Unassociated Document
UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
OF THE SECURITIES AND EXCHANGE ACT OF 1934

Includes financial statements and their related notes for the nine-month period
ended September 30, 2008 filed by Sociedad Química y Minera de Chile S.A.
before the Superintendencia de Valores y Seguros de Chile on October 28, 2008.

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
(Exact name of registrant as specified in its charter)

CHEMICAL AND MINING COMPANY OF CHILE INC.
(Translation of registrant's name into English)

El Trovador 4285, Santiago, Chile (562) 425-2000
(Address and phone number of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x      Form 40-F ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨        No x

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82 ¨



On October 28, 2008, the Registrant filed with the Superintendencia de Valores y Seguros of Chile (the "SVS") a report that included information as to the Registrant's consolidated financial condition and results of operations for the nine-month period ended September 30, 2008. Attached is a summary of such consolidated financial information included in the summary and in the report filed with the Superintendencia de Valores y Seguros of Chile. This financial information was prepared on the basis of accounting principles generally accepted in Chile and does not include a reconciliation of such information to accounting principles generally accepted in the United States of America.
 

THIS REPORT IS AN ENGLISH TRANSLATION OF, AND A CHILEAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES PRESENTATION OF, THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2008 REPORT FILED WITH THE SUPERINTENDENCIA DE VALORES Y SEGUROS (SVS) IN CHILE, AND UNLESS OTHERWISE INDICATED, FIGURES ARE IN US DOLLARS.




Consolidated Financial Statements

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.

Santiago, Chile
September 30, 2008 and 2007



Consolidated Financial Statements

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.

As of September 30, 2008 and 2007
and for the nine months ended September 30, 2008 and 2007
(A translation of the original in Spanish- see note 2 (a))

Contents

Consolidated Financial Statements
   
     
Consolidated Balance Sheets
 
3
Consolidated Statements of Income
 
5
Consolidated Statements of Cash Flows
 
6
Notes to the Consolidated Financial Statements
 
7

-
Chilean pesos
ThCh $
-
Thousands of Chilean pesos
US$
-
United States dollars
ThUS$
-
Thousands of United States dollars
-
Thousands of Euros
UF
-
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.
 
2


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Balance Sheets
(A translation of the original in Spanish- see note 2 (a))

       
As of September 30,
 
   
Note
 
2008
 
2007
 
       
ThUS$
 
ThUS$
 
ASSETS
                   
                     
Current assets
                   
Cash
         
22,360
   
13,076
 
Time deposits
         
77,763
   
25,985
 
Marketable securities
   
4
   
56,717
   
74,733
 
Accounts receivable, net
   
5
   
338,798
   
253,003
 
Other accounts receivable, net
   
5
   
73,307
   
58,017
 
Accounts receivable from related companies
   
6
   
58,989
   
35,912
 
Inventories, net
   
7
   
562,517
   
385,930
 
Recoverable taxes
         
43,802
   
27,748
 
Prepaid expenses
         
5,531
   
7,151
 
Deferred income taxes
         
16,265
   
-
 
Other current assets
         
34,357
   
22,686
 
Total current assets
         
1,290,406
   
904,241
 
                     
Property, plant and equipment, net
   
8
   
1,045,724
   
967,705
 
                     
Other assets
                   
Investments in related companies
   
9
   
36,824
   
21,866
 
Goodwill, net
   
10
   
32,548
   
34,733
 
Negative goodwill, net
   
10
   
(1,279
)
 
(1,650
)
Long-term accounts receivable, net
   
5
   
1,044
   
139
 
Long-term accounts receivable from related companies
   
6
   
2,000
   
2,118
 
Intangible assets, net
         
3,285
   
3,988
 
Other long-term assets
   
11
   
34,563
   
38,745
 
Total other assets
         
108,985
   
99,939
 
                     
Total assets
         
2,445,115
   
1,971,885
 
 
3


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Balance Sheets
(A translation of the original in Spanish- see note 2 (a))

       
As of September 30,
 
   
Note
 
2008
 
2007
 
       
ThUS$
 
ThUS$
 
LIABILITIES AND SHAREHOLDERS' EQUITY
                   
                     
Current liabilities
                   
Short-term bank debt
   
12
   
22,388
   
1,253
 
Current portion of long-term debt
   
12
   
1,114
   
2,014
 
Current portion of bonds payable
   
13
   
12,717
   
12,687
 
Dividends payable
         
546
   
432
 
Accounts payable
         
138,820
   
116,792
 
Other accounts payable
         
364
   
335
 
Notes and accounts payable to related companies
   
6
   
553
   
110
 
Accrued liabilities
   
14
   
60,706
   
36,923
 
Withholdings
         
11,399
   
7,378
 
Income taxes
         
68,162
   
11,802
 
Deferred income
         
55,873
   
42,050
 
Deferred income taxes
   
15
   
-
   
4,113
 
Other current liabilities
         
7,797
   
865
 
Total current liabilities
         
380,439
   
236,754
 
                     
Long-term liabilities
                   
Long-term bank debt
   
12
   
180,000
   
180,000
 
Long-term obligations with the public (bonds)
   
