonate (in lithium carbonate production and for the neutralization of iodine solutions), anti-caking and anti-dust agents (in the production of nitrates), kerosene (in iodine production), ammonium nitrate (in the preparation of the anfo that is used as explosives in the mining operations), woven bags for packaging our final products, electricity acquired from electric utilities, and diesel and fuel oil in heat generation. The Company previously used natural gas as the primary raw material in heat generation, but recent natural gas shortages have led us to use alternative fuels. Our raw material costs (excluding caliche ore and salar brines and including energy) represented approximately 13.5% of our cost of sales in 2007.

Most of our raw materials have experienced significant price increases during the last year.

In 1998 we entered into a long-term (fifteen-year) electricity supply agreement with Norgener, a major Chilean electricity producer. In 1999, we entered into a long-term electricity supply agreement with Electroandina S.A., also a major Chilean electricity producer. The agreement has a ten-year term, extending to 2009, with a six-year renewal option. Since April 2000, the Company has been connected to the Northern Power Grid (Sistema Interconectado del Norte Grande or “SING”), which currently supplies us with electricity and also supplies most cities and industrial facilities in northern Chile with electricity. During 2006 and 2007, both Norgener and Electroandina sought relief from the terms of their electricity supply agreements, arguing that certain unforeseen events had restricted the supply and increased the price of gas from Argentina. As of December 2007, in the case of Norgener, an agreement was reached among the parties, whereas in the case of Electroandina, an arbitrator determined the resolution of the dispute. In both cases the prices of energy to be paid by SQM were adjusted upwards, in line with increases in variable generation costs. For a discussion of risks related to electricity supply, see Item 3. Key Information—Risk Factors.

In May 2001, we entered into a 10-year gas supply contract with Distrinor S.A., which would supply a maximum of 3,850,000 million Btu per year. This gas supply was sufficient to satisfy the requirements for the facilities that are connected to a natural gas supply. However, beginning in 2004, the Argentinean government has imposed restrictions on the supply of natural gas, and in 2007 we received practically no gas from Argentina. Consequently, we have had to use other, higher-cost fuels as substitutes for natural gas. For a discussion of risks related to natural gas supply see Item 3. Key Information—Risk Factors.

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The natural gas supply crisis discussed above has placed the Northern Power Grid under significant stress. In order to mitigate the risks to our operations from energy shortages, at the beginning of 2008 we purchased five generators that will enable the critical points of our production processes to continue operating in the event of a blackout.

We obtain ammonium nitrate, kerosene and soda ash from several large suppliers, mainly in Chile and the United States, under long-term contracts or general agreements, some of which contain provisions for annual revisions of prices, quantities and deliveries. In addition to the potassium chloride we produce, we acquire potassium chloride from Sociedad Chilena del Litio Limitada, a local Chilean supplier. Diesel fuel is obtained under contracts that provide for sales of fuel at international market prices.

We believe that all of the contracts and agreements between SQM and third-party suppliers with respect to our main raw materials contain standard and customary commercial terms and conditions.

Water Supply

The main sources of water for our nitrate and iodine facilities at Pedro de Valdivia, María Elena and Coya Sur are the Loa and San Salvador rivers, which run near our production facilities. Water for our Pampa Blanca, Nueva Victoria and Salar de Atacama facilities is obtained from wells near the production facilities. In the case of Pampa Blanca we additionally buy water from third parties for our production processes. We have permits from the Chilean Water Authority to explore for additional non-potable water and permits to use granted water rights for an indefinite period of time (based on specified maximum volumes) without charge. In addition, we purchase potable water from local utility companies. We have not experienced significant difficulties obtaining the necessary water to conduct our operations.

Government Regulations

Regulations in Chile Generally

We are subject to the full range of government regulations and supervision generally applicable to companies engaged in business in Chile, including labor laws, social security laws, public health laws, consumer protection laws, environmental laws, securities laws and anti-trust laws. These include regulations to ensure sanitary and safe conditions in manufacturing plants.

We conduct our mining operations pursuant to exploration concessions and exploitation concessions granted pursuant to applicable Chilean law. Exploitation concessions essentially grant a perpetual right to conduct mining operations in the areas covered by the concessions, provided that annual concession fees are paid (with the exception of the Salar de Atacama rights, which have been leased to us until 2030). Exploration concessions permit us to explore for mineral resources on the land covered thereby for a specified period of time, and to subsequently request a corresponding exploitation concession.

We also hold water rights obtained from the Chilean water regulatory authority for a supply of water from rivers or wells near our production facilities sufficient to meet our current and anticipated operating requirements. See Item 3. Key Information for a discussion under "Risk Factors" of how changes in mining and water rights laws could affect our operating costs. We operate port facilities at Tocopilla for shipment of products and delivery of certain raw materials pursuant to maritime concessions, under applicable Chilean laws, which are normally renewable on application, provided that such facilities are used as authorized and annual concession fees are paid.

Under Law No. 16,319, the Company has an agreement with the Chilean Commission of Nuclear Energy (the “CCHEN”) regarding the exploitation and sale of lithium from the Salar de Atacama. The agreement sets yearly quotas for the tonnage of lithium authorized to be sold for each year of the Salar de Atacama, as determined by the agreement.

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In 2005, the Chilean Congress approved Law No. 20,026 (also known as the “Royalty Law”) establishing a royalty tax to be applied to mining activities developed in Chile. The Chilean Government may decide to levy additional taxes on mining companies or other corporations in Chile, and such taxes could have a material adverse impact on our business, financial condition and results of operations.

There are currently no material legal or administrative proceedings pending against the Company with respect to any regulatory matter, except as discussed under “Safety, Health and Environmental Regulations” below, and we believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business.

Safety, Health and Environmental Regulations in Chile

Our operations in Chile are subject to both national and local regulations related to safety, health, and environmental protection.

In Chile, the main regulations on these matters that are applicable to SQM are the Code on Safety in Mining Operations, the Health Code, the Law on Subcontracting, and the Environmental Framework Law.

Health and safety at work are fundamental aspects in the management of mining operations, which is why SQM has made constant efforts to improve the health and safety conditions of the people working at its mining sites.

In addition to the role played by the Company in this important matter, the government has a regulatory role, enacting and enforcing regulations in order to protect and ensure the health and safety of workers. The State, acting through the Ministry of Health and the National Service for Geology and Mining (“Sernageomin”), performs mine safety inspections and oversees mining projects, among other tasks, and it has exclusive powers to enforce standards related to environmental conditions and the health and safety of the people performing activities related to mining.

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The Mine Health and Safety Act of 1989 (Ministry of Economy, Reglamento de Seguridad Minera, Supreme Decree DS No. 72, amended by DS No. 132/2002) protects workers and nearby communities against health and safety hazards, and it provides for enforcement of the law where compliance has not been achieved.

The main provisions of this act are related to:

Securing the health, safety and well-being of persons at work;

Protecting nearby communities against risks to health or safety arising out of or in connection with mining operations in the vicinity;

Controlling the use and storage of explosive, highly flammable or otherwise dangerous substances;

Controlling the emission or pollution into the atmosphere of noxious or offensive substances.

SQM’s Internal Mining Standards (“Reglamentos internos mineros”) establish our obligation to maintain a workplace that is safe and free of health risks, inasmuch as this is reasonably practicable. We must comply with the general provisions of the Health and Safety Act 1999 (Ministry of Health, Standards on Basic Sanitary and Environmental Conditions in the Workplace, or “Reglamento sobre Condiciones Sanitarias y Ambientales Básicas en los Lugares de Trabajo” DS No. 594, amended by DS No. 57/2003), our own internal standards, and the provisions of the Mine Health and Safety Act of 1989. In the event of non-compliance, the Ministry of Health and particularly the National Service for Geology and Mining are entitled to use their enforcement powers to achieve compliance with the law.

The Chilean Environmental Framework Law created the National Corporation of the Environment (“Corporación Nacional del Medio Ambiente” or “CONAMA”), which is the governmental agency responsible for coordinating and supervising environmental issues. Under the Environmental Framework Law, we are required to conduct environmental impact studies of any future projects or activities (or their significant modifications) that may affect the environment. CONAMA, together with other public institutions with mandates related to the environment, evaluates environmental impact studies submitted for its approval and also oversees the implementation and operation of projects. The Environmental Framework Law also promotes citizen participation in project evaluation and implementation.

Chilean environmental regulations have become increasingly stringent in recent years, both with respect to new project approval and approved projects in their construction and operation phases. In this context, recently implemented environmental regulations in Chile have created uncertainty because rules and enforcement procedures for these regulations have not been fully developed or have been developed without taking into consideration specific aspects of the regulated industries. Given public interest in environmental enforcement matters, these regulations are subject to political considerations that are beyond our control.

On August 10, 1993, the Ministry of Health published in the Official Gazette a resolution establishing that atmospheric particulate levels at our production facilities in María Elena and Pedro de Valdivia exceeded air quality standards, affecting the nearby towns. The high particulate matter levels are principally from dust produced during the processing of caliche ore, particularly the crushing of the ore before leaching. Residents of the town of Pedro de Valdivia were relocated to the town of María Elena, practically removing Pedro de Valdivia from the scope of the determination of the Ministry of Health. In the year 2000, CONAMA approved a plan to reduce the atmospheric particulate levels below permissible levels by July of the same year, with certain amendments, by Decree No. 164/2000. Although we followed the plan and reduced substantially the atmospheric particulate levels at our principal production facilities, as a result of the investments and processes implemented, we were not able to fully comply with the July 2000 timetable. Resolution No. 384, published in the Official Gazette on May 16, 2000, initiated a revision and reformulation of the plan. The new plan was published by Decree No. 37/2004 on March 2004, and it called for an 80% reduction of the emissions of atmospheric particulate material in two years. We designed a new project to modify the milling and screening systems used in the processing of the caliche ore at María Elena facilities, in order to achieve the necessary reduction of particulate material emissions. An environmental impact study for this project was approved by CONAMA through Resolution No. 270 in October 2005. Upon issuing the approval for the environmental impact study, CONAMA issued the Decree No. 53975, authorizing this project as the one through which we will comply with the emission reductions required by Decree No. 37/2004. Construction of this project was completed in April of 2007, but after it started operating in mid-2007, certain design modifications became necessary. These modifications are currently being made, and the project is estimated to be in full operation by December 2008.

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On March 16, 2007, the Ministry of Health published in the Official Gazette a resolution establishing that atmospheric particulate levels exceeded air quality standards in the coast-town of Tocopilla, where we have our port operations. The high particulate matter levels are caused mainly by two thermoelectric power plants that use coal and fuel oil and are located next to our port operations. Our participation in particulate matter emissions is very small (less than 0.50% of the total). However, a decontamination plan is being developed and additional operating and control measures will be required in our port operations under this plan. CONAMA estimates that this plan will begin implementation by the end of 2008.

We continuously monitor the impact of our operations on the environment and have made, from time to time, modifications to our facilities trying to eliminate any adverse impacts. Also, over time, new environmental standards and regulations have been enacted, which have required minor adjustments or modifications of our operations for full compliance. We anticipate that additional laws and regulations will be enacted over time with respect to environmental matters. While we believe that we will continue to be in compliance with all applicable environmental regulations of which we are now aware, there can be no assurance that future legislative or regulatory developments will not impose new restrictions on our operations. We are committed to both complying with all applicable environmental regulations and applying an Environmental Management System (EMS) to continuously improve our environmental performance.

We have submitted and will continue to submit several environmental impact assessment studies related to our projects to the governmental authorities. We require the authorization of these submissions in order to maintain and to increase our production capacity.

International Regulations

In 2007, a new European Community Regulation on chemicals and their safe use went into effect. This regulation, called REACH (Regulation, Evaluation, Authorisation and Restriction of Chemical Substances), requires all manufacturers and importers of chemicals - including SQM - to identify and manage risks linked to the substances they manufacture and market. Non-compliance with this regulation would preclude the Company from commercializing its products in the European market.

