The Investment Dilemma
Goff, Fred
Since the 1973 coup, the military junta has tried desperately to turn Chile into an economic mecca for the foreign investor. The country's abundant mineral deposits have been thrown open to...
...and for funding the government's balance of payments deficit with other countries (see below...
...Our list includes companies listed by OCOFD only if we determined froman other sources that the investment had, in fact, been finalized...
...The provisions would include, among other things, a demand that the host country guarantee the "freedom of workers to organize and the right to strike...
...3 These credits break down into two general areas, private and public...
...Balance of payments financing automatically involves the lender in the political and monetary policies of the borrowing nation's government...
...This year, more than 70 percent of U.S...
...One of the most important projected investments is that of Leo Templeman & Sons, promoters who have signed a letter of intent to form a consortium to develop the El Abra copper mine, an investment requiring $1.2 billion...
...5. The New York Times, January 25, 1976...
...Business Week, September 27, 1976...
...It bought 70 percent of the Junta's first IOU's, in the words of Business Latin America, "seizing upon the desperate need of the new government to raise funds for its bankrupt treasury.' 4 Citibank subsequently reopened its branch -- the only U.S...
...158-159...
...8. NACLA interview...
...Citibank has been a consistent public supporter of the Junta...
...The $74.5 million project is to include construction of seven luxury hotels in three cities at a cost of $35.7 million.' 9 The Inter-American Development Bank has agreed to lend $12 million to Chile for development of its tourism industry...
...3. The other Latin American nations averaged at 17.1 percent return on investment...
...The New York Times, October 5, 1976...
...NACLA interview...
...They can afford to bide their time until copper prices rise and the political and economic situation stabilizes...
...Although Anaconda has settled with the junta for $253 million compensation, OPIC's obligation will only be reduced by an allocable portion of that amount...
...Other large U.S...
...In October 1976, U.S...
...For OPIC to continue to operate, Congress must pass new legislation, and Senator Frank Church (D-Idaho) and Congressman Stephen j. Solarz (D-New York), among others, have consistently criticized OPIC and indicated a desire to end the program altogether...
...This little-known, but important, U.S...
...This capital, which would normally have been paid out as dividends, was used to finance a "modest" expansion and to increase working capital at the Laja plant...
...lenders to Chile are Citibank and the Bank of America, with Citibank being the most aggressive and enthusiastic...
...In October, Robert Driscoll, the Chile Desk Officer at the State Department, said, "OPIC is ready to go back in, but the word from State is 'hold back.' "4 How can we explain the delay on new programs for Chile...
...For more on this, contact Research Associates International, Box 9662, Marina Del Rey, Calif., 90291...
...April 1976, pp...
...More important is the large number of investments that have been financed by the capitalization of profits of Chilean subsidiaries...
...producers cut prices to 70 cents per pound and the London Metals Exchange price dropped to 55 cents per pound...
...government will back them up in any investment dispute (see box...
...Further, the isotope can be used in a controlled fusion reaction, and lithium - rather than uranium - is the principal ingredient in the attempts underway to manufacture a fusion bomb...
...and some argue that OPIC should be included in any ceilings on U.S...
...8 The surplus of copper on the world market and resulting low copper prices have also held back many mining multinationals...
...This is somewhat surprising, because Chilean government sources claimed throughout the early part of 1976 that OPIC had in fact begun to insure U.S...
...2 3 Automobiles The Chilean government has ratified agreements permitting General Motors, Peugeot-Renault of France and Fiat-Concord, the Argentine subsidiary of Fiat of Italy, to produce automobiles in Chile...
...The Overseas Private Investment Corporation (OPIC), a government corporation, has not yet resumed its insurance of U.S...
...2. "Chile: the Status of Human Rights and its Relationship to U.S...
...One businessman told us he fears "Chile will become an outlaw like South Africa...
...Congress has passed several restrictions on U.S...
...Ibid...
...owned by Newmont Mining Corp...
...Business Week reports that "Most members of that consortium indicate that their experience will make them wary of getting involved in other mammoth projects in under-developed countries...
...We are grateful to RAI for information contained in this box...
...in Chile, where affiliates are not generating substantial funds, the need for easy, local credit is critical.' -Furthermore, as explained in Part II of ihis Report, plunging copper prices have left the junta in desperate need of foreign exchange...
...The junta claims that such provisions give them latitude in individual negotiations, but investors, remembering their experiences in Chile under the Unidad Popular, are being cautious...
...The country's abundant mineral deposits have been thrown open to bidding by multinational firms, the outstanding disputes over the expropriations of the Allende years have been settled, and a new liberalized code for foreign investors, Decree Law 600, has been enacted (for more on DL600 see NACLA's Latin America & Empire Report, November 1976...
...investment abroad by lessening the risk involved for U.S...
...They claimed that both plants were "ruined" under the UP and that it could cost as much as $1.5 million dollars to restore them...