13
   
299,941
   
304,101
 
Other accounts payable
         
515
   
753
 
Deferred income taxes
   
15
   
55,005
   
51,964
 
Long-term accrued liabilities
   
16
   
31,706
   
20,812
 
Total long-term liabilities
         
567,167
   
557,630
 
                     
Minority interest
   
17
   
51,363
   
42,486
 
                     
Shareholders' equity
                   
Paid-in capital
   
18
   
477,386
   
477,386
 
Other reserves
   
18
   
163,095
   
160,608
 
Retained earnings
   
18
   
805,665
   
497,021
 
Total shareholders' equity
         
1,446,146
   
1,135,015
 
                     
Total liabilities and shareholders' equity
         
2,445,115
   
1,971,885
 
 
4


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Statements of Income
(A translation of the original in Spanish- see note 2 (a))

       
For the nine months ended
 
       
September 30,
 
   
Note
 
2008
 
2007
 
       
ThUS$
 
ThUS$
 
Operating results
                   
                     
Sales
         
1,376,225
   
881,286
 
Cost of sales
         
(830,804
)
 
(631,970
)
Gross margin
         
545,421
   
249,316
 
Selling and administrative expenses
         
(64,037
)
 
(49,907
)
Operating income
         
481,384
   
199,409
 
                     
                     
Non-operating results
                   
Non-operating income
   
20
   
32,245
   
17,773
 
Non-operating expenses
   
20
   
(44,085
)
 
(41,162
)
Non-operating income, net
         
(11,840
)
 
(23,389
)
Income before income taxes
         
469,544
   
176,020
 
Income tax expense
   
15
   
(80,988
)
 
(38,256
)
Income before minority interest
         
388,556
   
137,764
 
Minority interest
   
17
   
(7,485
)
 
(2,330
)
Net income before negative goodwill
         
381,071
   
135,434
 
                     
Net income
         
381,071
   
135,434
 
 
5


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Statements of Cash Flows
(A translation of the original in Spanish- see note 2 (a))

       
For the nine months ended
September 30
 
       
2008
 
2007
 
 
 
 
 
ThUS$
 
ThUS$
 
Cash flows from operating activities
                   
Net income
         
381,071
   
135,434
 
Charges (credits) to income not representing cash flows
                   
Depreciation expense
   
8
   
83,535
   
71,800
 
Amortization of intangible assets
         
528
   
532
 
Write-offs and accruals
         
19,090
   
20,625
 
Gain on equity investments in related companies
         
(13,497
)
 
(3,558
)
Loss on equity investments in related companies
         
33
   
58
 
Amortization of goodwill
   
10
   
1,669
   
1,698
 
(Profit) loss on sales of assets
         
(2,939
)
 
(24
)
Loss from sale of investments
         
(1,387
)
 
-
 
Other credits to income not representing cash flows
         
(3,556
)
 
(590
)
Other charges to income not representing cash flows
         
172,690
   
92,835
 
Foreign currency translation, net
         
7,585
   
2,311
 
Net changes in operating assets and liabilities (Increase) decrease:
                   
Trade accounts receivable
         
(185,802
)
 
(53,752
)
Inventories
         
(199,902
)
 
(25,273
)
Other assets
         
(11,994
)
 
(14,120
)
Accounts payable
         
58,619
   
9,806
 
Interest payable
         
990
   
5,343
 
Net income taxes payable
         
(40,705
)
 
(18,320
)
Other accounts payable
         
-
   
(5,589
)
VAT and taxes payable
         
(13,802
)
 
(6,221
)
Minority interest
   
17
   
7,486
   
2,330
 
Net cash provided by operating activities
         
259,712
   
215,325
 
                     
Cash flows from financing activities
                   
Proceeds from short-term bank financing
         
70,239
   
-
 
Payment of dividends
         
(115,990
)
 
(94,999
)
Repayment of bank financing
         
(50,000
)
 
(57,090
)
Payment of obligations with the public
         
(3,138
)
 
(2,566
)
Payment of expenses for the issuance and placement of bonds payable
         
-
   
-
 
Net cash used in financing activities
         
(98,889
)
 
(154,655
)
                     
Cash flows from investing activities
                   
Sales of property, plant and equipment
         
25,382
   
2,611
 
Sales of permanent investments
         
1,688
   
-
 
Other investing income
   
24
   
-
   
361
 
Additions to property, plant and equipment
         
(183,671
)
 
(123,015
)
Capitalized interest
         
(7,405
)
 
(9,400
)
Other disbursements
         
(565
)
 
(785
)
Net cash used in investing activities
         
(164,571
)
 
(130,228
)
                     
Effect of inflation on cash and cash equivalents
         
547
   
1,125
 
Net change in cash and cash equivalents
         
(3,201
)
 
(68,433
)
Beginning balance of cash and cash equivalents
         
164,213
   
183,943
 
Ending balance of cash and cash equivalents
         
161,012
   
115,510
 
 
6


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 1 – Company Background

Sociedad Química y Minera de Chile S.A. (the “Company”) was registered with the Chilean Superintendency of Securities and Insurance (“SVS”) on September 18, 1983.

