In Chile There Will Be Work for All
NACLA
In Chile there is a new saying, "Chile es donde queman las papas." Literally translated, "Chile is where the potatoes are burning," Chileans use the saying to express their conviction that...
...The Christian Democratic government of Eduardo Frei (1964-1970) had previously "Chileanized" The UP government, during its first six months in office, expropriated 3.5 million acres of land, nearly half the amount expropriated during the entire six years of the Frei administration...
...Federal Trade Commnission, The Copper Industry (USGPO Washington, D.C.: 1947), p. 110...
...copper fabricating subsidiary--the Chase Brass and Copper Co...
...7 4 Furthermore, export economies specializing in raw materials production and primary products have traditionally been subject to serious instability -- and Chile's economy is no exception...
...And since the U.S...
...On many occasions he has defined what he sees happening in Chile today...
...It remains to be seen whether the relationship of power and authority among the men in the same centers of production really changes, even after the workers become theoretically the owners of the factories, the land, etc...
...copper companies who saw it as a way to placate nationalist demands without losing profits or control...
...3 6 Kennecott's sales subsidiary--the Kennecott Sales Company--was "Chileanized" in 1967, but Kennecott continued to run the operation under a management contract, meaning it still controlled the daily operations of the company...
...N 1/71 INESA, cement plant Nationalization of vital industries...
...The fact that there is both output instability and price instability causes the export industry's total value of production ** Returned value in this case is that part of the total value of Chilean copper remaining in Chile in the form of local labor costs, local material inputs, local taxes, etc...
...For the development of this thesis see also: A.G...
...Yet the bulk of value-added in the process of bringing the ore to the consumer is made in the fabricating and distributing stages...
...In February, RCA International reached an agreement with CORFO by which CORFO would acquire 51 percent ownership of RCA's Chilean subsidiary, the largest Chilean manufacturer of radio equipment...
...1 5 The language Allende chooses is important...
...Allende declared the event Chile's "second independence," referring to the achievement of economic independence that has been denied Chile despite its political break from Spain in 1818...
...Peruvian Times, July 18, 1969, p. 4; Peruvian Times, January 2, 1970, p. 3. 15...
...The composition of Chilean trade is discussed in a separate section of this study to be soon published by NACLA...
...business periodicals in the mid 1960's when Anaconda's mines in Chile were providing 80 percent of the company's profits...
...Kenneth Bradley, Copper Venture: The Story of Roan Antelope and Mufulira (London: 1962), p. 24...
...producers who had restricted output to boost Depression copper prices and the expansion of foreign capacity and output which might have flooded the U.S...
...2 7 Although the copper giants may desire to sell at arbitrary prices, for Chile this has disastrous consequences: it loses $17 million annually with every one cent drop in the price of a pound of copper...
...A contradiction develops between the interests of the international corporations and the interests of the host country (in this case, Chile...
...Fortune, May 1966, p. 120...
...84 The effective tax rate on the copper companies fell from 68 percent to 53 percent in 1961.85 This was caused by generous clauses in the contracts with the copper giants which allowed certain additional tax cuts once a specified level of production had been reached (these levels were fixed at an arbitrarily low figure), 8 6 and by allowing five year amortization periods (instead of the usual 20 to 25 years) on new company investments thereby substantially reducing taxable income...
...I - Intervention...
...6, 1971, p. 12...
...CODELCO) took over the sale-of copper, but met serious international pressures when setting up sales agencies abroad...
...3) a clause in the "bilateral" Washington Treaty,* imposed * In 1950, at the beginning of the Korean War, bilateral negotiations were held between Chile and the United States...
...The fourth largest mine, La Exotica, was to employ only 400 workers...
...Continental Copper and Steel Industries Inc...
...companie...
...Over 280,000 tons of copper came out of our North American mines just last year...
...Keith Griffin, Underdevelopment in Spanish America, p. 164...
...7 3 In the late 1950's and early 1960's, imports by the major American copper companies and the nitrate and iron ore producers alone, reanged from $27 million to $69 million, or, on the average between 6 and 16 percent of total Chilean imports...
...The first attempt occurred in 1952 when nationalist sentiment led to the passing of an act which provided for: 1) the President to have the option to determine the proportion of refined and unrefined copper to be exported annually...
...Thus, few people can appreciate the significance of Allende's act...
...And lastly, there was a strong feeling in Chile that the nation was not participating adequately in the proceeds of copper sales...