...It's not proper to issue statements about a country like that," the public relations executive told us...
...for the extraction of lithium* from the Atacama salt deposits...
...Executives, who were quoted in the press as saying that the investment conditions in Chile were "ideal," have been reprimanded...
...One of the largest investments made since the coup is Dow Chemicals' $2 million investment in its Chilean subsidiary Petrodow...
...THE INVESTMENT DILEMMA I. For comparison, the Survey lists 1975 investments by United States investors in Brazil at $803 million...
...A large portion of the private sector credits are loans to Chilean correspondent banks for relending within Chile, especially to finance trade...
...Some sources claim that this investment is being withdramm because, after Orlando Letlier's visit to the Netherlands, that goverment refused to insure the investment...
...The New York Times, July 24, 1976...
...31 13...
...In the late 60's, OPIC guaranteed more investments in Chile than in any other single country, and OPIC played an important role in attempts by the U.S...
...IBM's Chilean subsidiary distributes computers "in order to improve the quality of government operations in banking and industry and to aid international companies...
...Further, in the case of General Motors, protests by stockholder and labor groups have discouraged major commitments in Chile...
...We have trained the people...
...The public sector loans include credits for projects (Chase, for example, is a creditor of the government-owned copper mines...
...When the junta returned its two Chilean subsidiaries, Petrodow and Dow Quimica Chilena, Dow was faced with the option of either walking away or trying to salvage a $17 million investment...
...multinationals...
...and electronics...
...1 4 This trend toward politicizing bank lending, however, has inherent contradictions for the banks, exposing their loan portfolios to increased risk of bad loans and identifying the banks more directly with the policies of the borrowing nations' governments...
...For example, Laja Crown, a Crown Zellerbach affiliate, asked to reinvest $300,000 profits, when applying for a new license...
...MINING Buried Treasure Some important preliminary mining agreements have been negotiated since the coup, and the junta claims that investments totalling $2 billion will soon flow into the mining sector...
...Many major investors are counting on this preferential access to ANCOM and how they will be affected if Chile is excluded will be a major factor determining levels of foreign investment in the coming years...
...Further, critics voice the concern of the U.S...
...During interviews, most businessmen admitted the attractions of DL 600, but some remain wary of the vagueness of certain provisions...
...This is a key factor limiting investment because investors prefer to have the financial security of an OPIC guarantee, as well as the political assurance that the U.S...
...Minera Ibqui, lead and zinc mining 38.00 France *Campgnie des ompteurs Cia...
...The Chile Solidarity movement, and particularly Non-Intervention in Chile, have made OPIC a target in their attempts to stop all U.S...
...The center is to help Chile develop knowhow in food processing (Let them eat Twinkies...
...each...
...Journal of Commerce, July 28, 1976...
...Consequently the Junta is becoming even more dependent than other third world countries on foreign bank loans...
...A September 1974 bulletin from Fidelity Bank (Philadelphia) summarized the crucial role of U.S...
...Congresspeople complain that OPIC insurance programs inevitably involve the U.S...
...ChileNews, March 1, 1976...
...bank branch in Chile today with a $4 million capital investment, and has also established a wholly-owned finance company...
...1976 World Wood Review, May 31, 1976, p. 49...
...The major private banks are pushing for government and international guarantees for their loans and for more co-financing arrangements...
...Sources for this list are: Business Latin America, Bolsa Review, Bank of America Man-On-The-Spot Report (Chile), Latin America Economic Report, Latin America, Business Week, The New York Times, The Wall Street Journal, Chile News, Chile Economic News, Noticias, El Mercurio, and Ercilla...
...6 The future of OPIC coverage for corporations investing in Chile thus depends on several factors...
...Anaconda received $11.9 million from OPIC for its Exotica mine, but is suing for an additional $154 million for its other expropriated mines...
...See NACLA Report...
...7. NACLA conducted extensive interviews in preparing this Report...
...The copper market has always been unstable, making it nearly impossible for countries which depend on export of this commodity for their foreign exchange to plan their economies effectively...
...In interviews, corporate executives considering investments in Chile indicated that a resumption of OPIC coverage would play a key role in their final investment decision...
...8. The Wall Street Journal, April 27, 1976...
...Compiled by Vicky Bergesen 23 United States 29 $60.00 85.00 .72 .35 1.37 4.00 1.45 .15 2.00 .30 14.90 7.40 10.00 1.50 .25 25.00 1.90BANKS TO THE RESCUE U.S...
...He did indicate, however, that Parsons & Whittemore is still interested and that the resumption of OPIC guarantees would make a difference in his company's investment plans.18 Tourism Tourism Director Liliana Mahn recently announced that Chile planned a major development project aimed at encouraging tourism, a potentially important source of foreign exchange...
...Re-opening OPIC insurance for Chile would be like a red flag thrown up in the face of these efforts...
...and Girard Trust ($2 mn...