The subsidiary registered in the Superintendency of Securities and Insurance registry of securities is as follows:

Soquimich Comercial S.A., Registration No. 0436 dated January 11, 1993.

Note 2 – Summary of Significant Accounting Policies

a)
Basis for the preparation of the consolidated financial statements

The accompanying consolidated financial statements have been prepared in U.S. dollars in accordance with accounting principles generally accepted in Chile (“Chilean GAAP”) and the regulations of the SVS. Certain accounting practices applied by the Company that conform to Chilean GAAP may not conform to generally accepted accounting principles in the United States (“US GAAP”). For the convenience of the reader, the consolidated financial statements and their accompanying notes have been translated from Spanish into English.

The consolidated financial statements include the accounts of Sociedad Química y Minera de Chile S.A. (the “Parent Company”) and subsidiaries (companies in which the Parent Company holds a controlling participation, generally equal to direct or indirect ownership of more than 50%). The Parent Company and its subsidiaries are referred to as the “Company”.
 
The preparation of financial statements requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

In accordance with SVS Circular No. 1,697 and Technical Bulletins Nos. 64 and 72 of the Chilean Association of Accountants, the consolidated financial statements include the following subsidiaries:

7


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 – Summary of Significant Accounting Policies (continued)

a)
Basis for the preparation of the consolidated financial statements (continued)

   
Direct or indirect ownership
 
   
As of
September
30, 2008
 
As of
September
30, 2007
 
 
 
%
 
%
 
Foreign subsidiaries: 
         
Nitrate Corp. of Chile Limited (United Kingdom)
   
100.00
   
100.00
 
Soquimich SRL – Argentina
   
100.00
   
100.00
 
Nitratos Naturais do Chile Ltda. (Brazil)
   
100.00
   
100.00
 
SQM Europe NV (Belgium)
   
100.00
   
100.00
 
SQM North America Corp. (USA)
   
100.00
   
100.00
 
North American Trading Company (USA)
   
100.00
   
100.00
 
SQM Peru S.A.
   
100.00
   
100.00
 
SQM Corporation N.V. (Dutch Antilles)
   
100.00
   
100.00
 
S.Q.I. Corporation N.V. (Dutch Antilles)
   
100.00
   
100.00
 
Soquimich European Holding B.V. (Holland)
   
100.00
   
100.00
 
SQMC Holding Corporation L.L.P. (USA)
   
100.00
   
100.00
 
SQM Ecuador S.A.
   
100.00
   
100.00
 
Cape Fear Bulk L.L.C.(USA)
   
0.00
   
51.00
 
SQM Investment Corporation N.V. (Dutch Antilles)
   
100.00
   
100.00
 
SQM Brasil Ltda.
   
100.00
   
100.00
 
Royal Seed Trading Corporation A.V.V. (Aruba)
   
100.00
   
100.00
 
SQM Japon Co. Ltd.
   
100.00
   
100.00
 
SQM Oceanía PTY Limited (Australia)
   
100.00
   
100.00
 
SQM France S.A.
   
100.00
   
100.00
 
RS Agro-Chemical Trading A.V.V. (Aruba)
   
100.00
   
100.00
 
SQM Comercial de México S.A. de C.V.
   
100.00
   
100.00
 
SQM Indonesia
   
80.00
   
80.00
 
SQM Virginia L.L.C. (USA)
   
100.00
   
100.00
 
Agricolima S.A. de C.V. (Mexico)
   
0.00
   
100.00
 
SQM Venezuela S.A.
   
100.00
   
100.00
 
SQM Italia SRL (Italy)
   
100.00
   
100.00
 
Comercial Caiman Internacional S.A. (Cayman Islands)
   
100.00
   
100.00
 
SQM Africa PTY (South Africa)
   
100.00
   
100.00
 
Administración y Servicios Santiago S.A. de C.V. (Mexico)
   
100.00
   
100.00
 
SQM Lithium Specialties L.L.P. (USA)
   
100.00
   
100.00
 
SQM Nitratos México S.A. de C.V. (México)
   
51.00
   
51.00
 
Fertilizantes Naturales S.A.
   
66.67
   
66.67
 
Iodine Minera B.V.
   
100.00
   
100.00
 
SQM Dubai – FZCO.
   
100.00
   
100.00
 

8


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 – Summary of Significant Accounting Policies (continued)

a)
Basis for the preparation of the consolidated financial statements (continued)

   
Direct or indirect ownership
 
   
As of
September
30, 2008
 
As of
September
30, 2007
 
   
%
 
%
 
Domestic subsidiaries:
             
Servicios Integrales de Tránsitos y Transferencias S.A.
   
100.00
   
100.00
 
Soquimich Comercial S.A.
   
60.64
   
60.64
 
Isapre Norte Grande Ltda.
   
100.00
   
100.00
 
Almacenes y Depósitos Ltda.
   
100.00
   
100.00
 
Ajay SQM Chile S.A.
   
51.00
   
51.00
 
SQM Nitratos S.A.
   
99.99
   
99.99
 
Proinsa Ltda.
   
60.58
   
60.58
 
SQM Potasio S.A.
   
100.00
   
100.00
 
SQMC International Limitada.
   