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4.C. Organizational Structure

All of our principal operating subsidiaries are essentially wholly-owned, except for Soquimich Comercial, which is 61% owned by SQM and whose shares are listed and traded on the Chilean Stock Exchanges, and Ajay SQM Chile S.A., which is 51% owned by SQM. The following is a summary of our main subsidiaries as of March 31, 2008. For a list of all our consolidated subsidiaries see Note 2(a) to the Consolidated Financial Statements.

Main subsidiaries	Activity	Country of Incorporation	SQM Beneficial Ownership Interest (Direct/Indirect)

SQM Nitratos S.A.	Extracts and sells caliche ore to subsidiaries and affiliates of SQM	Chile	100%

SQM Industrial S.A.	Produces and markets the Company’s products directly and through other subsidiaries and affiliates of SQM	Chile	100%

SQM Salar S.A.	Exploits the Salar de Atacama to produce and market the Company’s products directly and through other subsidiaries and affiliates of SQM	Chile	100%

Minera Nueva Victoria S.A.	Produces and markets the Company’s products directly and through other subsidiaries and affiliates of SQM	Chile	100%

Servicios Integrales de Tránsitos y Transferencias S.A. (SIT)	Owns and operates a rail transport system and also owns and operates the Tocopilla port facilities	Chile	100%

Soquimich Comercial S.A.	Markets the Company’s specialty plant nutrition products domestically and imports fertilizers for resale in Chile	Chile	61%

Ajay-SQM Chile S.A.	Produces and markets the Company’s iodine and iodine derivatives	Chile	51%

Sales and distribution subsidiaries in the United States, Belgium, Brazil, Venezuela, Ecuador, Peru, Argentina, Mexico, South Africa and other locations.	Market the Company’s products throughout the world	Various

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4.D. Property, Plants and Equipment

Discussion of our mining rights is organized below according to the geographic location of our mining operations. SQM's mining interests located throughout the valley of the Tarapacá and Antofagasta regions of northern Chile (in a part of the country known as “el Norte Grande”), referred to collectively as the "Caliche Ore Mines", are discussed first. The Company's mining interests within the Atacama Desert in the eastern region of el Norte Grande (the "Salar de Atacama Brines") are discussed second.

DESCRIPTION OF THE CALICHE ORE MINES

As of December 31, 2007, we held exploitation rights to mineral resources representing approximately 1,675,000 hectares, and we have applied for additional exploitation rights for approximately 472,000. In addition, we held exploration rights to mineral resources representing approximately 283,000 hectares, and we have applied for additional exploration rights for approximately 55,000 hectares. As part of these rights, we have four mines covering an area of approximately 597,731 hectares. These four mines are currently being exploited.

During 2007, we modified the criteria we use to define a mine. The new criteria require that a property have both reserves and the processing facilities necessary to carry out exploitation. As a result, certain properties we previously defined as mines but that do not have processing facilities are now considered part of other mines, and the number of mines has been reduced from six to four. The Nueva Victoria mine now includes the mining properties Soronal, Mapocho and Iris, which were described separately in previous Company filings. The mining properties in terms of surface area and quantity of reserves have not changed as a result of the new criteria.

Pedro de Valdivia

The mine and facilities that we operate in Pedro de Valdivia are located 170 kilometers northeast of Antofagasta and are accessible by highway. These facilities have been in operation for approximately 77 years and were previously owned and operated by Anglo Lautaro. The areas currently being mined are located approximately 17 kilometers southeast and approximately 20 kilometers west of the Pedro de Valdivia production facilities. Our mining facilities at Pedro de Valdivia have a Weighted Average Age of approximately 10.88 years. Electricity, diesel, and fuel oil are the primary sources of power for this operation.

María Elena

The mine and facilities that we operate in María Elena are located 220 kilometers northeast of Antofagasta and are accessible by highway. These facilities have been in operation for approximately 82 years and were previously owned and operated by Anglo Lautaro. The area currently being mined is located approximately 14 kilometers north of the María Elena production facilities. The power sources of power utilized are mainly electricity, diesel, and fuel oil. The Weighted Average Age of the Company's mining facilities at María Elena is approximately 10.99 years.

Pampa Blanca

We currently conduct caliche ore operations in Pampa Blanca, which is located 100 kilometers northeast of Antofagasta and is accessible by highway. Ore from the Pampa Blanca mine is transported by truck to nearby heap leaching pads where it is used to produce iodine and nitrate salts. The Weighted Average Age of the ore recovery facilities at Pampa Blanca is approximately 13.46 years. The power source utilized is mostly electricity, produced by mobile diesel generators.

Nueva Victoria

We currently conduct caliche ore operations in Nueva Victoria, which is located 180 kilometers north of María Elena and is accessible by highway. Ore from Nueva Victoria is transported by truck to heap leaching pads where it is then used to produce iodine. The Weighted Average Age of the ore recovery facilities at Nueva Victoria is approximately 5.38 years. The power source utilized is mostly electricity, obtained from the Northern Power Grid (SING).

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Description of the Salar de Atacama Brines

Salar de Atacama Brines

We hold rights to exploit the mineral resources in an area covering approximately 197,000 hectares of land in the Salar de Atacama in northern Chile, and we have applied for additional exploitation rights covering approximately 70,000 hectares. In addition, we hold exploration rights covering approximately 60,000 hectares, and we have applied for additional exploration rights covering approximately 2,000 hectares. Exploration rights are valid for a period of two years, after which the Company can (i) request an exploitation concession for the land, (ii) request an extension of the exploration rights for an additional two years (the extension only applies to a reduced surface area equal to 50% of the initial area), or (iii) cease exploration of the zone covered by the rights. The Weighted Average Age of our mining facilities at the Salar de Atacama is approximately 8.28 years. The main source of power used by the operation is electricity.

Additional Mining Operations Leased in the Salar de Atacama Region

SQM Salar S.A. holds exclusive rights to exploit the mineral resources in an area covering approximately 197,000 hectares of land in the Salar de Atacama in northern Chile. These rights include 147,000 hectares that are owned by Corfo and leased to SQM Salar S.A. pursuant to a lease agreement between Corfo and SQM Salar S.A. (the Lease Agreement). Corfo may not unilaterally amend the Lease Agreement, and the rights to exploit the resources cannot be transferred. The Lease Agreement provides that SQM Salar S.A. is responsible for the maintenance of Corfo’s exploitation rights and for annual payments to the Chilean government, and it expires on December 31, 2030. SQM Salar S.A. is required to make lease-royalty payments to Corfo according to specified percentages of the value of production of minerals extracted from the Salar de Atacama brines. In the years 2007, 2006, and 2005, royalty payments amounted to approximately US$13.9 million, US$ 9.2 million, and US$ 6.8 million, respectively.

In addition to the mining rights leased to SQM Salar S.A. described above, Corfo has exclusive mining rights covering a total area of approximately 65,200 additional hectares in the Salar de Atacama. Under the terms of the Salar de Atacama Project Agreement between Corfo and SQM Salar S.A., (the Project Agreement), Corfo has agreed that it will not permit any other person to explore, exploit or mine any mineral resources in those 65,200 hectares of the Salar de Atacama. The Project Agreement expires on December 31, 2030.

Concessions, Extraction Yields and Reserves for the Caliche Ore Mines and Salar Brines

Concessions Generally

Caliche ore. We hold our mineral rights pursuant to one of two types of exclusive concessions granted pursuant to applicable law in Chile:

(1) "Exploitation Concessions" These are concessions whereby we are legally entitled to use the land in order to exploit the mineral resources contained therein on a perpetual basis subject to annual payments to the Chilean government; or

(2) "Exploration Concessions" These are concessions whereby we are legally entitled to use the land in order to explore for mineral resources for a period of two years, at the expiration of which the concession may be extended one time only for two additional years if the area covered by the concession is reduced by half.

An Exploration Concession is generally obtained for purposes of evaluating the mineral resources in an area. Generally, after the holder of the Exploration Concession has determined that the area contains exploitable mineral resources, such holder will apply for an Exploitation Concession for the area. Such application will give the holder absolute priority with respect to such Exploitation Concession against third parties. If the holder of the Exploration Concession determines that the area does not contain commercially exploitable mineral resources, the concession is usually allowed to lapse, although it is our policy to convert substantially all Exploration Concessions to Exploitation Concessions. An application also can be made for an Exploitation Concession without first having obtained an Exploration Concession for the area involved.

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Concessions for the Caliche Ore Mines and Salar Brines

Approximately 84% of our total mining concessions are held pursuant to Exploitation Concessions and 16% pursuant to Exploration Concessions, not including areas within the Salar de Atacama Mines. Of the Exploitation Concessions, approximately 77% have been already granted pursuant to applicable Chilean law, and approximately 23% are in the process of being granted. Of the Exploration Concessions, approximately 78% have been already granted pursuant to applicable Chilean law, and approximately 22% are in the process of being granted. Chile owns substantially all the surface land covering our Exploration and Exploitation Concessions.

We made payments to the Chilean government for our Exploration and Exploitation Concessions of approximately US$6.4 million in the year 2007.

The following table sets forth our exploitation and exploration concessions as of December 31, 2007:

	Exploitation Concessions				Exploration Concessions				Total
Mines (1)	Total number		Hectares		Total number		Hectares		Total number		Hectares
Pedro de Valdivia		585		149,128		5		900		590		150,028
Maria Elena		619		185,049		24		8,100		643		193,149
Pampa Blanca		463		136,888		1		400		464		137,288
Nueva Victoria (2)		344		89,466		77		27,800		421		117,266
Salar de Atacama		409		266,965		209		61,800		618		328,765
Subtotal mines		2,420		827,496		316		99,000		2,736		926,496

Other caliche areas		7,039		1,586,168		1,058		301,400		8,097		1,887,568
Other salars and other areas		581		117,756		308		81,400		889		199,156
Subtotal other areas		7,620		1,703,924		1,366		382,800		8,986		2,086,724

Total		10,040		2,531,421		1,682		481,800		11,722		3,013,221

(1)

We have included in this table both concessions that have been granted and concessions in the process of being granted.

(2)

Nueva Victoria amounts include the Mapocho and Soronal properties, which were presented separately in our 2006 Annual Report on Form 20-F.

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Extraction Yields

The following table sets forth certain operating data relating to each of our mines:

(Values in thousands unless otherwise stated)	2007		2006		2005
Pedro de Valdivia

Metric tons of ore mined		10,670		11,652		12,362
Average grade nitrate (% by weight)		7.5		7.4		7.2
Iodine (parts per million (ppm))		354		399		402
Metric tons of crystallized nitrate produced		423		454		476
Metric tons of iodine produced		2.3		2.5		2.6

María Elena (1)

Metric tons of ore mined		4,651		5,682		5,917
Average grade nitrate (% by weight)		7.4		7.5		8.0
Iodine (ppm)		363		399		428
Metric tons of crystallized nitrate produced		424		504		479
Metric tons of iodine produced		1.0		1.3		1.4

Pampa Blanca

Metric tons of ore mined		3,108		4,832		5,309
Iodine (ppm)		527		530		520
Metric tons of iodine produced		1.1		1.4		1.5

Nueva Victoria (2)

Metric tons of ore mined		12,285		14,635		7,140
Iodine (ppm)		495		941		504
Metric tons of iodine produced		3.7		4,6		2.2

Salar de Atacama
Metric tons of lithium carbonate produced (3)		30		29		27
Metric tons of potassium chloride produced		611		539		632
Metric tons of potassium sulfate produced		157		170		162
Metric tons of boric acid produced		7		8		9

(1)

Includes production at Coya Sur from treatment of fines from María Elena and Pedro de Valdivia and nitrates from pile treatment at Pampa Blanca.