...in Colombia at $31 million...
...Marine Midland, Chase, Royal Bank of Canada and Bank of Nova Scotia ($8.2 in...
...6. The New York Times, June I11, 1976 7. The Washington Post...
...21 Electronics Activity in the electronics equipment industry has long been dominated by some of the largest multinational Overriding the Underwriters The Overseas Private Investment Corporation is a U.S...
...companies nationalized by the Unidad Popular government...
...investors in Chile...
...OPIC is still embroiled in courtroom battles over its insurance for Anaconda properties nationalized in 1971.' It has also become a source of controversy in current debates over U.S.Chile policy, because of its stated intention to reinstitute insurance programs for companies wishing to invest in Chile...
...In fact, a Foote executive revealed in an interview that his company has invested only a small amount in Chile for exploration and study and that no agreement has been reached on the $10 million investment...
...However, in an interview, George Cleveland (a former manager of Celluloso Arauco, now with Parsons & Whittemore in the United States) said that his company has not bought Celluloso Arauco and the plant is still up for sale: Parsons & Whittemore only has a technical assistance agreement with the Chilean plant...
...Leo Templeman & Sons was the promoter behind the consortium developing the enormous cobalt and copper complex at the Tenk-Funguune copper deposits in Zaire...
...For example, Esso Chile Standard Oil Co...
...Currently, the United States consumes the largest amount of the world's lithium...
...aid to Chile...
...2 0 Some of the companies whose names have been mentioned in connection with this project are Holiday Inns, Sheraton Hotels (owned by IT&T) and Marriot Corp., which has catered food for airlines in Chile for several years...
...In October 1975, Anaconda sent a mission to Chile to explore investment possibilities, and in an interview, Anaconda admitted that Chile is attractive even though the company had its copper mines nationalized...
...First, Chile's internal depression discourages foreign investors...
...Paul Bilgore, a vice-president of Anaconda, said in an interview that while Anaconda plans to invest in Chile, the company has been diverted by its recent merger with the Atlantic Richfield Corporation and its long battle with OPIC over the expropriation settlement for their Chilean properties...
...company...
...In February 1976, the junta announced that the plant had been sold back to Parsons & Whittemore for $55 million...
...Between 1973 and the end of last year, the external liabilities of these countries exploded to $120 billion, up 50 percent in less than two years...
...NACLA interview...
...An Exxon executive told us that "These steps are normally taken on an on-going basis, but in the case of Chile, this was not done in recent years in view of the threat of expropriation faced by all U.S...
...19 THE INVESTORS A Brief Overview Some corporations have decided to brave the opposition to make limited investments which, given the factors above, seem risky at best...
...1 2 In addition, the banks have begun to pressure for more access to confidential IMF intelligence reports on the local economies which it monitors.' 3 And, in July, private banks, for the first time in recent memory, stepped into a country - Peru - to replace the IMF in policing a borrowing government's monetary and fiscal policies...
...In some cases, there eas considerable, but not definite, data indicating an investment mas approved and implemented...
...The People Continue to Be Exploited" Wall Mural 197120 Wood Products Wood products were Chile's second largest export (after copper) in 1975...
...The agreement, representing the "rationalization" of the Chilean auto industry, has been three years in the making...
...May 8, 1976...
...Wall Street Journal, April 19, 1974...
...Although this repression may indicate to some that their investments will be secure, those who saw the strength of the Chilean working class during the Unidad Popular government, realize that such political consciousness can be neither beaten nor legislated out of existence...
...The turn-around was caused by a lull in the recovery from worldwide recession, a softening of demand due to substitution with other materials, and the very large inventories which overhang the market...
...that matters are being handled very efficiently and with a great sense of responsibility.' Though more cautious than Citibank, the Bank of America also has direct investments -- in two finance companies - has a management advisory contract with Chile's fifth largest bank, and has arranged numerous credits, including the export financing mentioned above and an $8 million credit for LAN-Chile's acquisition of a Boeing jetliner...
...OPIC wants this provision amended to insure the right of the U.S...
...twisted OPIC arms" to insure new private investments in Chile...
...in fact the trend is even more accentuated in Chile...
...A closer look at this loan illustrates several of the contradictions facing U.S...
...government aid.' 0 As a result of the banks' growing stake in third world economies, bank lending is becoming increasingly politicized and the ties between the state and private banking capital are being tightened...
...NACLA interview...
...The New York Times, The Wall Street Journal: various articles July-October 1976)tsevnIn gieroF ments Over $100,000 Since Sept...
...bank credits in underwriting the Junta's rule: The key determinant as to whether Chile will be able to overcome its economic problems will be its ability to obtain financing from abroad...
...investors during the regime of Marxist President Allende...
...aid to Chile...
...Meanwhile, most foreign private investors are waiting on the sidelines...
...9 Chile is no exception to this trend...
...for trade (Bank of America, for example, arranged a $20 million credit for exports from the government-owned steel company...