60.64
   
60.64
 
SQM Salar S.A.
   
100.00
   
100.00
 
SQM Industrial S.A.
   
100.00
   
100.00
 
Minera Nueva Victoria S.A.
   
100.00
   
100.00
 
Exploraciones Mineras S.A.
   
100.00
   
100.00
 
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.
   
100.00
   
100.00
 
Comercial Hydro S.A.
   
60.64
   
60,64
 
 
All significant inter-company balances, transactions and unrealized gains and losses arising from transactions between these companies have been eliminated in consolidation.

9


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 - Summary of Significant Accounting Policies (continued)

b)
Accounting period

These consolidated financial statements have been prepared as of September 30, 2008 and 2007 and for the nine-month periods then ended.

c)
Reporting currency and monetary correction

The financial statements of the Company are prepared in U.S. dollars. As a significant portion of the Company’s operations are transacted in U.S. dollars, the U.S. dollar is considered the currency of the primary economic environment in which the Company operates.

The Parent Company and those subsidiaries which maintain their accounting records in U.S. dollars are not required, or permitted, to restate the historical dollar amounts for the effects of inflation.

The financial statements of domestic subsidiaries that maintain their accounting records in Chilean pesos have been restated to reflect the effects of variations in the purchasing power of the Chilean peso during the period. For this purpose, and in accordance with Chilean regulations, non-monetary assets and liabilities, equity and income statement accounts have been restated in terms of year-end constant pesos based on the change in the consumer price index during the period ( 6.9% and 5.1% in 2008 and 2007, respectively). The resulting net charge or credit to income arises as a result of the gain or loss in purchasing power from the holding of non-U.S. dollar denominated monetary assets and liabilities exposed to the effects of inflation.

Prior period financial statements presented for comparative purposes have not been restated to reflect the change in the purchasing power of the Chilean peso during the most recent period. In accordance with Chilean GAAP, amounts expressed in U.S. dollars, including amounts included in the consolidated financial statements as determined in prior years from the translation of financial statements of those Chilean subsidiaries which maintain their accounting records in Chilean pesos, are not adjusted for price-level changes.

10


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 - Summary of Significant Accounting Policies (continued)

d)
Foreign currency

 
i)
Foreign currency transactions

 
Monetary assets and liabilities denominated in Chilean pesos and other currencies have been translated to U.S. dollars at the observed exchange rates determined by the Central Bank of Chile in effect at each year-end of Ch$ 551.31 per US$1 at September 30, 2008 and Ch$ 511.23 per US$1 at September 30, 2007.

 
ii)
Translation of non-U.S. dollar financial statements

   
In accordance with Chilean GAAP, the financial statements of foreign and domestic subsidiaries that do not maintain their accounting records in U.S. dollars are translated from the respective local currencies to U.S. dollars in accordance with Technical Bulletin No. 64 and No. 72 of the Chilean Association of Accountants (“BT 64-BT 72”) as follows:

a)
For those subsidiaries and affiliates located in Chile that keep their accounting records in price-level adjusted Chilean pesos:

-
Balance sheet accounts are translated to U.S. dollars at the year-end exchange rate without eliminating the effects of price-level restatement.
-
Income statement accounts are translated to U.S. dollars at the average exchange rate each month. The monetary correction account on the income statement, which is generated by the inclusion of price-level restatement on the non-monetary assets and liabilities and shareholders’ equity, is translated to U.S. dollars at the average exchange rate for each month.
-
Translation gains and losses, as well as the price-level restatement to the balance sheet mentioned above, are included as an adjustment in shareholders’ equity, in conformity with Circular No. 1697 of the SVS.

11


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 - Summary of Significant Accounting Policies (continued)

d)
Foreign currency (continued)

b)
The financial statements of those foreign subsidiaries that keep their accounting records in currencies other than the U.S. dollar have been translated at historical exchange rates as follows:
 
-
Monetary assets and liabilities are translated at year-end exchange rates between the U.S. dollar and the local currency.
 
-
All non-monetary assets and liabilities and shareholders’ equity are translated at historical exchange rates between the US dollar and the local currency.
 
-
Income and expense accounts are translated at average exchange rates between the U.S. dollar and the local currency.
 
-
Any exchange differences are included in the results of operations for the period.

Foreign exchange differences for the periods ended September 30, 2008 and 2007 generated a net gain (loss) of ThUS$ (7,585) and ThUS$ (2,311), respectively, which has been charged to the consolidated statements of income in each respective period.

The monetary assets and liabilities of foreign subsidiaries were translated into U.S. dollars at the exchange rates per US dollar prevailing at September 30, as follows:

   
2008
 
2007
 
   
US$
 
US$
 
Brazilian Real
   
1.96
   
1.96
 
New Peruvian Sol
   
3.19
   
3.10
 
Argentine Peso
   
3.15
   
3.15
 
Japanese Yen
   
118.50
   
115.43
 
Euro
   
0.68
   
0.71
 
Mexican Peso
   
10.94
   
10.92
 
Australian Dollar
   
1.27
   
1.13
 
Pound Sterling
   
0.56
   
0.51
 
Ecuadorian Sucre
   
1.00
   
1.00
 
South African Rand
   
8.30
   
7.01
 

The Company uses the “observed exchange rate”, which is the rate determined daily by the Chilean Central Bank based on the average exchange rates at which bankers conduct authorized transactions.

