SANTIAGO - According to global forecasts, the price of copper,
Chile’s main export, will remain high in 2008 thanks to strong demand
from China. But just who will benefit from this bonanza is up for
Chile is the world’s largest producer and exporter of copper, with a 35 percent market share, and the biggest global reserves.
According to the state Chilean Copper Commission (COCHILCO), the
country produced 5,361 tons of copper concentrate in 2006, nearly five
times as much as its closest competitor, the United States, which
produced 1,226 tons. Peru followed, with 1,049 tons.
The Chilean state controls just 30 percent of the total output, through
the National Copper Corporation (CODELCO). The remaining 70 percent is
in private hands.
In 1966, the government of Christian Democrat President
Eduardo Frei Montalva (1964-1970) "Chileanised" copper by purchasing 51
percent of the shares in mines worked by foreign companies.
Then in 1971, Socialist President Salvador Allende (1970-1973)
expropriated the private mining companies and nationalised the copper
industry before he was overthrown by a military coup.
But under the dictatorship of the late General Augusto
Pinochet (1973-1990), laws were passed to promote the reopening of the
industry to private companies, even though the Chilean constitution
says that "the state has absolute, exclusive, inalienable and
imprescriptible domain over all mines."
This was done by granting concessions, which in practice allow
private firms to treat mines as their private property. The system has
attracted a large number of foreign investors, mainly since the return
to democracy in 1990. But for critics, the new legislation is
unconstitutional and signifies the denationalisation of copper.
Debate on these issues has heated up because of the high international prices for copper seen since 2003.
According to a COCHILCO report, the average price of copper for
2007 was 323 cents of a dollar per pound on the London Metal Exchange.
That is 5.9 percent higher than the average for 2006, and is
the highest nominal value in history and the third highest in real
terms, after 1966 and 1969 (361 and 325 cents per pound, respectively),
the December report says.
"Some of the world’s most respected companies and institutions
in copper futures are saying that copper prices will fluctuate between
280 and 360 cents per pound in 2008, with an average of approximately
325 cents, similar to that of 2007," Gustavo Lagos, head of the
Catholic University’s Mining Centre, told IPS.
"In 2009, the average price is predicted to be under 300 cents
per pound, and in 2010 it is expected to be around 270," said Lagos.
Despite the falling trend, these prospects are excellent, given that in
2003 the price per pound was 70 cents of a dollar.
"There was no such extended copper boom in the 20th century.
These very high prices, of over three dollars a pound, are likely to
last for at least three years, 2006, 2007 and 2008, which is
unprecedented," said the engineer.
In Lagos’ view, the run of high copper prices can be explained by two simultaneous global phenomena.
These are, on one hand, "the unexpected rise in Chinese demand for
commodities," including copper which is used in building
infrastructure, and on the other hand, "the inability of the mining
industry, in the short term, to supply the quantities it had promised,
because of underinvestment" since 1998, he said.
"The long-term price of copper will remain high, above 130
cents, unless there is world over-production, such as the transnational
mining companies in Chile created between 1995 and 2000," economist
Orlando Caputo, head of the Centre for Studies on Transnationalisation,
Economics and Society (CETES), told IPS.
Caputo’s career has been in academia, except for the period
when he was named general manager of CODELCO by Allende, from 1970 to
Along with some lawmakers belonging to the centre-left
coalition that has governed Chile since 1990, and subcontracted CODELCO
workers who organised a major strike in mid-2007, Caputo holds the view
that copper should be renationalised in order to finance wage
increases, greater social spending and economic diversification.
But in September, the lower chamber of congress rejected a draft
statement calling on President Michelle Bachelet to move towards
Gustavo Lagos, by contrast, says that "the future of copper in
Chile can be splendid, significant, or plain irrelevant or negative,
depending on how we handle it as a nation. Our development does not
depend on foreign companies, nor imperialism, nor ghosts from our past;
it depends on whether we do things properly."
This, he says, means maintaining the present tax rates to ensure
private investment over the coming years, drawing greater talent into
the industry, removing barriers so that transnational mining companies
can bring in technological innovation, and improving the management of
CODELCO to increase its competitiveness, "because there are signs that
it may not be competitive in the future."
Due to the high prices, the industry’s contribution to gross
domestic product (GDP), measured at current prices, rose from 8.3
percent in 2003 to 23 percent in 2006.
In 2006, CODELCO contributed 9.2 billion dollars to the state
coffers -- over 20 percent of total revenue. And in 2007, the state
received some 16 billion dollars from CODELCO profits and taxes on
private mining companies.
But the state mining company faced a series of labour
conflicts in 2007, led by subcontracted workers who want equal wages
and benefits to those of company employees doing the same jobs.
The latest tension broke out late last year, when the Labour
Ministry, which had completed a review of subcontracting practices in
the mining industry, ordered CODELCO to directly hire 5,000 workers who
are subcontracted in contravention of the recent Subcontracting Law.
CODELCO refused, and has appealed in court.
On Jan. 3, subcontracted mineworkers held protests demanding that the
Labour Ministry’s ruling be implemented. Two hundred protestors were
Lagos says that subcontracting workers is one of the reasons
for CODELCO’s loss of productivity. Caputo, in turn, says that the
subcontracted workers’ demands are fair, because of their low pay and
the physically demanding nature of work in the mining industry.
Caputo also says that "there is a scramble for plunder going
on within CODELCO. Former CODELCO employees are now owners of
contracting firms, and some politicians are also involved in
The Mining Ministry’s public report for 2007 says that mining
development has brought about considerable poverty reduction. "The
mining regions of Tarapacá, Antofagasta and Atacama have poverty levels
that are below the national poverty rate" of 13.7 percent, it says.
Mining has generated more and better jobs, development of
physical infrastructure, opportunities for companies to supply goods
and services and the incorporation of new technology, among other
benefits, it says.
Among the proposals made by political and social sectors on
how to make the most of the boom are improvements in education,
investing in public capital goods (mainly in the health sector),
supporting small and medium-sized businesses and spending more on the
In May, Bachelet announced that an additional 600 million
dollars from copper earnings would be spent on education in 2008, but
the government’s economic policy is mainly based on investing savings
Caputo complained that private mining companies made profits
of nearly 20 billion dollars in 2006, which according to his
calculations were equivalent to 17 percent of the country’s GDP, 75
percent of the national budget, and twice the combined budgets of the
Health and Education Ministries.
In his view, the specific tax on mining approved in 2005 is
too low. For 2007, it brought in revenues of approximately 670 million
dollars, which are to be spent on technological innovation and
"The Chilean state has no national development plan. That word
(plan) is prohibited. Everything is left up to the market. Everyone
talks about improving productivity factors, such as human capital, and
generating conditions for higher productivity. But that isn’t enough,"
According to Lagos, labour strife as well as international
turbulence caused by the U.S. mortgage crisis may affect copper prices
in 2008. (END/2008)
This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.