...2. "Military Government Pulling Chilean Economy Out of Chaos," Fidelity World Overnight, September 27, 1974...
...The United States Department of Commerce's Survey of Current Business lists only $12 million investment in Chile by U.S...
...4. Business Latin America, May 5, 1976, p. 140...
...Europe and Japan are the second and third most important consumers of the metal...
...Anaconda is considering mining uranium ore deposits as well as recovering uranium from copper tailings...
...to explore for copper, lead and zinc...
...increasingly smelters are being built in countries like Chile where controls are minimal...
...The banks are also moving to gain admission to the "Paris Club," the international government gathering which renegotiates the foreign public debt of insolvent third world countries...
...6. These remarks were made in an interview with Bill Goodfellow, October 1976...
...taxpayers - in any conflict between multi- nationals insured by OPIC and their host country...
...NACLA interview...
...A recent full page ad in The New York Times paid for by the junta, for example, quoted the bank's Santiago manager's endorsement: The return of City Bank [sic] to Santiago most certainly is an act of faith in Chile's economic future...
...In the words of the Wall Street journal, this loan "confronts the banks with thorny political and public relations problems...
...Others would be interviewed only after making it clear that they "would not discuss the human rights situation...
...de Medidores, calculators .49 *Gazocean Tanker 7.50 Canada Bata Shoe manufacturer 5.00 Noranda Mines Chile Canadian Mining, copper mining .60 Switzerland *Hlffan-La Roche Productos Farmaceuticos Roche 1.40 *Nestle Cia...
...Laja Crown, which produces pulp and computer cards, mostly for export, has been hurt by the worldwide recession, and will be adversely affected if Chile is expelled from ANCOM.13 Similarly, Ireco Chemicals Company, owned by Gulf Resources and Chemical Corp., has reinvested $252,000 in Ireco Chile Ltda...
...Joint ventures, such as Noranda Mines' proposed $250 million investment for exploitation of the Andacollo copper deposits ($350 million if a copper smelter is built), are left floundering...
...NACLA Interview, October 1976...
...The current government is acutely aware of this reality and has been successful in convincing U.S...
...Business Week, September 27, 1976...
...When IT&T settled with the junta for $95 million payment for their expropriated telephone company, they also agreed to funnel $25 million (to be matched by the junta) into a major research center that IT&T's Continental Baking Co...
...Chamber of Commerce, among others, has so vociferously denounced, it would also exclude Chile from preferntial tariffs for its considerable exports to ANCOM countries...
...and $130 million for 1977...
...Ultimately, Dow decided to reclaim its Chilean properties, in order to take advantage of the boom in prices caused by the worldwide shortage of petrochemicals.' 6 The failure of the junta's foreign investment campaign can be more clearly understood if the investments which have fallen through as well as those which have materialized are examined...
...There is much talk of major copper mining projects, but the companies are only keeping their options open...
...They were told that license applications were likely to be more favorably received if they were accompanied by a request for authorization of a further investment...
...When DL 600 was published, investors already in Chile were told they could remain licensed under the old investment law, or apply for a new license under the more favorable terms of DL 600...
...How the actors involved deal with these contradictions will greatly clarify the role of the state and private capital and will open new possibilities for organizing against the Junta's dictatorship - as well as against monopoly banking capital...
...Thus, OPIC provides political risk insurance, and involves the U.S...
...A World Bank 1975 Report states that Chile attracted only $50 million in foreign investment during 1975...
...Conclusion It is clear that the junta has so far been unsuccessful in attracting large amounts of foreign capital to Chile...
...They are in no hurry to begin new production which would only add to their bulging inventories...
...thus, after debt servicing, there are few dollars left for capital investments...
...When the Junta and the IMF failed to agree on the terms of the stand-by loan, the private bank loan was made without it...
...Wells Fargo, for example, is only now beginning to reconsider its wait-and-see policy towards Chile...
...Survey of Current Businesss [United States Department of Commercel, August 1976...
...6 Noting that Noranda rushed in soon after the coup to invest $600,000 in a small copper mining operation it had abandoned in 1971, some observers wonder at the delay in the new investment plans...
...government -- and U.S...
...Conveniently, these operations are the highly polluting industries that are increasingly facing restrictions in the industrialized nations...
...Such investors employ few people, thereby reducing labor costs and the threat of strikes...
...Although some firms, such as Noranda Mines, have brazenly gone ahead with their Chilean plans in spite of pickets, letter campaigns and testimonials at stockholders' meetings by persons who have been tortured in the junta's prisons, many companies are affected by such opposition and its resulting curbs on foreign aid...
...investors in 1975.' These investment figures are abysmal when compared to the $5.74 billion that U.S...
...Nevertheless, some sources - in the United States and in Chile - claim that the picture will improve...
...The same report projected $100 million for 1976...
...2. Business Week, September 6, 1976, p. 77...
