Pinochet's copper "relic" may finally fall
Published by MAC on 2009-09-22Source: Mercopress, Reuters
There has been a long discussion in Chile as to whether state-owned Codelco - the world's biggest copper producer - should relinquish the 10% of its earnings currently being siphoned to the military.
Discussions about the international status of Codelco have now come to the fore. More important, without this obligation to pay the 10% to the army, Codelco could be considered a company ripe for partial selling or privatisation.
At least two candidates in December's general elections are promoting the idea of privatising part of the company. But this would be simply impossible, so long as the obligation to pay that 10% military tribute remains.
Some questions are being raised as to whether the "liberated" 10% should rather be devoted to social funding.
But the biggest issue centres on the possibility of placing Codelco in a better position in international markets. Codelco can't at present invest in its own "strategic development" - either inside or outside Chile. It has to ask the government for money to do this; something that considerably weakens the company's position, compared with that of other mining companies.
The suppression of the 10% would start a process of transforming Codelco from a state-owned company to one with more transnational corporate characteristics.
[Commentary by Cesar Padilla (abridged)].
Chilean Congress to repeal copper sales law funding Armed Forces
By Daniel Zarchy, http://en.mercopress.com
11 September 2009
President Michelle Bachelet gave her support Tuesday to a bill that would repeal the Copper Reserve Law. The Copper Reserve Law, a relic of the Pinochet dictatorship, guaranteed that 10% of all sales made by the state-owned CODELCO copper company will be given to Chile’s Armed Services.
Bachelet was flanked by Finance Minister Andrés Velasco and Defense Minister Francisco Vidal at the ceremony and the bill is expected to pass in Congress this week. The law, initially imposed in 1958 as a 15% tax on mining profits, changed to a 10% tax on total sales from the state-run copper exporter CODELCO during the Pinochet dictatorship (1973-1990).
Abolishing this law would “free CODELCO of the burden that… has affected the valuation of the company and its risk rating” Bachelet said. “This, combined with the reform of the corporate governance of CODELCO, will reinvigorate it as an actor in the international mining industry.”
The law also overhauls the military finance system, and has won support from military leaders. The armed forces would receive its funding from the state general fund, rather than the current mix of general fund and copper revenues, and would be built around a 12-year plan broken into four-year segments.
“We are quite satisfied with the replacement of this law, and we believe it can give us a peace of mind in the medium and long-term” said Navy Admiral Edmundo Gonzalez.
Army Commander in Chief Óscar Izurieta agreed, adding, “Defence cannot be funded or planned on a year-to-year basis.”
CODELCO, which was nationalized under President Salvador Allende in 1971, is the largest copper exporting company in the world. CODELCO earned more than 23.3 billion US dollars between 2006 and the first half of 2009, 4.2 billion USD of which went to the military.
Spending by the Chilean military has at times heightened tensions with Peru, who, along with Bolivia, fought a war with Chile in the 1870s.
Peruvian President Alan García expressed pleasure with the change, according to Peruvian newspaper El Comercio, although he remains doubtful that it will provide the transparency of military spending that Bachelet promises.
Chile copper export revenue falls 18.4 pct in August
Reuters,15 September 2009
SANTIAGO - The value of Chile's copper exports amounted to $2.177 billion in August, down 18.4 percent from $2.669 billion in the same month a year ago, central bank figures showed on on Tuesday.
The value of Chile's copper exports totaled $2.542 billion in July, the central bank reported last month.
Chile is the world's top copper producer, mining about a third of global supply. A sharp drop in copper prices from record highs last year due to the global economic crisis has curtailed the South American country's revenue intake.
However, copper prices have risen in recent months, hitting a 10-1/2 month high in August on growing investor sentiment the global economic downturn is nearing its end.
(Reporting by Antonio de la Jara and Manuel Farias; Writing by Kevin Gray; Editing by John Picinich)