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.
By Daniel Zarchy (email@example.com)