...Business Week, October 20, 1975, p. 66...
...One State Department Chile officer recently acknowledged in an interview that Washington is relying on commercial bank loans to cover that portion of Chile's deficit which formerly would have been covered by U.S...
...Guarantee programs offered by other nations have also been held up, both because of Chile's economic viability and as a protest over the junta's repression...
...Republic National Bank ($3 mn...
...multinationals and their host countries...
...Further, Chile's economic situation is ultimately dependent on copper prices, which are currently at their lowest level in over a year...
...4. Business Latin America, January 14, 1976, p. 14...
...Furthermore, businessmen are quick to point out that DL 600 is in direct violation of Decision 24 of the Andean Code...
...However, El Mercurio admits that the materialized foreign investment since the publication of DL 600 in July 1974 is only $40 million...
...if OPIC reinstitutes its Chile programs, more U.S...
...The junta, anxious to diversify its mineral exports, has widely publicized its authorization of a $10 million investment from Foote Mineral Co...
...8 To this date, the banks in the consortium have 2425 refused to reveal their identity to the public.* What the bankers do not want is a repeat of the public campaign in the late sixties against ten major banks which extended a $40 million revolving credit to South Africa...
...As one businessman told us, "How stable is any government in Chile...
...Thus, the failure in Zaire is likely to sour Templeman's chance for success in Chile...
...bankers in Chile...
...The corporation is interested in extracting uranium from tailings left after copper extraction, but a public relations executive at Westinghouse told us that no * Lithium is a metal used in making aluminum, in manufacturing ceramic cooking ware, and in pharma- ceuticals, including the drug used for treating manic- depressives...
...So great was the pressure that South Africa finally asked the banks not to renew the credit...
...There is an outpouring of vituperation all over the world," one banker said...
...Japan *Ataka, Mitsubishi Nippon Steel, Mitsubishi *Armo Steel Bank of hAerica *Carborundm Citibank *Coca Cola Crom Zellerbach Dow oenical Dresser Industries Firestone Tire & Rubber Hochschild Group *I o as Ireco Chemicals Joint venture w/Cia...
...so the outcome of Chile's dispute with ANCOM will be crucial...
...Anaconda is actually demanding $159 million which will be reduced by $5 million tendered, but unpaid premiums...
...Although some predicted that the price would reach 80 cents by 1977, the price has, in fact, plummeted...
...Further, Anaconda is suing for interest on the OPIC settlement, which will probably bring the figure back up to $154 million...
...Chile has approved an investment totalling $5.6 million ($1.5 million in new capital and $4.1 million in reinvested funds) by IBM, and the corporation has loaned another $4 million to its subsidiary...
...In many cases, the much heralded rise in nontraditional exports (such as vegetables, fruit or shoes) does not represent an increase in production, but rather a re-orientation of production towards export due to Chilean poverty...
...commitments have been made and that the investment under discussion would be very small...
...1. Last year OPIC challenged a decision in Anaconda's favor claiming that the arbitrator was biased...
...banks, particularly those with fewer historical ties to Chile, have opted to wait on the sidelines...
...Aside from passing a new investment code and guaranteeing almost unrestrained exploitation of Chilean resources, the junta has courted foreign capital at numerous international meetings, seminars, and conferences...
...Despite all of these efforts to lure foreign capital into the country, few investments have materialized and a major 1718 thrust of the junta's economic program is in serious trouble...
...A Miami-based firm, International Venture Corp., plans to begin special gambling junkets to Chile from the United States this year...
...Anaconda is also interested in uranium...
...Labor, stockholder and church groups pressure corporations to stay out of Chile until human rights are respected and collective bargaining rights restored...
...Ireco, an explosives manufacturer, has been in Chile since 1967 and its investment also accompanied an application for a license under DL 600...
...In 1975, Cyprus Mining Corp...
...The San Francisco Chronicle, March 20, 1976...
...Under the Andean Foreign Investment Code (which Chile opposes), investment disputes must be settled in the courts of the host countries...
...and Canadian banks headed by Morgan Guaranty...
...In addition, the radioactive isotope of lithium is essential for the hydrogen bomb...
...They fear that imprecise profit remission ceilings and tax rates will come back to haunt them once they have made a capital commitment...
...The junta's decision to restructure the Chilean economy made it inevitable that foreign capital would be a major pillar of the new regime...
...Potential investors cannot forget that a succeeding government may disclaim any agreements made during the junta's rule...
...corporations invested in Latin America in 1974 and 1975.2 A number of factors explain why foreign capital is reluctant to move into a country that has thrown its doors open to the multinational investor...
...possibly to repurchase Embotelladora Andina Capitalization of Profits, Laja Crown Capital expansion, Petrodow Tricones Mineros, mining equipment Esso Chile, petroleum distribution Repurchased Firestone Chilena Its Mantos Blancos Mining bought and expanded Consorcio Agro-Industrial...
