Edgar Filing: CHEMICAL & MINING CO OF CHILE INC

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

Ch$	-	Chilean pesos
ThCh $	-	Thousands of Chilean pesos
US$	-	United States dollars
ThUS$	-	Thousands of United States dollars
ThEuro	-	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.

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

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

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

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

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

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:

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)

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

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)

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.

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.

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

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:

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.

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)

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.

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.

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.

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.

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.

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.

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.

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

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

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	%

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

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

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

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