(2)

Includes the Iris mining property, which was acquired in 2006 and was presented separately in the 2006 Annual Report on Form 20-F. Nueva Victoria extraction yields were higher in 2006 than they were in 2007 because they reflect extraction yields from the Iris property, which SQM continued to exploit for the first six months of 2006, subsequent to the acquisition. The Iris property has not been exploited since mid-2006, and it represents a future extension of the Nueva Victoria operations.

(3)

Lithium carbonate is extracted at the Salar de Atacama and processed at our facilities at the Salar del Carmen.

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Reserves

Reserves for the Caliche Ore Deposits

Our in-house staff of geologists and mining engineers prepares our estimates of caliche ore reserves. The proven and probable reserve figures presented below are estimates, and no assurance can be given that the indicated levels of recovery of nitrates and iodine will be realized. See Item 3. D. Risk Factors.

We estimate ore reserves based on engineering evaluations of assay values derived from sampling of drill-holes and other openings. Drill-holes have been made at different space intervals in order to recognize mining resources. Normally, we start with 400 x 400 meters and then we reduce spacing to 200x200 meters, 100x100 meters and 50x50 meters. The geological occurrence of caliche mineral is unique and different from other metallic and non-metallic minerals. Caliche ore is found in large horizontal layers at depths ranging from 1 to 4 meters and has an overburden between 0 and 2 meters. This horizontal layering is a natural geological condition and allows the Company to estimate the continuity of the caliche bed based on surface geological reconnaissance and analysis of samples and trenches. Mining resources can be calculated using the information from the drill-hole sampling.

According to our experience in caliche ore, the grid pattern drill-holes with spacing equal to or less than 100 meters produce data on the caliche resources that is sufficiently defined to consider them measured resources and then, adjusting for technical, economic and legal aspects, as proven reserves. These reserves are obtained using the Kriging Method and the application of operating parameters to obtain economically profitable reserves. Similarly, the information obtained from detailed geologic work and samples taken from grid pattern drill-holes with spacing equal to or less than 200 meters can be used to determine indicated resources. By adjusting such indicated resources to account for technical, economic and legal factors, it is possible to calculate probable reserves. Probable reserves are calculated by evaluating polygons and have an uncertainty or error margin greater than that of proven reserves; however, the degree of certainty of probable reserves is high enough to assume continuity between points of observation.

Proven and probable reserves are determined using extensive drilling, sampling and mine modeling, in order to estimate potential restrictions on production yields, including cut-off grades, ore type, dilution, waste-to-ore ratio and ore depth. Economic feasibility is determined on the basis of this information.

The updated estimates of our proven reserves of caliche ore at each of our mines, as of December 31, 2007, are as follows:

Mine	Proven Reserves (1) (millions of metric tons)		Nitrate Average Grade (percentage by weight)			Iodine Average Grade (parts per million)
Pedro de Valdivia		152.3		7.1	%		370
María Elena		134.8		7.3	%		415
Pampa Blanca		74.9		6.3	%		549
Nueva Victoria (2)		283.8		5.7	%		427

In addition, the updated estimates of our probable reserves of caliche ore at each of our principal mines as of December 31, 2007, are as follows:

Mine	Probable Reserves (1) (3) (millions of metric tons)		Nitrate Average Grade (percentage by weight)			Iodine Average Grade (parts per million)
Pedro de Valdivia		136.8		6.8	%		428
María Elena		97.6		7.3	%		380
Pampa Blanca		429.4		6.0	%		524
Nueva Victoria (2)		129.9		5.5	%		407

Notes on Reserves:

(1)

The proven and probable reserves set forth in the tables above are shown before losses related to exploitation and metallurgical treatment. Proven and probable reserves are affected by mining exploitation methods, which result in differences between the estimated reserves that are available for exploitation in the mining plan and the recoverable material that is finally transferred to the leaching vats or heaps. The average mining exploitation factor for our different mines ranges between 80% and 90%, whereas the average global metallurgical recoveries of processes for nitrate and iodine contained in the recovered material vary between 55% and 65%.

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(2)

Proven and probable reserves for Nueva Victoria include the Soronal and Mapocho mining properties, which were presented separately in the Company’s 2006 Annual Report on Form 20-F. Nueva Victoria also includes the reserves for the Iris mining property, which was acquired in 2006 and whose reserves had not yet been estimated at the time the 2006 Form 20-F was filed.

(3)

Probable reserves amounts can be transformed in order to obtain amounts expressed as proven reserves. On average, the transformation factor to express probable reserves as proven reserves is higher than 60%. This factor depends on geological conditions and caliche ore continuity, which vary from mine to mine. The difference between the probable reserve amounts and the transformed probable reserve amounts is the result of the lower degree of certainty pertaining to probable reserves compared with proven reserves.

The proven and probable reserves shown above are the result of exploration and evaluation of approximately 16.0% of the total caliche-related mining property of our Company. However, we have explored those areas in which we believe there is a higher potential of finding high-grade caliche ore minerals. The remaining 84.0% of this area has not been explored yet or has limited reconnaissance as inferred or hypothetical resources. Reserves shown in these tables consider and are calculated over mining properties that are not involved in any legal issues between SQM and other parties.

Exploration Program. We maintain an ongoing program of exploration and resource evaluation on the land surrounding the mines at Nueva Victoria, Pedro de Valdivia, María Elena and Pampa Blanca and at other sites for which we have the appropriate concessions. In 2007, we continued a basic reconnaissance program on new mining properties including a geological mapping of the surface and spaced drill-hole campaign covering approximately 46,516 hectares. Additionally, we conducted general explorations based on a closer grid pattern of drill-holes over a total area of approximately 2,480 hectares and, in addition, carried out in-depth sampling of approximately 2,305 hectares (896 hectares at Pedro de Valdivia, 413 hectares at María Elena, and 996 hectares at Nueva Victoria). The exploration and development program in 2008 calls for a basic reconnaissance program over a total area of 44,710 hectares, general exploration over a total area of about 4,067 hectares and, in addition, in-depth sampling of approximately 2,654 hectares.

Reserves for the Salar de Atacama Brines

Our in-house staff of hydro-geologists and mining engineers prepares our estimates of potassium, sulfate, lithium and boron reserves at the Salar de Atacama. We have explored the land up to a depth of 100 meters and estimate that our proven and probable reserves, based on economic restrictions, geostatistical analysis and brine sampling up to a depth of 30 and 50 meters, are as follows:

	Proven Reserves (1) (millions of metric tons)		Probable Reserves (1) (millions of metric tons)
Potassium (K ⁺) (2)		49.9		7.3
Sulfate (SO₄ ^2-) (3)		36.1		1.3
Lithium (Li ⁺) (4)		3.0		2.0
Boron (B ³⁺) (5)		1.2		0.1

Notes on Reserves:

(1)

Metric tons of potassium, sulfate, lithium and boron considered in the proven and probable reserves are shown before losses from evaporation processes and metallurgical treatment. The recoveries of each ion depend on both brine composition, which changes over time, and the process applied to produce the desired commercial products.

(2)	Recoveries for potassium vary from 47% to 68%.

(3)	Recoveries for sulfate vary from 27% to 44%.

(4)	Recoveries for lithium vary from 28% to 32%.

(5)	Recoveries for boron are approximately 29%.

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The proven and probable reserves are based on drilling, brine sampling and geo-statistic reservoir modeling in order to estimate brine volumes and their composition. To evaluate reserves, we conduct a geostatistical study using the Kriging Method in 2D. We calculate the quality of brine effectively drainable or exploitable in each evaluation unit. We consider chemical parameters to determine the process to be applied to the brines. Based on the chemical characteristics, the volume of brine and drainable percentage, we determine the number of metric tons for each of the chemical ions. Proven reserves are defined as those geographical blocks that comply with a Kriging method estimation error of up to 15%. In the case of probable reserves, the selected blocks must comply with an estimation error between 15% and 35%. Blocks with an error greater than 35% are not considered in the evaluation of reserves. This procedure is used to estimate potential restrictions on production yields, and the economic feasibility or producing such commercial products as potassium chloride, potassium sulfate, lithium carbonate and boric acid is determined on the basis of the evaluation.

PORTS AND WATER RIGHTS

We operate port facilities at Tocopilla for shipment of products and delivery of certain raw materials pursuant to renewable concessions granted by Chilean regulatory authorities, provided that such facilities are used as authorized and annual concession fees are paid by us. We also hold water rights for a supply of water from rivers and wells near our production facilities sufficient to meet our current and anticipated operational requirements.

PRODUCTION FACILITIES

Our principal production facilities are located near our mines and extraction facilities in northern Chile. The following table sets forth the principal production facilities as of December 31, 2007:

Location	Type of Facility		Approximate Size (1) (Hectares)
Pedro de Valdivia		Nitrates and iodine production		126
María Elena		Nitrates and iodine production		110
Coya Sur		Nitrates and iodine production		232
Pampa Blanca		Concentrated nitrate salts and iodine production		86
Nueva Victoria		Iodine production		11
Salar de Atacama (2)		Potassium chloride, lithium chloride, potassium sulfate and boric acid		2,288
Salar del Carmen, Antofagasta		Lithium carbonate and lithium hydroxide production		32
Tocopilla		Port facilities		24

(1)

Includes production facilities, solar evaporation ponds and leaching heaps, if any.

(2)

We lease the exploitation rights used at the Salar de Atacama from Corfo.

We own, directly or indirectly through subsidiaries, all of the facilities, free of any material liens, pledges or encumbrances, and believe that they are suitable and adequate for the business we conduct in them. As of December 31, 2007, the approximate gross book value of the property and associated plant and equipment at our locations was as follows: Pedro de Valdivia (US$74.04 million), María Elena (US$156.48 million), Coya Sur (US$106.77 million), Pampa Blanca (US$4.07 million), Nueva Victoria (US$104.76 million), Salar de Atacama (US$250.58 million), Salar del Carmen (US$44.00 million) and Tocopilla (US$39.04 million).

In addition to the above-listed facilities, we operate a computer and information system linking our principal subsidiaries to our operating facilities throughout Chile via a local area network. The computer and information system is used mainly for accounting, monitoring of supplies and inventories, billing, quality control and research activities. The system's mainframe computer equipment is located at our offices in Santiago.

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The map below shows the location of SQM's principal mining operations and land concessions.

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The approximate Weighted Average Age of our production facilities as of December 31, 2007 was as follows: Pedro de Valdivia (10.88 years), María Elena (10.99 years), Coya Sur (5.97 years), Nueva Victoria (5.38 years), Salar de Atacama (8.28 years), and Salar del Carmen (8.95 years). Our railroad line between our production facilities and Tocopilla was originally constructed in 1890, but the rails, locomotives and rolling stock have been replaced and refurbished as needed. The Tocopilla port facilities were originally constructed in 1961 and have been refurbished and expanded since that time. The Weighted Average Age of the Tocopilla port facilities is approximately 13.70 years. We consider the condition of our principal plant and equipment to be good.

We maintain different projects to improve our production methods, to increase production capacity of current products and to develop new products and markets. We have in place a capital expenditure program calling for investments of approximately US$320 million for the year 2008 and a total of approximately US$680 million during 2009 and 2010. For further discussion see item 4.A History and Development of the Company - Capital Expenditure Program.

TRANSPORTATION AND STORAGE FACILITIES

We own and operate railway lines and equipment, as well as port and storage facilities, for the transport and handling of finished products and consumable materials.

The main center for our production and storage of raw materials is the hub composed of the facilities in Coya Sur, Pedro de Valdivia and María Elena. Our Salar de Atacama facilities constitute the second largest concentration of plants and raw material storage. Other facilities include Nueva Victoria, Pampa Blanca, and the lithium carbonate and lithium hydroxide finishing plants. The Tocopilla Port Terminal, which we own, is the main facility for storage and shipment of our products.