...The largest single loan yet to Chile - a $125 million credit to the Central Bank - was extended in May 1976 by a consortium of 16 U.S...
...However, growing pressure from a well-organized Chile solidarity movement has greatly increased the political price for government lending to Chile...
...2 2 An IT&T affiliate, Standard Electrica, produces radio, television and telephone equipment...
...Although the contract agreement was signed nearly a year ago, Noranda, Canada's eighth largest corporation, has not made the investment...
...Chile's balance of payments, for example, fluctuates widely with changes in the price of copper, its major export...
...Even now, six months after the final ratification, the auto companies have made no investment, because: (1) the internal market for automobiles is virtually nonexistent...
...Miguel Caram, general manager of Standard Electrica, claims that they have a head start over any international competitors: "For forty-five years anything in telecommunications in this country has had to do with IT&T...
...An aggregate of $9.8 million in capital assets will be invested over a five year period in order to modernize and upgrade existing market outlets, terminals and bulk plants...
...Apparently, while the Japanese companies have put up $85 million, the junta cannot finance its own $75 million participation...
...Bank of America Man-on-the-Spot Report (Chile), April 1976...
...The risks of the former type of lending are easier to judge and the means of repayment are clear...
...Business Latin America recently reported that despite some signs of economic improvement, "for local corporate operations, 1976 will bring little relief from sagging sales and slim profit margins, due to the dogged determination of the authorities to continue reining in public and private demand to contain inflation...
...investment is sure to flow into Chile...
...Their agreement with the Junta de Adelante de Arica expresses hopes of "channelizing a strong touristic current from the United States to Arica...
...but a circuit judge upheld the decision...
...4 Furthermore, investors have been deterred by the restriction of credit, another anti-inflationary measure...
...Judging all investment in terms of profitability, executives cannot help but be deterred by the most recent figures available for Chile: in 1974, the rate of return on United States investment was only 2.7 percent, the lowest in all Latin America...
...Minera Atacana, iron mining Joint venture w/Cia...
...5 Finally, OPIC is part of the Foreign Assistance Program...
...government during 1971-1973 to get compensation for U.S...
...Bank of America, Irving Trust, Bank of New York, Toronto Dominion Bank, Banco do Brasil ($4.2 mn...
...The probability that many of these investments will materialize diminishes upon examination of projects which have been abandoned, projects which are endangered (such as those of Noranda Mines and CAP causing a loss of jobs at home...
...CONCLUSION Over the past two years the non-oil producing third world nations borrowed heavily to survive the fourfold increase in the price of oil and the recession-induced plunge in the price and volume of their exports to the industrialized nations...
...Only the multinational firms have the capital as well as the distribution and marketing apparatuses that are necessary to carry out these development plans...
...Vicky Bergesen In July 1976, copper prices reached 74 cents per pound...
...Cyprus claims that they gave up the project because they were not able to obtain the title they wanted, but the real explanation for their dropping out probably lies in the red ink on their books...
...each...
...Nevertheless, the State Department has decided - at least for the moment - that it can not afford the criticism which would result from new OPIC guarantees for corporations in Chile...
...The New York Times...
...5. European trade union groups are actively working now to force the OPIC-like agencies in Europe to include "social provisions" in deciding on investment guarantees for European multinationals which invest in the Third World...
...World Wood, May 1976, p. 22...
...Jack Anderson charged that both the State and Treasury departments "encouraged" the banks to proceed with the loan to help keep the Junta afloat...
...If they don't return the power to the people and the political parties, the people will get restless and there will be anouther coup...
...overseas investment will be financed from internally-generated funds of foreign affiliates...
...6 Since the details of loan contracts are carefully guarded secrets, one can only speculate as to the conditions attached to the bank consortium loan...
...Informed sources explain that the junta is unable to finance its 51 percent equity in the project.' Similarly, construction work has been halted at the site of an iron ore venture, jointly operated by Cia...
...9 At the time of this writing, it seems that ANCOM will be forced to exclude Chile from the pact altogether.'o While this would remove restrictions on foreign investments that the U.S...
...Finally, the worldwide Chile solidarity movement is quick to expose and embarrass investors in Chile...
...Business Latin America, January 28, 1976, p. 31...
...In the case of Fidelity Bank, we reestablished our lines of credit to Chilean banks shortly after the new government took control.2 In late 1973 and 1974 foreign private banks made some $500 million in loans to Chile...
...After suffering losses in Cyprus and in Peru (where their affiliate, Marcona, was national- ized), they sold their interests in Brazil and Australia.26 While Cyprus is nursing its wounds it is not likely to make any risky investments, especially not in Chile...
...Economic Assistance Programs," Hearings Before the Subcommittee on International Organizations of the Committee on International Relations, House of Representatives, April 29 and May 5, 1976 (GPO: 1976), pp...
...We believe...
...9-10...
