Chilean lawmakers have unanimously approved changes to a
law that forces state-own Codelco, the world’s largest copper producer, to
transfer 10% of its annual export sales to the country’s armed forces.
The ruling, known as Ley Reservada del Cobre (Restricted Law
on Copper), has been on the books since 1958 and was strengthened during the
1973-90 military dictatorship of Augusto Pinochet.
The minimum contribution expected is $180 million a year,
though in periods with high copper prices, such as during the super cycle at
the start of the decade, it increases to nearly $1 billion.
The funding has transformed Chile’s armed forces into one of
the most capable in the region, with equipment far superior to any other neighbouring
country.
The decades-old law has limited the amount of funds Codelco has available for reinvestment at a time when is in the midst of a $39-billion,10-year overhaul of its aging mines.
It has also been an obstacle for the copper giant to invest
in foreign projects or form joint ventures in other countries, as other
governments are not keen on the idea of indirectly help finance the armed
forces of a regional competitor.
Defence minister Alberto Espina told Soy Chile that the “historical change”, which has yet to be approved by the lower chamber of parliament, would increase the transparency of military financing.
According to official
data, in the past 17 years Codelco has injected about $13.7 billion into
the country’s armed forces coffers.
Two previous governments have tried and failed to eliminate
the controversial law, but Sebastián Piñera’s administration is confident this
time the modifications will be approved.
The copper giant holds vast deposits of the red metal,
accounting for over 10% of the world’s known proven and probable reserves and
about 11% of the global annual copper output with 1.8 million tonnes of
production.
Production decline, together with lower copper prices and
higher costs, saw Codelco’s annual profits drop by a third last year to $2
billion, not counting paper losses worth almost $400 million, as it wrote down
the value of its assets, including its Ventanas smelter and the open pit at its
Salvador division.