12


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 - Summary of Significant Accounting Policies (continued)

e)
Cash and cash equivalents

Included in cash and cash equivalents are cash and bank balances included in cash, time deposits, financial instruments classified as marketable securities and other short-term investments maturing within 90 days, in compliance with Technical Bulletin No. 50 issued by the Chilean Association of Accountants.

The Company has considered as operating cash movements, all positive or negative cash flows directly related to its line of business and in general all cash flows that are not defined as from investment or financing.

f)
Time deposits

Time deposits are recorded at cost plus accrued interest.

g)
Marketable securities

Marketable securities are recorded at the lower of cost plus accrued interest or market value.

h)
Allowance for doubtful accounts

The Company records an allowance for doubtful accounts based on estimated probable losses.

i)
Inventories and materials

Inventories of finished products and products in process are stated at average production cost, which is presented net of provisions. Provisions have been made based on a technical study which covers the different variables which affect our products (density, moisture, and others).

Materials and supplies received are stated at average acquisition cost and inventories in transit are stated at cost incurred at the end of the period.

The cost of inventories does not exceed their net realizable value.

j)
Income taxes and deferred income taxes

In conformity with current Chilean tax regulations, the Company recognizes the provision for corporate income tax expense and the income tax for the mining activity on an accrual basis.

13


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 - Summary of Significant Accounting Policies (continued)

j)
Income and deferred taxes (continued)

Prior to 2000, income taxes were charged to results in the same period in which the income and expenses were recorded and were calculated in accordance with the enacted tax laws in Chile and the other jurisdictions in which the Company operated.

Under Chilean law, the Parent Company and its subsidiaries are required to file separate tax returns.

Beginning January 1, 2000, the Company records deferred income taxes in accordance with Technical Bulletin Nos. 60, 69, 71 and 73 of the Chilean Association of Accountants, and with SVS Circular No. 1466 issued on January 27, 2000, recognizing the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities, using the liability method. The effect of the temporary differences at March 31, 1999 were recorded in complementary asset and liability accounts, which are recognized in the statement of operations over the estimated period in which they reverse.

k)
Property, plant and equipment

Property, plant, equipment and property rights are recorded at acquisition cost, considering in general an average residual value of 5%, except for certain assets that were restated in accordance with a technical appraisal in 1989. Depreciation for the period is calculated according to the straight-line method based on the remaining technical useful lives of assets, estimated by management.

Property, plant and equipment acquired through financial lease agreements are accounted for at the present value of the minimum lease payments plus the purchase option based on the interest rate included in each contract. The Company does not legally own these assets and therefore cannot freely dispose of them.

In conformity with Technical Bulletin No. 31 and 33 of the Chilean Association of Accountants, the Company capitalizes interest cost associated with the financing of new assets during the construction period of such assets.

Maintenance costs of plant and equipment are charged to expenses as incurred.

The Company obtains property rights and mining concessions from the Chilean state. Other than minor filing fees, the property rights are usually obtained without initial cost, and once obtained, are retained by the Company as long as the annual fees are paid. Such fees, which are paid annually in September, are recorded as prepaid assets to be amortized over the following twelve months. Values attributable to these original mining concessions are recorded in property, plant and equipment.

14

 
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 - Summary of Significant Accounting Policies (continued)

l)
Investments in related companies

Investments in related companies over which the Company has significant influence are included in other assets and are recorded using the equity method of accounting, in accordance with SVS Circulars Nos. 368 and 1697 and Technical Bulletins Nos. 64 and 72 issued by the Chilean Association of Accountants. Accordingly, the Company’s proportional share in the net income or loss of each investee is recognized in the non-operating income and expense classification in the consolidated statements of income on an accrual basis, after eliminating any unrealized profits from transactions with the related companies.

The translation adjustment to U.S. dollars of investments in domestic subsidiaries that maintain their accounting records and are controlled in Chilean pesos is recognized in other reserves within shareholders’ equity. Direct and indirect investments in foreign subsidiaries or affiliates are controlled in U.S. dollars.

Investments in which the Company has less than 20% ownership and the capacity to exert significant influence or control over the investment, because SQM forms part of its Board of Directors have been valued using the equity method.

m)
Goodwill and negative goodwill

Goodwill is calculated as the excess of the purchase price of companies acquired over their net book value, whereas negative goodwill occurs when the net book value exceeds the purchase price of companies acquired. Goodwill and negative goodwill resulting from equity method investments are maintained in the same currency in which the investment was made and are amortized based on the estimated period of investment return, generally 20 years for goodwill and negative goodwill.

Beginning on January 1, 2004, goodwill and negative goodwill represents the difference between the acquisition cost of the investment in a related company and the fair value of this investment at the acquisition date, which is amortized with a charge or credit to income in the expected period of return of the investment, which does not exceed 20 years.

n)
Intangible assets

Intangible assets are stated at cost plus acquisition expenses and are amortized over a period of up to a maximum of 40 years, in accordance with Technical Bulletin No. 55 of the Chilean Association of Accountants.

o)
Mining development cost

Mining development costs are recorded in other long-term assets and are amortized utilizing the unit of production basis.
 