...Business Week, August 9, 1976...
...1975Parent Nationality Parent Ocmpany Gaumat ($U.S...
...9. The New York Times, October 5, 1976...
...each...
...4. Driscoll made these remarks in an interview with Bill Goodfellow, October 1976...
...manufacturers to move abroad,21 corporations, among them IBM and IT&T...
...5. The New York Times, September 21, 1976...
...3 Further, Jack Anderson reported on May 8, 1976, that the "State Department...
...Originally the $125 million loan had been made contingent on Chile's obtaining a stand-by loan from the International Monetary Fund -- signalling that the IMF was supervising the Junta's economic policies...
...aid to * The National Coordinating Center in Solidarity with Chile has since learned that the 32 year loan was supplied by: Morgan Guaranty, Bankers Trust, Chemical Bank, Manufacturers Hanover ($13.2 mn...
...Some businessmen refused to speak with us when they heard we wanted to talk about Chile...
...The private banks now hold about $50 billion of that debt, up from $30 billion two years earlier...
...commercial banks played a strategic role in the U.S.-coordinated credit blockade against Chile, which was one of the main factors in the overthrow of the Allende government.' Developments since the coup reveal the growing importance of private bank credit in keeping the military dictatorship afloat...
...In recent months, though, most indicators project continuing difficulties, and hopes for an upturn have faded...
...Construction on that project was halted when cost overruns brought the price tag up to $800 million from an original estimate of $600 million...
...Some investors hope that the technological requirements of such operations will protect them from expropriation, because Chile does not have the technicians capable of running the operations independently...
...Among the largest U.S...
...INM de Chile, computers Ireco Chile, explosives manufacture Scientific research institute Primarily adhesive tapes Netherlands Ako Pharma & Vetrex Farmnquamica de Chile, $800,000 credit granted .50 Duco BERL ED, pharmaceuticals .79 Philips Dutch West Indies Electronics 3.70 Stevin Bagehern Sociedad Minera de Recursos Aluviales (SCI4NWA)** 62.50 West Gerauny Deutsch Sudamerikanische Baek Capital for Banco Unido de Feaneto .25 Elmston, Merck Halding Merck Chile, pharmaceuticals 1.20 Metallsgesellachaft Cia...
...Some copper smelters in the United States have been forced to close down temporarily in recent years to comply with existing controls...
...Unlike other loans tied to specific trade or revenue-generating projects, this loan was to finance Chile's balance of payments deficit...
...Naturally bank officers and boards of directors are leary of giving the appearance of supporting a military dictatorship...
...published in April 1976 a list of all foreign investment in Chile uhich urs "%ider consideration" and/or had been "approved...
...Chile), a subsidiary of Exxon, has announced a $14.9 million investment in its oil product marketing operations...
...and European banks to reopen their credit facilities for Chile...
...government to outside arbitration of investment disputes...
...Business Week, August 23, 1976, p. 48...
...Ibid...
...Political and diplomatic considerations obviously played an important role...
...agency insures multinational corporations against the risks of "expropriation, currency inconvertibility, and war, revolution or insurrection...
...Now, under the junta, the imperative for foreign investment becomes even greater as the bourgeoisie seeks to expand exports and to tie the Chilean economy even more firmly into the system of international capitalism...
...95-98...
...Another $5.1 million, representing capitalized profits which Exxon says Chilean laws will not allow them to repatriate, will be used to fulfill general working capital requirements...
...The junta's planners hope to triple forest exports by offering foreign investors tax incentives, grants, and immunity from agrarian reform...
...Acero del Pacifico, iron mining Armco Chile, capital expansion Capital for finance company Abrasives plant Capital for branch opened Deceober 1975 Soft drinks...
...In many cases interviews were given only on the condition that sources not he disclosed...
...labor movement, which accuses OPIC of encouraging U.S...
...Finally, OPIC has waited to see if Chile would leave the Andean Pact...
...British Ropes, which made a $272,000 investment immediately after the coup, was so concerned about its public image that it stubbornly denied reports of its investment in the British press...
...We are also grateful to Bill Goodfellow for information contained in this box.22 mentioned above), and those projects which are likely to be completed...
...these companies are marked by an asterisk...
...announced the establishment of Cyprus Chile Mining Corp...
...government insurance company established to promote U.S...
...7 The $125 million loan also exposed the participating banks to increased public criticism for directly supporting such a brutal dictatorship...
...3. Chile Economic News, March 1976, Embassy of Chile (Washington, D.C...
...These investments should not really be considered new capital inflow, although the junta is quick to label them as such...
...Finally, while the junta appears to have a firm hold on Chile politically, its economic policies are encountering increasing difficulties and are under fire even from industrialists in Chile...
...4 Further, for those who had done business in Chile previously, it was more profitable to expand established plants and marketing apparatuses than to make a new investment in another country...
...3 The shrinking internal market has crippled many who produce for domestic consumption...