Nitrate raw materials are produced and first stored at our Pampa Blanca, Pedro de Valdivia and María Elena mines, and then transported by rail (Pedro de Valdivia), conveyor belt (María Elena) and truck (others) to the plants described in the next paragraph, for further production processes.

Nitrate finished products are produced at our facilities in Pedro de Valdivia, María Elena and Coya Sur and then transported by our rail system to Tocopilla Port Terminal, where they are stored and shipped, either bagged or in bulk.

Potassium chloride is produced at our facilities in the Salar de Atacama and transported either to Tocopilla Port Terminal or Coya Sur by a dedicated dual transport system (rail/truck) owned by a third-party dedicated contractor. Product transported to Coya Sur is used as a raw material for the production of potassium nitrate or for potassium chloride finished product.

Potassium sulfate and boric acid are both produced at our facilities in the Salar de Atacama and then are transported to Tocopilla Port Terminal to follow the rest of the process. Potassium sulfate is transported by the same dual mode system as potassium chloride, and boric acid is transported by a contracted trucking company, after being bagged at the Salar de Atacama.

Lithium solutions, produced at our facilities in the Salar de Atacama, are transported to the lithium carbonate facility in the Salar del Carmen area, where finished lithium carbonate is produced. Part of the lithium carbonate is fed to the adjacent lithium hydroxide plant, where finished lithium hydroxide is produced. These two products are bagged and stored on the premises and are subsequently transported by truck to Tocopilla Port Terminal or to the Antofagasta Terminal for shipment on charter vessels or container vessels.

Iodine raw material, obtained in the same mines the nitrates, is processed, bagged and stored exclusively in the facilities of Pedro de Valdivia and Nueva Victoria, and then shipped by truck to Antofagasta or Iquique for vessel container transport or by truck to Santiago, where iodine derivatives are produced.

The facilities at Tocopilla Port Terminal are located approximately 186 kilometers north of Antofagasta and approximately 124 kilometers west of Pedro de Valdivia, 84 kilometers west of María Elena and Coya Sur and 372 kilometers west of the Salar de Atacama. SIT operates the facilities under maritime concessions granted pursuant to applicable Chilean laws. The port also complies with ISPS (International Ship and Port Facility Security Code) regulation. The Tocopilla Port Terminal facilities include a railcar dumper to transfer bulk product into the Conveyor Belt system used to store and ship bulk product.

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Storage facilities consist of a six silo system, with a total capacity of 54,000 metric tons, and an open storage area for approximately 180,000 metric tons. A bagging station capable of bagging both small and maxi bags is also connected to the conveyor system.

For shipping bulk product, the conveyor belt system extends over the coast line to deliver product directly inside bulk carrier hatches. Using this system, the loading capacity is 1,200 tons per hour. Bags are loaded to bulk vessels using barges that are loaded in Tocopilla Port Terminal dock and unloaded by vessel cranes into the hatches. Both bulk and bagged trucks are loaded in Tocopilla Port Terminal for transferring product directly to customers or for container vessels shipping from other ports, mainly Antofagasta, Mejillones and Iquique.

Bulk carrier loading in the Tocopilla Port Terminal is mostly contracted for by us to transfer the product to our hubs around the world or for shipping to customers, which in limited cases use their own contracted vessels for delivery. Trucking is provided by a mix of spot, contracted and customer owned equipment.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, which would potentially result in materially different results under different assumptions and conditions.

We believe that our critical accounting policies in the preparation of our Chilean GAAP financial statements are limited to those described below. It should be noted that in many cases, Chilean GAAP specifically dictates the accounting treatment of a particular transaction, with no need for management's judgment in their application. Additionally, significant differences can exist between Chilean GAAP and U.S. GAAP, as explained below in the Notes to the Financial Statements in Note 29—Differences between Chilean and United States Generally Accepted Accounting Principles. There are also areas in which management's judgment in selecting available alternatives would not produce materially different results. For a summary of significant accounting policies and methods used in the preparation of the financial statements, see Note 2 to the Consolidated Financial Statements as of December 31, 2007 and 2006, and for the three years in the period ended December 31, 2007.

Allowance for doubtful accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the assessed inability of our customers to make required payments. If the financial condition of our customers were to deteriorate unexpectedly, impacting their ability to make payments, additional allowances may be required. We routinely review the financial condition of our customers and make assessments of collectibility.

Deferred income tax asset valuation allowance

Our Company and each of its subsidiaries compute and pay income tax on a separate basis, except for the U.S. subsidiaries. We estimate our tax exposure and assess temporary differences resulting from differing treatment of various items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are reflected in our consolidated balance sheet.

We record a valuation allowance to reduce deferred tax assets to the amount that we believe is more likely than not to be realized. The valuation of the deferred tax asset is dependent on, amongst other things, the ability of the Company to generate a sufficient level of future taxable income.

Inventories

Inventories of finished products and work in process are valued at average production cost. Raw materials and products acquired from third parties are stated at average cost and materials-in-transit are valued at cost. We regularly review inventory for impairment and record an obsolescence provision so that carrying values do not exceed net realizable values.

Staff severance indemnities

We have significant staff severance indemnity liabilities, which are recognized on accrual basis. Inherent in the valuations of these obligations are key assumptions, including discount rates. We are required to consider current market conditions, including changes in interest rates, in selecting these assumptions. Changes in the related benefit plan liabilities may occur in the future due to changes resulting from fluctuations in our related headcount or to changes in the assumptions.

Mining development costs

Mine exploration costs and stripping costs to maintain production of mineral resources extracted from operating mines are considered variable production costs and are included in the cost of inventory produced during the period. Mine development costs at new mines, and major development costs at operating mines outside existing areas under extraction that are expected to benefit future production, are capitalized under “other long-term assets” and amortized using a units-of-production method over the associated proven and probable reserves. The Company determines its proven and probable reserves based on drilling, brine sampling and geostatistic reservoir modeling in order to estimate mineral volume and composition. See Item 4.D. Property, Plants and Equipment—Reserves.

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All other mine exploration assets costs, including expenses related to low grade mineral resources rendering reserves that are not economically exploitable, are charged to the results of operations in the period in which they are incurred.

Long-lived assets and their impairment

We estimate the useful lives of property, plant and equipment in order to determine the amount of depreciation expense to be recorded during any reporting period. The estimated useful lives are based on historical experience with similar assets, taking into account anticipated technological or other changes. If technological changes are expected to occur more rapidly or in a different way than previously anticipated, the useful lives assigned to these assets may need to be reduced, resulting in the recognition of increased depreciation expense in future periods.

We evaluate the recoverability of our long-lived assets (other than intangibles and deferred tax assets) in accordance with Technical Bulletin No. 33 “Accounting treatment of Property, Plant and Equipment”, issued by the Chilean Association of Accountants, and SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The rules require recognition of impairment of long-lived assets in the event that the net book value of such assets exceeds the future undiscounted net cash flows attributable to such assets. Impairment, if any, is recognized in the period of identification to the extent the carrying amount of an asset exceeds the fair value of such asset. We believe that the accounting estimate related to asset impairment is critical because it requires us to make assumptions about future cash flows generated from the use of the assets over their estimated useful lives.

Impairment of goodwill

We have intangible assets related to goodwill. Under Chilean GAAP, goodwill should be reviewed for impairment when events or circumstances, such as recurrent losses for two or more periods, indicate a possible inability to realize the carrying amount. Under SFAS No. 142, goodwill must be allocated to reporting units and tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. The first part of the test is a comparison, at the reporting unit level, of the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value is less than the carrying value, then the second part of the test is needed to measure the amount of potential goodwill impairment. The implied fair value of the reporting unit’s goodwill is calculated and compared to the carrying amount of goodwill recorded in the Company’s financial records. If the carrying value of the reporting units goodwill exceeds the implied fair value of that goodwill, then we would recognize an impairment loss in the amount of the difference, which would be recorded as a charge against net income.

The fair values of the reporting units are determined using discounted cash flow models based on each reporting unit’s internal forecasts.

The impairment analysis requires management to make subjective judgments concerning estimates of how the assets will perform in the future using a discounted cash flow analysis. Additionally, estimated cash flows may extend beyond ten years and, by their nature, are difficult to determine. Events and factors that may significantly affect the estimates include, among others, competitive forces, customer behavior and attrition, changes in revenue growth trends, cost structures and technology, and changes in interest rates and specific industry or market sector conditions. Impairment is recognized earlier whenever warranted.

During the period ended December 31, 2007, there were no changes in the application of generally accepted accounting principles in Chile compared to the prior year.

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5.A. Operating Results

Introduction

The following discussion should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto included in Item 18. Certain calculations (including percentages) that appear herein have been rounded.

Our Consolidated Financial Statements are prepared in accordance with Chilean GAAP, which differ in certain material respects from U.S. GAAP. Note 29 to the Consolidated Financial Statements provides a description of the material differences between Chilean GAAP and U.S. GAAP and a reconciliation to U.S. GAAP of net income for the years ended December 31, 2007, 2006 and 2005 and of total shareholders' equity as of December 31, 2007 and 2006. Our Consolidated Financial Statements are prepared in U.S. dollars. The U.S. dollar is the primary currency in which we operate.

We operate as an independent corporation. Nonetheless we are a "controlled corporation", as that term is defined under Chilean law. See Item 6.E. Share Ownership.

Certain segment information by products group and by geographical area is provided in Note 29 -Differences between Chilean and United States Generally Accepted Accounting Principles— II. k) Industry segment and geographic area information.

Overview of Our Results of Operations

We divide our operations into the following five product lines:

Specialty plant nutrition: production and commercialization of specialty fertilizers.

Iodine and derivatives: production and commercialization of iodine and derivatives.

Lithium and derivatives: production and commercialization of lithium and derivatives.

Industrial chemicals: production and commercialization of industrial nitrates, and boric acid.

Potassium chloride and other commodity fertilizers: production and commercialization of potassium chloride and commercialization of other commodity fertilizers.

We sell our products through three primary channels: our own sales offices, a network of distributors and, with respect to our fertilizer products, through Yara International ASA pursuant to a commercial agreement.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our results of operations substantially depend on:

Trends in demand for and supply of our products. See Item 5.D. Trend Information;

Our efficiency in operating our facilities, as they are generally running at nameplate capacity;

Our ability to accomplish our capital expenditures program in a timely manner, as we are the main supplier in our core businesses;

Trends in the exchange rate between the US dollar and Chilean peso, as a significant portion of the cost of sales is related to the Chilean peso;

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Logistics, raw materials and maintenance costs, which have been increasing in the last several years; and

Energy costs, which have increased due to the high cost of oil and the interruption of our natural gas supply.

The following table sets forth our revenues (in millions of U.S. dollars) and the percentage accounted for by each of our product lines for each of the periods indicated:

	Year ended December 31,
	2007				2006				2005
	US$		%		US$		%		US$		%
Specialty plant nutrition		580.0		49		503.1		48		487.8		54
Iodine and derivatives		215.1		18		217.7		21		149.1		17
Lithium and derivatives		179.8		15		128.9		12		81.4		9
Industrial chemicals		81.2		7		71.3		7		70.5		8
Potassium chloride and other commodity fertilizers⁽¹⁾		130.7		11		121.9		12		107.2		12
Total		1,187.5		100		1,042.9		100		896.0		100

(1)

Primarily imported fertilizers distributed in Chile and potassium chloride sold to third parties.

