MercoPress. South Atlantic News Agency

Chile freezes arms shopping with surplus copper funds

The Chilean Finance Ministry this week ordered the Budget Office to freeze the additional resources generated by the excellent international price of copper and which legally are earmarked for Defence purchases.

The sum involved is approximately 250 million US dollars and the Finance Ministry alleges that investing such a sum would affect "macroeconomic fundamentals" such as the 2005 structural budget.

According to the Reserved Cooper Bill, Chilean Armed Forces are entitled to a basic 240 million US dollars annually for maintenance and acquisition of new military equipment plus the surplus generated in excess of a pre-established copper price and equivalent to 10% of the country's copper exports.

Since this year copper has been booming at an average 1,30 US dollar per pound, well above the basic estimate, Codelco the giant government copper company will have handed to the Chilean Treasury at the end of the year over two billion US dollars, and to the military, the controversial 250 million US dollars.

The Chilean Armed Forces have so far restrained from comments but have indicated that the freezing of those funds could affect the modernization process began in the nineties when the number of servicemen was drastically cut and significant funds were invested in new equipment for the three services.

The Chilean Army replaced the old Sherman tanks with refurbished German "Leopard 1"; the Navy acquired five second hand frigates with a ten year life span and the Air Force is scheduled to receive in 2006, ten F 16 fighter bombers.

Chile's growing participation in international peace operations has also had a cost in equipment.

Defence Minister Jaime Ravinet and the Chiefs of Staff have said that is spite of certain concern they clearly understand that the additional funds can only be invested "with specific strategic and financial criteria" and certainly not in "a disproportionate manner or unrealistically".

Further more Chile is not interested in making neighbours feel restless about the modernization process.

However some analysts argue that the overall financial situation of Chile is "excellent", and copper prospects for 2005 and 2006 are similarly encouraging, so the Armed Forces could very well use the "copper reserve" money to repay some loans from European banks with European interest rates, or plan long term, twenty year planning, which would include the purchase of another three second hand frigates that have been offered by the Royal Navy; replacing the ageing French Mirage fighter bombers and continue mechanizing ground troops.