...OPIC is particularly vulnerable to criticism right now, because the legislation authorizing OPIC activities expires at the end of FY 1977 (September 30, 1977...
...September 30, 1976...
...A brief summary of five key sectors (wood products, tourism, electronics, autombbiles and mining) illustrates how some of the factors described above actually affect foreign investors...
...For years, the Chilean bourgeoisie has relied heavily on foreign capital to help it develop key sectors of the economy...
...Such optimism is based largely on the belief that the current crisis in capitalist economies throughout the world will abate...
...If Chile does in fact leave the Andean Pact, then - according to a senior economist at the Commerce Department "a major legal impediment to an OPIC bilateral treaty with Chile will have been removed...
...BANKS TO THE RESCUE 1. See NACLA Reports of January 1973 and October 1974...
...efforts to further renegotiate Chile's foreign debt, and the U.S...
...For the most part, these investments have been capital intensive operations in the mining, chemical, forestry or pharmaceuticals sectors, all of which are export-oriented...
...Forbes, October 15, 1976, pp...
...At a time when OPIC is vulnerable to all criticism, it clearly does not want to be in the public limelight with new programs for Chile...
...The junta has been trying to sell state-owned operations to private investors because, as Julio Ponce Lerou, Director of Chile's National Forestry Corporatiori puts it: "Productivity of a governmentowned mill is not as efficient as one owned by a private company...
...7 One of the plants which the junta has been trying to sell is Celluloso Arauco, an important pulp and paper producer jointly owned by Corporacion de Fomento (CORFO) and Parsons & Whittemore of the United States until 1971, when CORFO bought out the U.S...
...The solid front that the Chilean ruling class presented during the coup is fast disintegrating and the outlook for foreign investors in Chile is growing cloudier...
...and (2) a considerable percentage of the industry's output was to be exported to the Andean countries...
...However, collecting on balance of payments financing depends on the economic health of the country, which is difficult to forecast...
...The banks have been falling all over each other to make loans," observed a Business International analyst earlier this year...
...In April 1976, OPIC informed a House subcommittee that it planned a "limited" program in Chile beginning sometime after July 1976.2 To date, however, OPIC has not signed the bilateral executive agreement with the junta necessary to initiate fullscale activities in Chile...
...Even if Chile integrates itself into the bloc of countries including Brazil, Uruguay, Paraguay and Argentina, it will take time to work out arrangements for multinationals and Chilean capitalists who wish to produce for these markets...
...government in squabbles between U.S...
...The junta has not yet fixed the final terms of DL 600, and Foote has been unable to reach an agreement on certain crucial provisions concerning taxation and profit remission.2 Late in 1975, executives of Westinghouse visited Chile to discuss uranium prospecting with the Chilean Minister of Mining, General Mendoza, and representatives of CODELCO (Corporacion del Cobre).2 Westinghouse is especially anxious to find new sources of uranium, because it faces numerous suits in the United States for its refusal to fulfill uranium supply contracts to public utilities at the established prices...
...Also, rather than breaking the back of ANCOM, it looks increasingly like Chile will be expelled (it is currently "suspended" from the group...
...The Junta's economic development model calls for massive infusions of foreign capital...
...investments in Chile...
...9. I-or an extensive analysis of Chile's dispute with the ANCOM, see NACLA s Latin America and Empire Report, November 1976...
...Latin America Economic Report, June 11, 1976...
...is helping the junta set up and staff...
...They have insisted that Chile resolve its dispute with the other members of the Andean Common Market (ANCOM) before they will make investments...
...Acero del Pacifico (CAP), a state-owned company, and Nippon Steel and Mitsubishi of Japan...
...To further facilitate the plunder it has established free trade zones at the ports of Punta Arenas and Iquique where corporations can bring in materials that are refined or assembled by cheap labor and subsequently exported without paying any duty...
...European governments, for example, have blocked U.S...
...Business Latin America, May 19, 1976, pp...
...6. For more on Noranda's investment see "Canadian Multinational Goes to Chile," Chile Report, Latin American Working Group, Box 6380, Station A, Toronto, Ontario, Canada...
...Ohilena de Productos Alimenticios ((IPWDAL) 3.80 Brazil Benco do Brasil Capital for branch opened February 1976 3.00 umsenia Geomin (bedin, to export ore concentrates to ltmania 2.90 Great Britain British Ropes Steel cable mmrufacture .27 Holland Chenicals Liquidos a Granel, Servicios y Caoercio, chemical transport 1.00 Belgian Bekaert Repurchased Inchalan Wire Industry .90 IUaibourg *Hannkver Electronics .59 Multinational AIELA Capital for Banco Unido de Famento .48 *CCFO(the Chilean Developnent Corp...
...47 and 132-133...
...II1...
...3. As quoted in The New York Times, February 20, 1976...
...in Peru at $312 million...
Vol. 10 • December 1976 • No. 10
