MercoPress. South Atlantic News Agency

Chile prepared to cut Armed Forces copper earnings share

José Pablo Arellano, CEO of Chile's state-owned CODELCO copper company, this week questioned the utility of a Pinochet-era law that gives 10% of CODELCO sales to the Chilean military.

"Ending the law would allow us to work as an autonomous company," said Arellano, while speaking at seminar earlier in the week. He added that the transfer of earnings has damaged the reputation of the world's largest copper company: Peru is reluctant to deal with CODELCO, since CODELCO finances Chile's military. State-owned CODELCO poured 7.4 billion US dollars into the Chilean Armed Forces between 1990 and 2007, providing about 21% of the military's budget. CODELCO earnings are expected to rise as a result of increased demand for copper and soaring prices. This results in a huge amount of buying power for the nation's armed forces. Chile's Mining Minister Santiago Gonzalez backs Arellano's initiative. "It is a subject we wanted to bring forward for a long time," he said. "If an agreement is possible, let's negotiate it as soon as possible." But Francisco Vidal, the official spokesman for the government of President Michelle Bachelet, said, "This is only Arellano's position. The polemic has been fierce within Chile's Defense Ministry and the government remains careful." "The company's economic health would improve immediately (if the transfers to the armed forces were ended)," said economist Guillermo Pattillo of Universidad de Santiago. "The financial transfer to Chile's Army puts CODELCO at a disadvantage compared to its competitors, restricting private investments and future projects". Socialist (PS) Senator Jaime Gazmuri, current President of Chile's Foreign Relations Commission, advocates ending CODELCO's financial contribution to the armed forces. "To me, the earnings transfer is an anachronism," he said. "The Copper Law has unnecessarily burdened the company. CODELCO should be treated like all the Chilean private companies – profits are transferred to the government for public use, and not to a specific government spending area." Still, conservative Independent Democratic Union (UDI) Sen. Jorge Arancibia (a former Navy Commander-in-Chief) showed his unhappiness with Arellano's offensive. "Laws are decided by the government and not by the President of a state-owned company," said Arancibia. "Arellano's job is to be efficient in extracting and marketing Chile's copper. Moreover, only Chile's Finance Ministry and Chile's Public Treasury are competent to deal with CODELCO's financial contribution to the armed forces". Bolivia, Peru and Argentina fear Chile's ongoing military expansion. Chile has spent more than 2.8 billion US dollars for weapons and warplanes since 2000. Peru's Foreign Minister José Garcia Belaunde said that Chile's over militarization threatens the region's strategic and defense balance. The Santiago Times