The following table sets forth certain financial information of the Company under Chilean GAAP (in millions of U.S. dollars) for each of the periods indicated, as a percentage of revenues:

	Year ended December 31,
	2007						2006						2005
	US$			%			US$			%			US$			%
Total revenues		1,187.5			100.0			1,042.9			100.0			896.0			100.0
Cost of goods sold		(857.7	)		(72.2	)		(753.3	)		(72.2	)		(652.9	)		(72.9	)
Gross margin		329.8			27.8			289.6			27.8			243.1			27.1
Selling and administrative expenses		(70.3	)		(5.9	)		(69.7	)		(6.7	)		(61.9	)		(6.9	)
Operating income		259.5			21.9			219.9			21.1			181.2			20.2

Non-operating income		25.9			2.2			19.2			1.8			16.4			1.8
Non-operating expenses		(53.0	)		(4.5	)		(55.3	)		(5.3	)		(50.8	)		(5.7	)

Income before income taxes		232.4			19.6			183.8			17.6			146.8			16.3
Income tax		(48.6	)		(4.1	)		(37.9	)		(3.6	)		(32.5	)		(3.6	)
Minority interest		(3.8	)		(0.3	)		(4.7	)		(0.5	)		(1.0	)		(0.1	)
Amortization of negative goodwill		0.0			0.0			0.1			0.0			0.2			0.0

Net income		180.0			15.2			141.3			13.5			113.5			12.7

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Results of Operations - 2007 compared to 2006

During 2007, we generated total revenues of approximately US$1,187.5 million, which is approximately 13.9% higher than the US$1,042.9 million recorded for the year ended December 31, 2006.

The main factors that explain the increase in revenues and the operational variations in the different product lines are the following:

Specialty Plant Nutrition

Revenues from sales of specialty plant nutrition products increased 15.4% to US$580.8 million in 2007 from US$503.1 million in 2006. Set forth below are sales volume data in the specified year by product category.

		2007	2006	% Change

Sodium nitrate	Th. Ton	45.9	43.3	6	%
Potassium nitrate and sodium potassium nitrate	Th. Ton	695.3	615.0	13	%
Blended and other specialty fertilizers	Th. Ton	261.5	250.9	4	%
Other non-SQM specialty plant nutrients	Th. Ton	117.1	142.9	(18	)%
Potassium sulfate	Th. Ton	172.0	172.4	0	%

The year-over-year growth in revenues was mainly the result of favorable pricing conditions in this business segment, as well as increased sales volumes. On average, specialty plant nutrition prices increased 9% during the year, as a result of the tight supply scenario affecting global potassium-related markets, combined with a demand that continues to grow. The general lack of potassium in the soil found in developing countries is strongly pushing demand for potash. At the same time, our specialty plant nutrients have benefited from changing preferences on the part of consumers, who increasingly demand better-quality agricultural products, and as a result, farmers strive to improve yields in order to meet the increased demand. Rising prices began to have a beneficial effect on the Company’s results during the third quarter of 2007, and the upward trend was even more noticeable in the fourth quarter.

Higher prices in the Specialty Plant Nutrition segment were complemented by increased sales volumes during the year. Demand for specialty plant nutrients in European markets, which were affected by bad weather in 2006, recovered in 2007; as a result, the Company reported a year-over-year increase in sales volumes of water soluble potassium nitrate to Europe, and especially to Spain. During 2007 the Company also recorded a substantial increase in volumes of potassium nitrate sold to China. In addition, sales of potassium nitrate and sodium potassium nitrate in Latin America were higher in 2007, due in large part to the strong agriculture markets in Brazil. The decrease in sales volumes of other non-SQM specialty plant nutrients was predominantly due to the sale of our trading affiliate in Mexico during the third quarter of 2006.

Iodine and Iodine Derivatives

Revenues for iodine and iodine derivatives decreased 1.2% to US$215.1 million in 2007 from US$217.7 million in 2006. Set forth below are sales volume data in the specified year.

					2007			2006			% Change
Iodine and derivatives			Th. Ton			9.1			9.8			(7	)%

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The Company’s 2007 results in the Iodine and Iodine Derivatives segment for 2007 were driven by a combination of higher prices and lower volumes. Iodine prices increased approximately 7% compared to 2006, as rising production costs were reflected in the pricing. Further influencing prices was the growing demand at the global level, which during 2007 was driven predominantly by the use of iodine in such applications as x-ray contrast media for diagnostic imaging, biocides for paints and wood treatment products, and liquid crystal displays (LCDs).

Demand for iodine salts in LCD screens—iodine’s third-largest end market, where it is used in the production of polarizing film—grew by close to 30% in 2007. In particular, the LCD TV market has been expanding not only in terms of sales volumes, but also in terms of growing screen sizes; this tendency should continue in the future. Part of this growth in demand is being satisfied by iodine recycled in that same industry, as only a fraction of this product remains in the polarizing film. The remaining iodine, which producers used to discard, is now increasingly being reprocessed, and as a result, recycled iodine has become essentially an additional “competitor” in this market.

Higher pricing was offset by lower sales volumes in the year, as the Company decreased its total volumes by approximately 7% compared to 2006. This decrease was the result of an increasingly competitive market environment; other Chilean producers increased their production capacity during the year, and there were also increases in production from recycling.

Lithium and Lithium Derivatives

Revenues for lithium and lithium derivatives increased 39.5% to US$179.8 million in 2007 from US$128.9 million in 2006. Set forth below are sales volume data in the specified year.

					2007			2006			% Change
Lithium carbonate and derivatives			Th. Ton			28.6			30.4			(6	)%

Year-over-year revenue growth in this business line was driven by lithium prices, which increased approximately 48% in 2007. As expected, sales volumes decreased slightly compared to 2006, but this effect was outweighed by the substantial price increase observed during the year.

The favorable pricing conditions that have prevailed in the past couple of years have prompted Chinese producers to increase their lithium capacity. As a result of this new production, tightness in lithium carbonate supply observed during the first half of 2007 eased in the second half.

World lithium demand continues to grow at rates of around 7% per year. As in recent periods, the upward trend during 2007 was driven in large part by demand for lithium in rechargeable batteries, which market grew an estimated 20% during the year. Lithium-ion batteries—traditionally used in mobile phones, laptops, digital cameras, and many other devices—are being utilized more and more in cordless power tools, which are more lithium-intensive than some of the other applications and therefore represent considerable growth potential.

During 2007, this business line also benefited from growth in the market for lubricating greases, the primary end market for lithium hydroxide. In addition, the Company recorded revenues from sales of butyllithium and lithium chloride on the order of US$10.7 million for the year.

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Industrial Chemicals

Revenues for industrial chemicals increased 13.9% to US$81.2 million in 2007 from US$71.3 million in 2006. Set forth below are sales volume data in the specified year by product category.

		2007		2006		% Change
Industrial nitrates	Th. Ton		175.2		161.7		8	%
Boric acid	Th. Ton		9.2		9.9		(7	)%

Revenues from sales of industrial chemicals increased in 2007 largely as a consequence of rising prices. Prices of industrial nitrates and prices of specialty plant nutrients are indirectly related, and on average prices for this business line were approximately 6% higher than they were in 2006.

Growth in sales volumes in the Industrial Chemicals business segment was primarily explained by sales in Latin America. Favorable conditions in the commodities markets in recent periods have resulted in increased mining activity in this region, which in turn has generated greater demand for explosives, in which the Company’s industrial-grade sodium nitrate is a key component. In addition, the Company reported higher volumes of sodium nitrate sold in Europe during the year, which is partly due to the use of this product as a medium for heat storage in a solar energy project in Spain.

Potassium Chloride and Other Commodity Fertilizers

Potassium chloride

Revenues from sales of potassium chloride increased 59.8% to US$51.3 million in 2007 from US$32.1 million in 2006. Set forth below are sales volume data in the specified year.

					2007			2006			% Change
Potassium chloride			Th. Ton			179.0			126.4			42	%

The substantial year-over-year increase in potassium chloride revenues was driven by prices, which rose nearly 13% in 2007, as well as sales volumes, which were more than 40% higher than sales volumes in 2006. Global potash prices have experienced a sustained increase in recent periods, due to the combined effect of tight supply and growing demand.

Other commodity fertilizers

Revenues from sales of other commodity fertilizers decreased from US$89.8 million in 2006 to US$79.4 million in 2007, as a result of the sale of our trading affiliate in Mexico during the third quarter of 2006.

Production Costs

During 2007, the Company continued to be affected by higher costs related to energy, raw materials and the appreciation of the Chilean peso against the U.S. dollar, affecting the Company’s peso-denominated expenses. The ongoing natural gas shortages have forced us to use higher-cost alternative fuels, such as diesel and fuel oil. Additionally, the price increases that have affected raw materials and spare parts in recent years maintained their upward trend, and the Chilean peso has continued to strengthen against the U.S. dollar. These factors had a significant impact during 2007.

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Gross Profit

As a result of the factors described above, gross profit increased 13.9% to US$329.8 million in 2007 from US$289.6 million in 2006.

Selling and Administrative Expenses

Selling and administrative expenses totaled US$70.3 million (5.9% of revenues) for the full year, compared to the US$69.7 million (6.7% of revenues) recorded during full-year 2006.

Operating Income

As a result of the factors described above, operating income increased 18.0% to US$259.5 million in 2007 from US$219.9 million in 2006.

Non-Operating Income and Expenses

The Company recorded a non-operating loss of US$27.1 million for 2007 which is lower than the US$36.0 million loss recorded for full-year 2006.

Net financial expenses totaled US$(10.6) million during 2007. This figure was lower than the US$(16.2) million recorded for 2006, primarily as a result of the lower levels of debt held by the Company during 2007.

Income Taxes

In 2007, income taxes were US$48.6 million, resulting in an effective consolidated tax rate of 20.9%, compared to income taxes of US$37.9 million and an effective consolidated tax rate of 20.6% in 2006. In accordance with Chilean law, SQM and each of its Chilean subsidiaries compute and pay taxes on an individual basis, not on a consolidated basis. We had tax loss carry-forwards of US$142.2 million as of December 31, 2007, the majority of which have no expiration dates and are expected to be utilized in the future.

The corporate income tax rate in Chile was 17% for 2007 and 2006. The Company’s effective tax rate is higher than the Chilean rate because its foreign operations are subject to higher tax rates.

The 28.2% increase in income taxes is mainly due to the increase in our taxable income.

For a more detailed analysis of the Company’s income and deferred taxes see Note 14 to the Consolidated Financial Statements.

Results of Operations - 2006 compared to 2005

During 2006, we generated total revenues of approximately US$1,042.9 million, which was approximately 16.4% higher than the US$896.0 million recorded for the year ended December 31, 2005.

The main factors that explain the increase in revenues and the operational variations in the different product lines were the following:

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Specialty Plant Nutrition

Revenues from sales of specialty plant nutrition products increased 3.1% to US$503.1 million in 2006 from US$487.8 million in 2005. Set forth below are sales volume data in the specified year by product category.

		2006		2005		% Change
Sodium nitrate	Th. Ton		43.3		63.3		(32	)%
Potassium nitrate and sodium potassium nitrate	Th. Ton		615.0		690.2		(11	)%
Blended and other specialty fertilizers	Th. Ton		250.9		217.5		15	%
Other non-SQM specialty plant nutrients	Th. Ton		142.9		133.2		7	%
Potassium sulfate	Th. Ton		172.4		178.6		(3	)%

Lower sales volumes obtained during 2006 were mainly explained by the following:

Increased production levels reached by other producers mainly affected our potassium nitrate and sodium potassium nitrate sales in the Brazilian market. Our sales of sodium potassium nitrate to the Brazilian market were also affected by a reduction in the planted hectares of some of our target crops. This reduction in the planted hectares is believed to have been caused in part by the strengthening of the Real against the US dollar observed during the first half of 2006, affecting the export volumes of local producers.

Spain, an important market for our soluble plant nutrients, was affected by one of the most severe droughts of recent years. This situation generated a decrease of 6% in the sales volume for that market compared with 2005.