15


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 - Summary of Significant Accounting Policies (continued)

p)
Accrued employee severance

The Company calculates the liability for staff severance indemnities based on the present value of the accrued benefits for the actual years of service worked assuming average employee tenure of 24 years and a real annual discount rate of 8%.

q)
Vacations

The cost of employee vacations is recognized in the financial statements on an accrual basis.

r)
Saleback operations

Saleback operations are registered in Other Current Assets at the amount of the purchase. Starting at the purchase date, the respective interest is recorded in accordance with SVS Circular 768.

s)
Derivative contracts

The Company maintains derivative contracts to hedge against movements in foreign currencies, which are recorded in conformity with Technical Bulletin No. 57 of the Chilean Association of Accountants. Such contracts are recorded at fair value with net losses recognized on an accrual basis and gains recognized when realized.

t)
Reclassifications

For comparison purposes, certain reclassifications have been made to the 2007 financial statements.

u)
Revenue recognition

Income from the operation of the lines of business of the Parent Company and its subsidiaries is recorded as of the date of physical delivery of the products in accordance with the sales conditions stated in Technical Bulletin No. 70 issued by the Chilean Association of Accountants.

16


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 2 - Summary of Significant Accounting Policies (continued)

v)
Computer software

Computer systems developed internally using the Company’s personnel and materials are charged to income during the year in which the expenses are incurred. In accordance with SVS Circular No. 1819 dated November 14, 2007, computer systems acquired by the Company are recorded at cost

w)
Research and development expenses

Research and development cost are charged to the income statement in the period in which they are incurred. Property, plant and equipment that are acquired for use in research and development activities and determined to provide additional benefits to the Company are recorded in property, plant and equipment.

x)
Obligations with the public (Bonds payable)

Bonds are stated at the principal amount plus interest accrued. The difference between the carrying value and the placement value is capitalized and amortized in the period of expiration of the bonds.

y)
Provisions for mine closure costs

The Company has made a provision to cover those costs associated with mine closure and mining facilities and mitigation of environmental damage, which has been recorded at its present value. The amount determined is presented under accrued expenses in long-term liabilities.

z)
Deferred income

Deferred income relate to the recognition of documented sales the delivery of which occurs subsequent to the closing date of the financial statements.

aa)
Employee benefits

Benefits agreed other than staff severance indemnities which the Company and its subsidiaries will have to pay to its employees by virtue of agreements entered recognized on an accrual basis.

17


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 3 - Changes in Accounting Principles

Beginning on January 1, 2008, the Company recognized the change in the functional currency (from Chilean pesos to U.S. dollars) in which the subsidiary Soquimich Comercial S.A. was controlled in order to reflect the currency which represents underlying transactions, events and conditions, which are relevant to the control of the investment by its Parent Company.

During the period ended September 30, 2008, there were no other changes in the application of generally accepted accounting principles in Chile compared to the prior year, which could significantly affect the interpretation of these consolidated financial statements.

18


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 4 - Marketable Securities

As of September 30, marketable securities are detailed as follows:

   
2008
 
2007
 
   
ThUS$
 
ThUS$
 
           
Mutual funds
   
56,717
   
74,733
 
Total
   
56,717
   
74,733
 

Mutual funds relate to investments made in 'Citifunds Institutional Liquid Reserve Limited' for ThUS$ 52,073 (ThUS$ 65,715 in 2007) and in 'Merrill Lynch Institutional Liquidity Fund' for ThUS$ 4,644, (ThUS$ 9,018 in 2007)

These institutions are high-liquidity funds dedicated to invest basically in fixed income instruments in the U.S. market.


Note 5 - Short- and Long-Term Accounts Receivable

 
a)
Short- and long-term accounts receivable and other accounts receivable as of September 30 are detailed as follows:

       
Between 90 days
 
Total
 
   
Up to 90 days
 
and 1 year
 
Short-term (net)
 
   
2008
 
2007
 
2008
 
2007
 
2008
 
2007
 
   
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
Short-term
                                     
Trade accounts receivable
   
266,249
   
164,027
   
82,264
   
97,021
   
348,513
   
261,048
 
Allowance for doubtful accounts
                           
(9,715
)
 
(8,045
)
Notes receivable
   
26,131
   
12,280
   
37,308
   
39,505
   
63,439
   
51,785
 
Allowance for doubtful accounts
                           
(6,684
)
 
(3,480
)
Accounts receivable, net
                           
395,553
   
301,308
 
                                       
Other accounts receivable
   
13,665
   
10,257
   
4,001
   
651
   
17,666
   
10,908
 
Allowance for doubtful accounts
                           
(1,114
)
 
(1,196
)
Other accounts receivable, net
                           
16,552
   
9,712
 
                                       
Long-term receivables
                           
1,044
   
139
 

19


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
 
Note 5 - Short- and Long-term Accounts Receivable (continued)
 
