MercoPress. South Atlantic News Agency

Piñera submits bill to repeal financing military expenditure with copper exports

Chilean armed forces are among the best equipped in South America

Chilean President Sebastián Piñera signed a bill which, if approved by Congress, would eliminate a substantial source of revenue for Chile’s Armed Forces. Under current legislation, 10% of all export revenues from Chile’s National Copper Corporation (CODELCO) are directed to the Superior Council of National Defence, to be spent on weaponry and equipment.

In a press release, Piñera expressed his intention to eliminate the CODELCO-military funding model and have military spending placed on a budgetary system which would be updated every four years. This new system would itself be “inserted in a National Security and Defence Strategy” which will set the framework of the Armed Forces’ objectives over a span of 12 years.

The proposed legislation would simultaneously entail the creation of a “Strategic Contingency Fund” in order to access the funding required for the “efficient completion of (its) duties.”

“The needs of our Armed Forces are not always tied to the amount of copper produced by CODELCO or its price in the global market,” said Piñera on Tuesday. “On the other hand, we also believe that a 10% tax placed on CODELCO gross copper sales is very distorting.”

Piñera went on to describe the bill as a step forward in the integration of the Armed Forces into civil society and expressed his hope for the opposition coalition’s support in turning it into law. Party for Democracy Deputy Patricio Hales stated his appreciation for the bill’s reaffirmation of the principles former president Michelle Bachelet had established in a similar bill put forth in 2009.

A state-owned company, CODELCO is the largest copper mining company in the world, holding first place in terms of reserves. It currently produces 11% of the world’s supply.

The current Copper Law can be traced back to legislation passed in 1942, during the presidency of Juan Antonio Ríos. Under the Ríos administration, the Superior Council of National Defence was created and placed export-based revenue at the disposition of the Chilean Armed Forces.

The law was repealed in 1955, and a similar version was reintroduced in 1958, re-establishing the availability of export-based revenue to the military.

The reintroduction of this funding model took place in a context of a Chilean mining sector which was predominantly owned by foreign firms. Furthermore, a border dispute in the Beagle Channel in the same year had strained relations between Chile and Argentina enough to make secure military funding seem indispensable.

Further legislation was passed under Gen. Augusto Pinochet from 1976 to 1987, establishing the specifications which correspond to the current “secret” Copper Law, so called due to the fact that it was passed in secret and was not made publicly available until transparency legislation was passed in August 2008 under President Michelle Bachelet.

Military spending has come under increased scrutiny in a country still suffering from the effects of the global recession and outraged with a recent profiteering scandal involving lucrative contracts being put out to tender by the upper echelons of Chile’s Armed Forces.

Though its 2010 military budget of 6 billion USD places it well behind Brazil and Colombia, with a population of 17 million Chile is the largest spender on a per capita basis. A 2010 study conducted by the Stockholm International Peace Research Institute also placed Chile as the largest arms importer in the region.

By Ivan Ebergenyi – The Santiago Times