Lower volume of sodium nitrate was sold to the Japanese market. This effect was caused by a delay in arrival of a vessel destined to Japan that was rescheduled for the first half of 2007.

The lower sales volume observed during this period were partially offset by better price conditions across most of our markets. Specialty plant nutrition revenues were therefore mainly driven by improved pricing conditions, increasing on average 5% as compared with the previous year. The increase in prices responded mainly to the positive pricing conditions for all potassium-related fertilizers.

Consistent with the Company’s decision to focus more on its core businesses, during the last part of 2006, SQM sold its stakes in the Italian company Impronta and in the Mexican company Fertilizantes Olmeca.

Regarding our Chilean operation, during 2006 our subsidiary Soquimich Comercial had revenues of US$141.2 million with a significant increase in margins related to the fertilizer trading activity.

Iodine and Iodine Derivatives

Revenues for iodine and iodine derivatives increased 46% to US$217.7 million in 2006 from US$149.1 million in 2005. Set forth below are sales volume data in the specified year.

					2006			2005			% Change
Iodine and derivatives			Th. Ton			9.8			8.1			21	%

Table of Contents

The higher revenues reached in this business line were explained both by higher volume and higher prices:

Higher volume was mainly due to the acquisition of DSM’s iodine business and the capacity increase in Nueva Victoria, both during first quarter 2006

The most important applications of iodine and derivatives increasing in demand were iodophors and biocides, in the U.S.; LCD polarizing film in Asia and x-ray contrast media in Europe and USA.

On average, iodine prices increased by approximately 20% or close to US$3.50 per kilogram as compared with 2005.

During the early part of 2006, SQM acquired the iodine and iodine derivatives business of the Dutch "DSM Group" for a base payment of US$72 million plus working capital. The acquisition provided SQM with logistics, commercial and productive synergies and reaffirmed SQM´s commitment with the development and strengthening of its core businesses and with the iodine industry as part of its strategy to be a long-term reliable iodine supplier.

Lithium and Lithium Derivatives

Revenues for lithium and lithium derivatives increased 58.4% to US$128.9 million in 2006 from US$81.4 million in 2005. Set forth below are sales volume data in the specified year.

					2006			2005			% Change
Lithium carbonate and derivatives			Th. Ton			30.4			27.8			9	%

The higher revenues recorded in this business line were mainly explained by better price conditions. The strong demand observed during the last few years, with a growth of approximately 6% during 2006, positively affected pricing conditions.

The higher sales volume observed during 2006 was mainly due to the increase in consumption in markets such as batteries in Japan, Korea and China and glass in Europe. Another application with an important increase during this period was the continuous casting powder used in the steel industry in Asia.

As the lithium carbonate plant was working close to nameplate capacity, the increase in volume was limited by this fact and the use of inventories.

Regarding lithium hydroxide, demand continued to increase, also generating improved pricing conditions. During 2006 prices increased by more than 30% compared to the previous year.

Table of Contents

Title of each class		Name of each exchange on which registered
Series A shares, in the form of American Depositary Shares Series B shares, in the form of American Depositary Shares		New York Stock Exchange New York Stock Exchange

Series A shares	142,819,552
Series B shares	120,376,972

		Page

PRESENTATION OF INFORMATION		iii
GLOSSARY		iii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		vi

PART I		1
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3.	KEY INFORMATION	1
ITEM 4.	INFORMATION ON THE COMPANY	12
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	45
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	62
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	74
ITEM 8.	FINANCIAL INFORMATION	76
ITEM 9.	THE OFFER AND LISTING	78
ITEM 10.	ADDITIONAL INFORMATION	81
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	92
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	93

PART II		94
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	94
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	94
ITEM 15.	CONTROLS AND PROCEDURES	94
ITEM 16.	RESERVED	95
ITEM 16.A.	AUDIT COMMITTEE FINANCIAL EXPERT	95
ITEM 16.B.	CODE OF ETHICS	95
ITEM 16.C	PRINCIPAL ACCOUNTANT FEES AND SERVICES	96
ITEM 16.D	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	96
ITEM 16.E	PURCHASES OF EQUITY SECURITIES BY THE ISSUERS AND AFFILIATED PURCHASERS	96

PART III		97
ITEM 17.	FINANCIAL STATEMENTS	97
ITEM 18.	FINANCIAL STATEMENTS	97
ITEM 19.	EXHIBITS	97
SIGNATURES		98

CONSOLIDATED FINANCIAL STATEMENTS		99
EXHIBIT 1.1
EXHIBIT 8.1
EXHIBIT 12.1
EXHIBIT 12.2
EXHIBIT 13.1
EXHIBIT 13.2

	2007			2006
	Th US$			Th US$
Chilean pesos		36,975			(41,922	)
Brazilian real		(1,281	)		(1,332	)
Euro		31,730			27,167
Japanese yen		692			730
Mexican pesos		(2,900	)		1,587
South African rand		8,346			11,676
Dirhams		10,012			13,554
Other currencies		8,584			7,854

Total, net		92,158			19,314

On Balance Sheet Financial Instruments	Interest Rate	Issue Date	Maturity Date	Amortizations

Bond – US$200 million	6.125%	Apr. 5, 2006	Apr. 15, 2016	Bullet
Bond – UF 2.85 million (1)	4.00%	Jan. 24, 2006	Dec. 1, 2026	Semiannual partial amortizations
Syndicated loan – US$100 million	LIBOR 3M + 0.375%	Mar. 3, 2005	Feb. 25, 2010	Bullet
Syndicated loan – US$ 80 million	LIBOR 6M + 0.30%	Nov. 28, 2006	Nov. 28, 2011	Bullet

		2006		2005 (1)		% Change
Industrial nitrates	Th. Ton		162		176.3		(8	)%
Boric acid	Th. Ton		10		6.3		59	%

*Maturity()**	Amount ( millions of US$)
2009		5.13
2010		105.13
2011		85.13
2012		5.13
2013		5.13
2014 and thereafter		266.71
Total		472.36

The following table sets forth our material expected obligations and commitments as of December 31, 2007:

			Less Than		1 - 3		3 - 5		More Than
	Total		1 year		years		Years		5 years
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$
Long- and short-term debt		498,126		11,475		100,000		80,000		306,651
Capital lease obligations		974		244		730		-		-
Operating leases (*)		120,049		10,760		9,094		9,094		91,101
Purchase commitments		27,488		27,488		-		-		-
Staff severance indemnities		20,679		-		-		-		20,679
Total Contractual Obligations and Commitments		667,316		49,967		109,824		89,094		418,431

Directors
Name	Position	Current position held since
Julio Ponce L. (1)	Chairman of the Board and Director	September 1987
	Mr. Ponce is a Forestry Engineer with a degree from the Universidad de Chile. He joined the Company in 1981. He is also Chairman of the Board of the following corporations: Sociedad de Inversiones Pampa Calichera S.A., Sociedad de Inversiones Oro Blanco S.A., Norte Grande S.A. and Soquimich Comercial S.A. He is the brother of Luis Eugenio Ponce.

Wayne R. Brownlee	Vice Chairman of the Board and Director	December 2001
	Mr. Brownlee is Executive Vice-President, Treasurer and Chief Financial Officer of Potash Corporation of Saskatchewan, Inc. Mr. Brownlee earned degrees in Science and Business Administration from the University of Saskatchewan. He is on the Board of Great Western Brewing Company as well as PhilomBios, an agricultural biotechnology company. He became a director of SQM in December 2001.

Hernán Büchi B.	Director	April 1993
	Mr. Büchi is a Civil Engineer with a degree from the Universidad de Chile. He served as Vice Chairman of SQM's Board from January 2000 to April 2002. He is currently a Board member in Quiñenco S.A. Banco de Chile, S.A.C.I. Falabella and Madeco S.A., among others. He is also Chairman of the Board of Universidad del Desarrollo.

José María Eyzaguirre B.	Director	December 2001
	Mr. Eyzaguirre is a lawyer and is a partner of the Chilean law firm Claro y Cia. He obtained his law degree from the Universidad de Chile and was admitted to the Chilean Bar in 1985. In 1987, he obtained a Master's Degree from the New York University School of Law. He was admitted to the New York Bar in 1988. He is also a member of the board of directors of Gasoducto del Pacífico S.A., a transandean gas pipeline, Embotelladora Andina S.A., a bottler of The Coca Cola Company, and Chairman of the Board of directors of Club de Golf Valle Escondido.

Daniel Yarur E.	Director	April 2003
	Mr. Yarur is an Information Engineer with a degree from the Universidad de Chile and holds an MSc in Finance at the London School of Economics and an AMP from Harvard Business School. He is a member of the Board of Banco de Crédito e Inversiones, Antofagasta P.L.C. (based in London), Antofagasta Minerals, Invertec Pesquera Mar de Chiloé S.A., President Fundación Chilena de Ajedrez, President Fondo de Inversiones Alekine. Mr Yarur was Chairman of the Chilean Securities and Exchange Commission from 1994 to 2000 and was also Chairman of the Council Organization of the Securities Regulators of America. He is also a Professor in the Faculty of Economic and Administrative Sciences, Universidad de Chile.

Wolf von Appen	Director	May 2005
	Mr. Von Appen is an entrepreneur. He is currently a Board member of Sociedad de Fomento Fabril and Vice president of Centro de Estudios Publicos.

Eduardo Novoa C.	Director	April 2008
	Mr. Novoa is an economist with a degree from the Universidad de Chile and holds a Master’s in Business Administration from the University of Chicago. He has held positions in business development, corporate level strategic direction and asset management at a number of Chilean and multinational companies, either as a Board member, Chief Development Officer, Country Manager or CEO. Mr. Novoa currently provides strategic advisory services, and he is also a member of the Board of Directors of Esval, as well as other private companies.

Kendrick T. Wallace	Director	December 2001
	Mr. Wallace is a lawyer who graduated from Harvard Law School. He is now Senior Vice President and General Counsel of Yara International ASA in Oslo, Norway. Prior to the spin-off of Yara International ASA from Norsk Hydro ASA, he was the chief legal counsel of Norsk Hydro ASA for North and South America in Tampa, Florida. Before that he was a partner in the law firm of Bryan Cave LLP in Kansas City, Missouri. Mr. Wallace is a member of the Board of Directors of Yara Brasil Ltda. in Brasil, OAO Minudobreniya (Rossosh) in Russia and of a number of subsidiaries of Yara International ASA. He is also on the Board of Directors of Norte Grande S.A., Sociedad de Inversiones Oro Blanco S.A. and Sociedad de Inversiones Pampa Calichera S.A.

Executive Officers
Name	Position	Current position held since
Patricio Contesse G.	Chief Executive Officer	March 1990
	Mr. Contesse is a Forestry Engineer with a degree from the Universidad de Chile. He joined the Company in 1981 as CEO, a position he held until 1982, and again in 1988. In the past, he was CEO of Celco Limitada, Schwager S.A. and Compañía de Aceros del Pacífico S.A. He has also served as Operations Senior Executive Vice President of Codelco Chile, President of Codelco USA and Executive President of Codelco Chile. Mr. Contesse is also a member of the Board of Soquimich Comercial.

Patricio de Solminihac T.	Chief Operating Officer and Executive Vice President	January 2000
	Mr. de Solminihac is an Industrial Engineer with a degree from the Pontificia Universidad Católica de Chile and holds a Master in Business Administration from the University of Chicago. He joined the Company in 1988 as Business Development Vice President. In 1989, he became General Manager and later on he became Vice Chairman of the Board of SQM, a position he held from 1989 through January 2000. Mr. de Solminihac was Country Manager for Raychem Corporation. Currently he is a member of the Board of Empresas Melón S.A. and CEM. Mr. de Solminihac is also a member of the Board of Soquimich Comercial.