Consolidated Short- and Long-Term Receivables – by Geographic Location
 
               
Asia and
 
USA, Mexico
 
Latin America
         
   
Chile
 
Europe
 
Oceania
 
and Canada
 
and the Caribbean
 
Total
 
   
2008
 
2007
 
2008
 
2007
 
2008
 
2007
 
2008
 
2007
 
2008
 
2007
 
2008
 
2007
 
   
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
                                               
Short-term trade accounts receivable, net
                                                                         
Balance
   
182,686
   
150,864
   
106,137
   
71,659
   
8,914
   
3,572
   
38,429
   
25,455
   
2,632
   
1,453
   
338,798
   
253,003
 
% of total
   
53.92
%
 
59.63
%
 
31.33
%
 
28.32
%
 
2.63
%
 
1.41
%
 
11.34
%
 
10.06
%
 
0.78
%
 
0.58
%
 
100.00
%
 
100.00
%
                                                                           
Short-term notes receivable, net
                                                                         
Balance
   
54,493
   
45,834
   
-
   
-
   
-
   
-
   
-
   
-
   
2,262
   
2,471
   
56,755
   
48,305
 
% of total
   
96.01
%
 
94.88
%
 
-
   
-
   
-
   
-
   
-
   
-
   
3.99
%
 
5.12
%
 
100.00
%
 
100,00
%
                                                                           
Short-term other accounts receivable, net                                                                          
Balance
   
15,434
   
8,655
   
343
   
384
   
161
   
155
   
526
   
434
   
88
   
84
   
16,552
   
9,712
 
% of total
   
93.25
%
 
89.12
%
 
2.07
%
 
3.95
%
 
0.97
%
 
1.60
%
 
3.18
%
 
4.47
%
 
0.53
%
 
0.86
%
 
100.00
%
 
100.00
%
                                                                           
Subtotal short-term accounts receivable, net
                                                                         
Balance
   
252,613
   
205,353
   
106,480
   
72,043
   
9,075
   
3,727
   
38,955
   
25,889
   
4,982
   
4,008
   
412,105
   
311,020
 
% of total
   
61.30
%
 
66.03
%
 
25.84
%
 
23.16
%
 
2.20
%
 
1.20
%
 
9.45
%
 
8.32
%
 
1.21
%
 
1.29
%
 
100.00
%
 
100.00
%
                                                                           
Long-term accounts receivable, net
                                                                         
Balance
   
1,044
   
139
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
1,044
   
139
 
% of total
   
100.00
%
 
100.00
%
 
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
100.00
%
 
100.00
%
                                                                           
Total short and long-term accounts receivable, net
                                                                         
Balance
   
253,657
   
205,492
   
106,480
   
72,043
   
9,075
   
3,727
   
38,955
   
25,889
   
4,982
   
4,008
   
413,149
   
311,159
 
% of total
   
61.40
%
 
66.04
%
 
25.77
%
 
23.16
%
 
2.20
%
 
1.20
%
 
9.43
%
 
8.32
%
 
1.20
%
 
1.28
%
 
100.00
%
 
100.00
%
 
20


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 6 - Balances and Transactions with Related Parties

Balances with related companies are generated by commercial transactions which accrue no interest under normal conditions in force for this type of operations in respect to term and market price. Expiration conditions for each case vary depending on the transaction which generated it.

On April 21, 2008, Inversiones SQ S.A. and SQH S.A. acquired from Yara Netherland B.V. 49% of the shares of the privately-held shareholders’ company Inversiones SQYA S.A. Beginning on the date referred to above, SQYA S.A. Yara is no longer a related company of Sociedad Química y Minera de Chile S.A.

a)
Amounts included in balances with related parties as of September 30, 2008 and 2007 are as follows:

   
Short-term
 
Long-term
 
   
2008
 
2007
 
2008
 
2007
 
Accounts receivable
 
ThUS$
 
ThUS$
 
ThUS$
 
ThUS$
 
Doktor Tarsa Tarim Sanayi AS
   
13,908
   
6,810
   
-
   
-
 
Nutrisi Holding N.V.
   
1,790
   
1,721
   
-
   
-
 
Ajay Europe S.A.R.L.
   
2,769
   
7,439
   
-
   
-
 
Ajay North America LLC
   
4,505
   
3,743
   
-
   
-
 
Abu Dhabi Fertilizer Industries WWL
   
6,904
   
3,265
   
2,000
   
2.000
 
NU3 B.V.
   
2,677
   
710
   
-
   
-
 
PCS Sales INC.
   
-
   
40
   
-
   
-
 
Sales de Magnesio Ltda.
   
100
   
85
   
-
   
-
 
SQM Agro India
   
629
   
322
   
-
   
-
 
Misr Specialty Fertilizers (MSF)
   
891
   
502
   
-
   
118
 
Soc.Inv.Pampa Calichera S.A.
   
8
   
8
   
-
   
-
 
Inversiones PCS Chile S.A.
   
-
   
17
   
-
   
-
 
Kowa Company Ltd.
   