...First, Anaconda was "not particularly going out of its way in the copper expansion program" called for as a part of Frei's original Chileanization.*** 9 6 Secondly, many local Chilean copper users resented the fact that Anaconda was unwilling to sell them copper at a price other than those on the London Metals Exchange (LME...
...In 1964, the price differential between the New York market and the London market was such that had all the copper output from Anaconda's and Kennecott's Chilean mines been sold on the LME, it would have sold for a total of $59 million more than it would have fetched on the New York market...
...Now deduct depreciation for such investments during that period, which companies took back out of the country, and the net figure would be only $257 million...
...Mitsubishi, Furukawa, and I.T...
...Allende admits these limitations...
...The cost of the management contract was roughly one percent of annual sales or about $ 5 million a year...
...refining capacity...
...Business Latin America, November 26, 1970...
...plant Result of worker seizure (May, 1971) and part of nationalization of the auto industry...
...copper giants prevented the country from exploiting this situation...
...7. The New York Times, January 18, 1971...
...As a result of this artificially low price, Chile lost at least $500 million in potential surplus 5 6 With the booming demand for copper generated by the Korean War, the U.S...
...10004...
...The American companies have preferred production of blister (instead of refined) copper because it involves a smaller foreign investment per final ton produced, centralization of refining capacity in the * Transfer pricing is the practice of fixing arbitrary prices on sales between subsidiaries or branches of the same corporation with the purpose of distributing profits according to the company's needs...
...Total employment at the U.S.-owned facilities has dropped while production has risen...
...Chile was to lend an additional $20 million to the new mixed company and international lending agencies another $100 million...
...Between 1960 and 1969, while total Chilean copper production increased only 27 percent, that of the small and medium mines increased 157 percent 4 (see Table I...
...Thus, in 1964 while the London price averaged 44 cents per pound, Kennecott reported getting only 35 cents per pound (including shipping and refining charges) for its Chilean copper it sold to favored customers in Europe!58 * Moreover, taxes paid abroad are deducted from taxes paid in the United States...
...The government ordered most industries to produce at full capacity to meet this demand -- or face expropriation...
...By September 1971, it controlled 19 banks of the 22 private Chilean commercial banks...
...How did the U.S...
...For example, in 1968, the U.S...
...investment guarantees) led to a denationalization of the copper spin-off industries...
...11 Table IVa Geographical Distribution of Anaconda and Kennecott Copper Mine Production (in percent) Anaconda 1964 1969 United States Chile Mexico Canada total 23.8% 26.0% 69.5 66.7 5.5 6.1 1.2 1.1 100...
...cit., pp...
...on the Anaconda project the net benefits for the Chilean government were $112 million (versus $150 million for Anaconda...
...This wage difference creates distortions in the labor market, that is, there is an upward pressure on other wages in the economy, thereby further encouraging the use of capital-intensive, employment-minimizing technology in other sectors of the economy...
...In 1922, Anaconda bought the American Brass Co., a large copper fabricating enterprise, but its own Montana copper mines could not produce enough primary ore for American Brass to operate at full capacity...
...Panorama Economico Latinoamericano, 1965, No...
...Other sources include major U.S...
...Third Copper Reform Attempt: Chileanization in the 1960's The third attmept by Chile to gain higher returns from her copper was undertaken by the Frei Administration in 1965 and was called "Chileanization...
...As you clearly indicate, the problems of management and growth of the socialized productive forces and the new relationships between men in production and the outside of it begin to appear...
...Zimbalist, op...
...5 1 Kennecott's El Teniente mine in Chile employed 16 percent fewer workers in 1960 than in 1930 while its sales of copper increased 400 percent...
...Imports are a marginal source (10 percent) of U.S...
...and for the Rio Blanco project, the comparable figures were $40 million (versus $10 million...
...Most copper in the United States is sold at the (low) "producer's price" which is established by the maJor and smaller integrated U.S...
...If the price of copper is too high or the supply too limited, customers who could use other materials with similar qualities would turn to competitive substitutes...
...In recent years, the rate of taxation has not increased significantly...
...Following the United States, the major "free-world" primary copper producmine 51% 51% 51% 25% 30% 25% 180,000 283,000 77,000 (100,000)* (60,000)* (29,000)*- 15 - ers are Zambia, Chile, Canada and the Congo...
...The firm was also undercapitalized...
...prices and the London prices--the differential often ranged from 20-40 percent...