Matías Astaburuaga S.	General Counsel and Senior Vice President	February 1989
	Mr. Astaburuaga is a lawyer with a degree from the Pontificia Universidad Católica de Chile. He joined the Company in 1989. Before that, he was Regional Counsel of The Coca Cola Export Corporation, Andean Region and Regional Counsel of American Life Insurance Company, Latin America Region.

Ricardo Ramos R. (2)	Chief Financial Officer and Business Development Senior Vice President	November 1994
	Mr. Ramos is an Industrial Engineer with a degree from the Pontificia Universidad Católica de Chile. He joined SQM in 1989. Mr. Ramos is also a member of the Board of Soquimich Comercial.

Jaime San Martín L. (2)	Nueva Victoria Operations Senior Vice President	March 2008
	Mr. San Martín is a Transportation Engineer with a degree from the Pontificia Universidad Católica de Chile. He joined the Company in 1995 as Project Manager. He became Metallic Mining Development Manager in 1997, and Development Manager in 1998, Business Development and Mining Property Vice President in 1999, Technical Senior Vice President in 2001, and Senior Vice President of Lithium Operations and Mining Affairs in January 2007.

Eugenio Ponce L.	Corporate Commercial Senior Vice President	March 1999
	Mr. Ponce is a Mechanical Engineer with a degree from the Universidad Católica de Valparaíso. In 1981, he joined the Company as a Sales Manager. He became Commercial Manager in 1982, Commercial and Operations Manager in 1988 and Chief Executive Officer of SQM Nitratos S.A. in 1991. In the past he was member of the Board of IANSA. Currently he is a member of the board of Soquimich Comercial and Vice Chairman of the Board of Pampa Calichera. He is Julio Ponce’s brother.

Mauricio Cabello C. (2)	Nitrates-Iodine Operations Senior Vice President	June 2005
	Mr. Cabello is a Mechanical Engineer with a degree from the Universidad de Santiago de Chile. He joined the Company in 2000 as Maintenance Superintendent of SQM Salar. He became Maintenance Manager of SQM's nitrates and iodine operations in 2002 and Production Manager of SQM's nitrates and iodine operations in 2004. He previously worked in various engineering-related positions in Pesquera San José S.A., Pesquera Coloso S.A. and Cintac S.A.

Pauline De Vidts S.	Safety, Health & Environment Senior Vice President	June 2005
	Mrs. De Vidts is an Industrial Engineer with a degree from the Pontificia Universidad Católica de Chile and holds a Ph.D. in Chemical Engineering from Texas A&M University. She joined the Company in 1996 to work in process development for the Salar de Atacama Operations, becoming Development Manager for these operations in 1998, and in 2001, she became Corporate R&D and Environmental Issues Vice President.

Juan Carlos Barrera P. (2)	Salar and Lithium Operations Senior Vice President	January 2007
	Mr. Barrera is an Industrial Engineer with a degree from the Pontificia Universidad Católica de Chile and holds a Master in Business Administration degree from Tulane University and a Master in Business Administration degree from Universidad de Chile. He joined the Company in 1991 as an advisor in the Business Development area and has served in many positions since then. In 1995, he became Business Development Manager of SQM Nitratos S.A. In 1999, Corporate Quality Manager, in 2000 Corporate Supply Chain Vicepresident and, in 2006, General Manger of Soquimich Comercial S.A.

Daniel Jiménez Sch. (2)	Human Resources and Corporate Affairs Senior Vice President	May 2007
	Mr. Jiménez is an Industrial Engineer with a degree from the Pontificia Universidad Católica de Chile and holds a Masters in Business Administration degree from Old Dominion University. He joined the Company in 1991, holding several positions in the finance and sales areas at SQM’s headquarters and foreign subsidiaries in USA and Belgium, countries he was based in for 8 years. In 2002, he became VP Sales and Marketing Iodine, Lithium and Industrial Chemicals.

	SQM S.A.				SQMC				TOTAL
Name	Meeting (Ch$)		Committee (Ch$)		Meeting (Ch$)		Committee (Ch$)		(Ch$)
Ponce Lerou, Julio		557,486,448		-		67,824,618		-		625,311,066
Büchi Buc, Hernán		80,405,862		5,605,994		-		-		86,011,856
Brownlee, Wayne R.		81,386,996		-		-		-		81,386,996
Eyzaguirre, José María		82,305,947		-		-		-		82,305,947
Silva, José Antonio (1)		80,467,889		11,301,818		-		-		91,769,707
Wallace, Kendrick T.		81,386,996		-		-		-		81,386,996
Yarur, Daniel		81,386,996		12,220,925		-		-		93,607,921
Von Appen, Wolf		83,226,832		-		-		-		83,226,832

Total		873,752,786		29,128,737		67,824,618		-		1,225,007,321

Section	NYSE Standards	SQM practices pursuant to Chilean regulations
303A.01	The majority of the listed company directors must be independent.	There is no legal obligation to have a majority of independent directors on the Board.

303A.02	Independence Test	A Director is considered independent if he would have been elected without the vote of the controlling shareholder and related persons and entities.

303A.03	Non-management directors must meet at regularly scheduled executive sessions without management.	These meetings are not needed given that directors do not also serve as executive officers.

303A.04	Listed companies must have a nominating/corporate governance committee composed entirely of independent directors, and must have a written charter.	This committee is not required as such in the Chilean regulations. Pursuant to Chilean regulations SQM has a Directors' Committee (see Board practices above).

303A.05	Listed companies must have a compensation committee composed entirely of independent directors, and must have a written charter	This committee is not required as such in the Chilean regulations. Pursuant to Chilean regulations SQM has a Director’s Committee (see Board practices above) that is in charge of reviewing management’s compensation.

303A.06	Listed companies must have an audit committee.	This committee is not required as such in the Chilean regulations. On May 24, 2005, the Board of Directors approved the establishment of an audit committee to comply with the requirements of the NYSE corporate governance rules.

	% Beneficial ownership
May 31, 2008		34.03	%
December 31, 2007		34.03	%
December 31, 2006		32.28	%

Shareholder	Number of Series A Shares Beneficially Owned		% Series A Shares			Number of Series B Shares Beneficially Owned		% Series B Shares			% Total Shares
Sociedad de Inversiones Pampa Calichera S.A. (1) (2)		57,934,256		40.56	%		12,490,092		10.38	%		26.76	%
Inversiones El Boldo Ltda. (3)		44,582,453		31.22	%		17,740,419		14.74	%		23.68	%
The Bank of New York		53,850		0.04	%		45,265,853		37.56	%		17.20	%
Inversiones RAC Chile Ltda. (3)		19,200,242		13.44	%		2,699,773		2.24	%		8.32	%
Inversiones Global Mining (Chile ) Limitada. (1)		13,798,539		9.66	%		-		0.00	%		5.24	%
AFP Habitat S.A. (4)		-		0.00	%		6,761,211		5.62	%		2.57	%
AFP Provida S.A. (4)		-		0.00	%		6,421,524		5.33	%		2.44	%
AFP Capital S.A. (4)		9,335		0.01	%		5,418,113		4.50	%		2.06	%
Kowa Group (5)		5,292,450		3.71	%		50,000		0.04	%		2.03	%
Banco de Chile por Cuenta de Terceros		-		0.00	%		5,270,961		4.38	%		2.00	%

Th. US$	2007			2006			2005

Foreign sales		954,641			878,066			739,924
Total sales		1,187,527			1,042,886			895,970

% of foreign sales		80.39	%		84.20	%		82.60	%

Dividends			Per Share		Per ADS(1)
Declared for the business year	Paid in		Ch$		US$

2003		2004		55.05		0.088
2004		2005		106.56		0.182
2005		2006		145.11		0.279
2006		2007		183.96		0.349
2007		2008		204.14		0.445

	Santiago Stock Exchange								NYSE
	Per Share (1)								Per ADS
	Series A				Series B				Series A (2)				Series B (3)
	High		Low		High		Low		High		Low		High		Low
	Ch$		Ch$		Ch$		Ch$		US$		US$		US$		US$
2003		3,050		1,630		2,995		1,580		47.10		22.00		4.62		3.97
2004		3,900		2,350		3,580		2,160		68.00		37.05		6.28		3.30
2005		7,000		3,600		7,170		3,269		129.40		66.80		13.34		5.75
2006		7,100		5,220		7,347		5,000		137.5		93.15		13.95		8.99
2007		12,100		7,100		9,985		6,800		234.80		135.00		20.04		12.50

	Expected Maturity Date
On Balance Sheet Financial Instruments	2008		2009		2010		2011		2012 and thereafter		Total		Fair Value
(in thousands of U.S. dollars)

Fixed Rate (US$)		23,094		22,775		22,471		22,167		367,446		457,953		313,845
200m US$ bond - Int. rate: 6.125%		12,250		12,250		12,250		12,250		255,125		304,125		211,668
3m UF bond swapped to US$ at 5.84% (1)		10,844		10,525		10,221		9,917		112,321		153,828		102,177

Variable Rate (US$)		7,436		7,540		104,570		84,096		-		203,643		179,665
100m US$ loan – Avg. Int.: 4.083%		4,052		4,230		100,954		-		-		109,236		99,692
80m US$ loan – Avg. Int.: 4.441%		3,384		3,310		3,616		84,096		-		94,407		79,972

Total		30,531		30,315		127,041		106,263		367,446		661,596		493,510

Report of Independent Registered Public Accounting Firm	F-1

Report of Independent Registered Public Accounting Firm on the internal control over financial reporting as of December 31, 2007	F-2

Consolidated Financial Statements:

Audited Consolidated Balance Sheets as of December 31, 2007 and 2006	F-4

Audited Consolidated Statements of Income for each of the three years in the period ended December 31, 2007, 2006 and 2005	F-6

Audited Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2007, 2006 and 2005	F-7

Notes to the Audited Consolidated Financial Statements	F-9

Supplementary Schedules*

Exhibit No.		Exhibit
1.1		By-laws (Estatutos) of the Company**
8.1		Significant subsidiaries of the Company
12.1		Section 302 Chief Executive Officer Certification
12.2		Section 302 Chief Financial Officer Certification
13.1		Section 906 Chief Executive Officer Certification
13.2		Section 906 Chief Financial Officer Certification

Contents


Report of Independent Registered Public Accounting Firm	F-1
Report of Independent Registered Public Accounting Firm on the internal control over financial reporting as of December 31, 2007	F-2

Consolidated Financial Statements:
Audited Consolidated Balance Sheets as of December 31, 2007 and 2006	F-4
Audited Consolidated Statements of Income for each of the three years in the period ended December 31, 2007	F-6
Audited Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2007	F-7
Notes to the Audited Consolidated Financial Statements	F-9

US$	-	United States dollars
ThUS$	-	Thousands of United States dollars
Ch$	-	Chilean pesos
ThCh$	-	Thousands of Chilean pesos
ThEuro	-	Thousands of Euros
UF	-	or Unidad de Fomento. The UF is an inflation-indexed, Chilean peso-denominated monetary unit. The UF rate is set daily in advance, based on the change in the Consumer Price Index of the previous month.