23,609
   
11,135
   
-
   
-
 
SQM East Med Turkey
   
1,199
   
115
   
-
   
-
 
Total
   
58,989
   
35,912
   
2,000
   
2,118
 
 
b)
Amounts included in balances with related parties as of September 30, 2008 and 2007, continued:

   
Short-term
 
   
2008
 
2007
 
Accounts payable
 
ThUS$
 
ThUS$
 
           
SQM Thailand Co. Ltd.
   
90
   
107
 
NU3 N.V.
   
463
   
3
 
Total
   
553
   
110
 
 
There were no outstanding long-term accounts payable with related parties as of September 30, 2008 and 2007

21


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 6 - Balances and Transactions with Related Parties (continued)

c)
During 2008 and 2007, the principal transactions with related parties were as follows:
 
Company
 
Relationship
 
Type of transaction
 
Amount of
Transaction
 
 Impact on income
(charge) credit
 
           
2008
 
2007
 
 2008
 
2007
 
           
ThUS$
 
ThUS$
 
 ThUS$
 
ThUS$
 
                            
NU3 N.V. (Belgium)
   
Indirect
   
Sales of products
   
16,442
   
4,860
   
11,542
   
1,447
 
Doktor Tarsa Tarim Sanayi AS
   
Indirect
   
Sales of products
   
15,894
   
6,629
   
11,615
   
1,781
 
Abu Dhabi Fertilizer Ind. WWL
   
Indirect
   
Sales of products
   
7,498
   
4,117
   
2,350
   
461
 
 
   
Indirect
   
Financial income
   
129
   
-
   
129
   
-
 
Ajay Europe S.A.R.L.
   
Indirect
   
Sales of products
   
15,871
   
18,964
   
4,211
   
7,139
 
 
   
Indirect
   
Financial income
   
7
   
-
   
7
   
-
 
 
   
Indirect
   
Dividends
   
118
   
-
   
-
   
-
 
NU3 B.V.
   
Indirect
   
Sales of products
   
11,750
   
6,302
   
7,721
   
1,988
 
 
   
Indirect
   
Services
   
83
   
-
   
83
   
-
 
Ajay North America LLC
   
Indirect
   
Sales of products
   
24,523
   
12,626
   
7,083
   
6,507
 
 
   
Indirect
   
Dividends
   
1,054
   
-
   
-
   
-
 
Kowa Company Ltd.
   
Shareholder
   
Sales of products
   
82,423
   
65,190
   
37,612
   
39,073
 
SQM Agro India PVT Ltd
   
Indirect
   
Sales of products
   
598
   
-
   
275
   
-
 
Misr Specialty Fertilizers (MSF)
   
Indirect
   
Sales of products
   
733
   
-
   
539
   
-
 
 
   
Indirect
   
Financial income
   
7
   
-
   
7
   
-
 
Nutrisi Holding N.V.
   
Indirect
   
Financial income
   
78
   
-
   
78
   
-
 
Sales de Magnesio Ltda.
   
Indirect
   
Sales of products
   
615
   
-
   
280
   
-
 
 
   
Indirect 
   
Dividends
   
491
   
-
   
-
   
-
 
SQM East Med Turkey
   
Indirect
   
Sales of products
   
397
   
-
   
264
   
-
 

Note 7 - Inventories

Net inventories are summarized as follows:

   
2008
 
2007
 
   
ThUS$
 
ThUS$
 
           
Finished products
   
361,558
   
230,634
 
Work in process
   
162,695
   
130,359
 
Supplies
   
38,264
   
24,937
 
Total
   
562,517
   
385,930
 
 
22


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 8 - Property, Plant and Equipment

Property, plant and equipment are summarized as follows:

   
2008
 
2007
 
   
ThUS$
 
ThUS$
 
Land
             
Land
   
80,625
   
82,598
 
Mining Concessions
   
30,086
   
30,086
 
Total
   
110,711
   
112,684
 
               
Buildings and infrastructure
             
Buildings
   
151,437
   
163,806
 
Installations
   
315,135
   
274,477
 
Construction-in-progress
   
291,820
   
251,841
 
Other
   
210,665
   
193,738
 
Total
   
969,057
   
883,862
 
               
Machinery and Equipment
             
Machinery
   
545,250
   
487,735
 
Equipment
   
138,278
   
128,541
 
Project-in-progress
   
41,279
   
20,531
 
Other
   
20,350
   
19,524
 
Total
   
745,157
   
656,331
 
               
Other Property, Plant and Equipment
             
Tools
   
9,564
   
8,968
 
Furniture and office equipment
   
15,739
   
15,115
 
Project-in-progress
   
13,220
   
11,756
 
Other
   
9,831
   
16,670
 
Total
   
48,354
   
52,509
 
 
23


SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))

Note 8 - Property, Plant and Equipment (continued)

   
2008
 
2007
 
   
ThUS$
 
ThUS$
 
Amounts relating to technical revaluation of property, plant and equipment
             
Land
   
7,839
   
7,839
 
Buildings and infrastructure
   
41,439
   
41,439
 
Machinery and equipment
   
12,048
   
12,048
 
Other assets
   
53
   
53
 
     
61,379
   
61,379
 
Total property, plant and equipment
   
1,934,658
   
1,766,765
 
               
Less: Accumulated depreciation
             
Buildings and infrastructure