			As of December 31,
ASSETS	Note		2007			2006
			ThUS$			ThUS$
Current assets
Cash and cash equivalents				164,212			183,943
Trade accounts receivable, net		4		224,444			177,406
Other accounts receivable, net		4		6,249			4,857
Accounts receivable from related companies		5		61,042			65,640
Inventories, net		6		387,768			365,499
Recoverable taxes				31,322			32,830
Prepaid expenses				4,197			3,885
Other current assets				24,720			11,815
Total current assets				903,954			845,875

Property, plant and equipment, net		7		983,449			916,928

Other Assets
Investments in related companies		8		23,935			18,329
Goodwill, net		9		34,236			36,331
Negative goodwill, net		9		(1,291	)		(1,928	)
Intangible assets, net				3,814			4,523
Long-term accounts receivable, net		4		604			388
Long-term accounts receivable from related companies		5		2,000			2,000
Other long-term assets		10		35,618			48,756
Total other assets				98,916			108,399

			As of December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY	Note		2007		2006
			ThUS$		ThUS$
Current liabilities
Short-term bank debt		11		1,806		58,350
Current portion of long-term bank debt		11		801		828
Current portion of bonds payable		12		8,868		5,540
Dividends payable				531		264
Accounts payable				99,030		80,810
Notes and accounts payable to related companies		5		6,880		5,807
Accrued liabilities		13		22,314		16,404
Withholdings				22,931		11,386
Income taxes				9,514		8,722
Deferred income				10,858		4,065
Deferred income taxes		14		6,214		4,088
Other current liabilities				2,675		1,378
Total current liabilities				192,422		197,642

Long-term liabilities
Long-term bank debt		11		180,000		180,000
Bonds payable		12		306,651		300,724
Deferred income taxes		14		55,409		47,361
Long-term accrued liabilities		15		22,671		19,464
Other long-term liabilities				731		849
Total long-term liabilities				565,462		548,398

Minority interest		16		45,999		39,213

Commitments and contingencies		23		-		-

Shareholders' equity
Paid-in capital		17		477,386		477,386
Other reserves		17		163,442		155,190
Retained earnings		17		541,608		453,373
Total Shareholders' equity				1,182,436		1,085,949
Total Liabilities and Shareholders' equity				1,986,319		1,871,202

			For the years ended December 31,
	Note		2007			2006			2005
			ThUS$			ThUS$			ThUS$
Operating income

Sales				1,187,527			1,042,886			895,970
Cost of sales				(857,765	)		(753,336	)		(652,901	)
Gross margin				329,762			289,550			243,069
Selling and administrative expenses				(70,273	)		(69,662	)		(61,878	)
Operating income				259,489			219,888			181,191

Non-operating income and expense

Non-operating income		19		25,948			19,293			16,433
Non-operating expenses		19		(53,032	)		(55,341	)		(50,755	)
Non-operating loss				(27,084	)		(36,048	)		(34,322	)

Income before income taxes, minority interest and amortization of negative goodwill				232,405			183,840			146,869

Income tax expense		14		(48,592	)		(37,916	)		(32,527	)

Income before minority interest and amortization of negative goodwill				183,813			145,924			114,342

Minority interest		16		(3,792	)		(4,715	)		(1,039	)

Income before amortization of negative goodwill				180,021			141,209			113,303

Amortization of negative goodwill		9		-			68			203

Net income for the year				180,021			141,277			113,506

			For the years ended December 31
	Note			2007			2006			2005
				ThUS$			ThUS$			ThUS$
Cash flows from operating activities
Net income					180,021			141,277			113,506
Charges (credits) to income not representing cash flows:
Depreciation expense		7			97,826			90,354			70,054
Amortization of intangible assets					712			915			498
Write-offs and accruals					34,063			16,512			17,034
Equity participation in net income of unconsolidated investees					(3,643	)		(2,314	)		(3,073	)
Equity participation in net losses of unconsolidated investees					77			362			477
Amortization of goodwill		9			2,252			2,229			2,070
Amortization of negative goodwill		9			-			(68	)		(203	)
Loss (gain) on sales of assets					87			(809	)		216
Gains on sale of investment					(1,316	)		(732	)		-
Other credits to income not representing gash flows		22			(1,745	)		(2,762	)		(10,109	)
Other charges to income not representing cash flows		22			108,075			82,333			87,689
Foreign currency exchange and price-level restatement, net					(2,212	)		2,263			3,804
Net changes in operating assets and liabilities:
Accounts receivable					(25,830	)		(240	)		(15,838	)
Inventories					(34,983	)		(46,730	)		(58,807	)
Other assets					(6,437	)		7,917			(10,783	)
Accounts payable					(4,000	)		(23,359	)		(6,520	)
Interest payable					582			2,968			349
Net income taxes payable					(23,541	)		(49,515	)		(25,620	)
Other accounts payable					(2,760	)		(10,840	)		(10,517	)
VAT and taxes payable					(9,726	)		6,724			(3,282	)
Minority interest		16			3,792			4,715			1,039
Net cash provided by operating activities					311,294			221,200			151,984
Cash flows from financing activities
Proceeds from bank loans					-			259,257			185,000
Proceeds from issuance of bonds					-			299,833			-
Payments of dividends					(94,910	)		(74,566	)		(51,732	)
Repayment of bank loans					(57,089	)		(406,282	)		(6,000	)
Payment of bonds					(5,131	)		-			-
Payment of expenses for the issuance and placement of bonds payable					-			(6,629	)		-
Net cash provided by (used in) financing activities					(157,130	)		71,613			127,268
Cash flows from investing activities
Sales of property, plant and equipment					2,498			10,289			2,546
Sales of investments in related companies					1,478			5,790			-
Other investing income					399			500			1,345
Additions to property, plant and equipment					(165,640	)		(175,788	)		(185,603	)
Capitalized interest					(12,388	)		(10,948	)		(5,140	)
Purchase of permanent investments, net of cash acquired of ThUS$ 0, ThUS$ 24,311, 836 and 242 respectively					-			(88,885	)		(12,026	)
Other disbursements					(513	)		(504	)		(668	)
Net cash used in investing activities					(174,166	)		(259,546	)		(199,546	)
Effect of inflation on cash and cash equivalents					271			2,720			1,497
Net change in cash and cash equivalents					(19,731	)		35,987			81,203
Beginning balance of cash and cash equivalents					183,943			147,956			66,753
Ending balance of cash and cash equivalents		2e)			164,212			183,943			147,956

	Direct or indirect ownership
	2007		2006		2005
Foreign subsidiaries:		%		%		%
Nitrate Corp. of Chile Limited (United Kingdom)		100.00		100.00		100.00
Soquimich SRL (Argentina)		100.00		100.00		100.00
Nitratos Naturais do Chile Ltda. (Brazil)		100.00		100.00		100.00
SQM Europe NV (Belgium)		100.00		100.00		100.00
SQM North America Corp. (USA)		100.00		100.00		100.00
North American Trading Company (USA)		100.00		100.00		100.00
SQM Perú S.A.		100.00		100.00		100.00
SQM Corporation NV (Dutch Antilles)		100.00		100.00		100.00
S.Q.I. Corporation NV (Dutch Antilles)		100.00		100.00		100.00
Soquimich European Holding BV (Holland)		100.00		100.00		100.00
PTM - SQM Ibérica S.A. (Spain)		-		100.00		100.00
SQMC Holding Corporation LLP (USA)		100.00		100.00		100.00
SQM Ecuador S.A.		100.00		100.00		100.00
Cape Fear Bulk LLC (USA)		-		51.00		51.00
SQM Investment Corporation NV (Dutch Antilles)		100.00		100.00		100.00
SQM Brasil Ltda.		100.00		100.00		100.00
Royal Seed Trading Corporation AVV (Aruba)		100.00		100.00		100.00
SQM Japan K.K.		100.00		100.00		100.00
SQM Oceanía PTY Limited (Australia)		100.00		100.00		100.00
SQM France S.A.		100.00		100.00		100.00
RS Agro-Chemical Trading AVV (Aruba)		100.00		100.00		100.00
SQM Comercial de México S.A. de C.V.		100.00		100.00		100.00
SQM Indonesia		80.00		80.00		80.00
SQM Virginia LLC (USA)		100.00		100.00		100.00
Agricolima S.A. de C.V. (Mexico)		100.00		100.00		100.00
SQM Venezuela S.A.		100.00		100.00		100.00
SQM Italia SRL (Italy)		100.00		100.00		95.00
Comercial Caiman Internacional S.A. (Cayman Islands)		100.00		100.00		100.00
SQM Africa PTY (South Africa)		100.00		100.00		100.00
Fertilizantes Olmeca y SQM S.A. de C.V. (Mexico)		-		-		100.00
Administración y Servicios Santiago S.A. de C.V. (Mexico)		100.00		100.00		100.00
SQM Lithium Specialties LLC (USA)		100.00		100.00		100.00
SQM Nitratos México S.A. de C.V. (Mexico)		51.00		51.00		51.00
Fertilizantes Naturales S.A. (Spain)		66.67		66.67		50.00
Iodine Minera B.V. (Holland)Fertilizantes Naturales S.A. (Spain) (1)		100.00		100.00		-
SQM Dubai – Fzco (United Arab Emirates).		100.00		100.00		100.00

	US$

December 31, 2005		35.07
December 31, 2006		34.44
December 31, 2007		39.49

	Estimated years of useful life

Mining Concessions		7 – 13
Building and infrastructure		3 – 80
Machinery and equipment		3 – 35
Other		2 – 30

					Between 90 days				Total
	Up to 90 days				And 1 year				Short-term (net)
	2007		2006		2007		2006		2007			2006
	ThUS$		ThUS$		ThUS$		ThUS$		ThUS$			ThUS$
Short-term receivables
Trade accounts receivable		118,229		95,111		52,444		41,743		170,673			136,854
Allowance for doubtful accounts										(6,203	)		(7,419	)
Notes receivable		43,784		50,859		19,459		354		63,243			51,213
Allowance for doubtful accounts										(3,269	)		(3,242	)
Total trade accounts receivable and notes receivable, net										224,444			177,406

Other accounts receivable		7,355		5,582		71		407		7,426			5,989
Allowance for doubtful accounts										(1,177	)		(1,132	)
Other accounts receivable, net										6,249			4,857

Long-term receivables										604			388

	Chile						Africa and Middle East						Asia and Oceania and Other						North America, Mexico and Canada						Latin America and the Caribbean						Total
	2007			2006			2007			2006			2007			2006			2007			2006			2007			2006			2007			2006
	ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$			ThUS$

Net short-term trade accounts receivable
Balance		60,999			42,375			50,389			43,402			9,352			4,575			28,134			28,730			15,596			10,353			164,470			129,435
% of total		37.08	%		32.74	%		30.64	%		33.53	%		5.69	%		3.53	%		17.11	%		22.20	%		9.48	%		8.00	%		100.00	%		100.00	%

Net short-term notes receivable
Balance		53,713			41,270			429			2,093			490			340			392			994			4,950			3,274			59,974			47,971
% of total		89.56	%		86.03	%		0.72	%		4.36	%		0.82	%		0.71	%		0.65	%		2.08	%		8.25	%		6.82	%		100.00	%		100.00	%

Net short-term other accounts receivable
Balance		3,376			2,815			1,609			585			159			9			457			1,277			648			171			6,249			4,857
% of total		54.03	%		57.96	%		25.75	%		12.04	%		2.54	%		0.19	%		7.31	%		26.29	%		10.37	%		3.52	%		100.00	%		100.00	%

Subtotal short-term accounts receivable, net
Balance		118,088			86,460			52,427			46,080			10,001			4,924			28,983			31,001			21,194			13,798			230,693			182,263
% of total		51.18	%		47.44	%		22.73	%		25.28	%		4.34	%		2.70	%		12.56	%		17.01	%		9.19	%		7.57	%		100.00	%		100.00	%

Long-term accounts receivable, net
Balance		604			368			-			-			-			-			-			-			-			20			604			388
% of total		100.00	%		94.85	%		-			-			-			-			-			-			-			5.15	%		100.00	%		100.00	%

Total short and long-term accounts receivable, net
Balance		118,692			86,828			52,427			46,080			10,001			4,924			28,983			31,001			21,194			13,818			231,297			182,651
% of total		51.31	%		47.54	%		22.67	%		25.23	%		4.32	%		2.70	%		12.54	%		16.96	%		9.16	%		7.57	%		100.00	%		100.00	%