...Can a legally-elected Marxist government bring about socialism without breaking through the legal framework of the bourgeois state through which it gained power in the first place...
...CODELCO $1.5 million $1.0 million shareholders' advances U.S...
...and First National Bank of Chicago, Monthly Bulletin, March 1971, p. 2. 25...
...MYTH AND REALITY: U.S...
...imperialism appropriates and retains Chilean economic surplus, not only through corporate profits, but also through institutionalized manipulation of the price of copper, charges for processing the ores abroad, charges for shipping and insurance, discriminatory U.S...
...5/71 -- State agency, GASMA, is formed to construct and operate pipeline for natural gas from Punta Arenas to major Chilean cities...
...Economic recessions can be pushed off on the fabricators or suppliers...
...6 7 During the period 1950-62, since Chile did not refine, insure, or ship her own copper, she forewent earning $200 million in potential economic surplus...
...State plans to base a publishing company on it...
...SP 7/71 Bank of America, with Nationalization of banking...
...alone, we have enough proven and potential reserves to meet the estimated needs for the next 65 years...
...Forbes, July 15, 1971, p. 34...
...The following article, part of a larger work on the Chilean economy to be published soon, explores some of the most significant points in the workings of copper imperialism...
...We have said that we are going to create a democratic, national, revolutionary and popular government which will open the way to socialism,because socialism is not imposed by decree...
...COPPER INVESTMENTS IN CHILE While the U.S...
...copper companies want these advantages as well, but in their home country where they have more control...
...Tariff Policies Chile is further hindered in building a fabricating industry by the discriminatory tariff policies of the industrialized nations...
...These same four companies currently control 75 percent of the U.S...
...Griffin, Underdevelopment in Spanish America, p. 152...
...subsidiaries, the Cerro Copper and Brass Co...
...At various times since the 1930s the Chilean government sought to increase the integration of the export-oriented mining "enclaves"* into the local economy by increasing taxation on them...
...producers' price, Chile lost $200 million...
...steel producer CORFO purchased the 45% of CAP's stock still remaining in private hands for $90.6 million payable over 3-8 years...
...In addition, Anaconda sold 25 percent interest in its new Exotica mine to CORFO forming the new company, Sociedad Mineria Mixta La Exotica...
...During periods of short-run shortage, primary copper is often released from the strategic stockpiles of the industrialized consuming nations to dampen the world copper price fluctuations so as to meet consumption requirements at stable lower prices...
...This hinders the development of an internal consumer market: urban unemployment rises and bloats an already over-filled service sector...
...PEL, 153, 1966...
...government purchased Chile's major (and Latin 51% of stock & contracted for 100% of ownership America's largest) coal in the future...
...Allende: It is true that if we look at the issue from the point of view of the creation of a socialistic society, once the decisive and absorbing current problems of constituting and securing popular power and the destruction of the economic bases of monopoly-capitalism are overcome, the problems which come to the fore are different...
...Miniere du M'Zaita (French), the largest medium-sized copper mine until the 1960's when it closed down due to depletion...
...interests have robbed Chile of its major natural resource...
...PEL, 45, April 1962...
...4 1 Allende, speaking before a crowd of miners at the time Congress passed his copper nationalization bill last July, made an even stronger assertion: "The companies (Anaconda and Kennecott) took out $552 million between 1965 and 1970, and not one cent went into the expansion program...
...5 4 This occurred at a time when unemployment in the norther mining regions was reported to be as high as 33 percent of the labor force...
...Recovery of basic resources...
...To prevent this, the U.S...
...For a discussion of the decapitalization which comes as an inevitable consequence of foreign investment see "A Note on Foreign Investment," URPE Newsletter, July 1971, pp...
...and that does not depend simply on will, but rather on the general development of the productive forces...
...Source: Annual Reports, various year Moreover, in its 1964 Annual Report, Anaconda noted that "substantially all" of its over $40 million net profits from Chile and Mexico "has been received in U.S...
...6 1 Fabricating operations remain located in the industrialized nations where the copper giants achieve greater "efficiency" (through economies of scale) and at the same time limit their "investment exposure" (hedge against nationalization...
...The fabrication of copper includes the making of wire, cables, tubing and other final products using copper (see also the flow chart on the copper production process below...
...Second Copper Reform Attempt: Laissez Faire in 1955 In 1955 (during the conservative Ibaniez and Alessandri administrations), a new copper law, the "Nuevo Trato," was passed...
...B. The Demand for Copper The demand for copper is highest in the industrialized nations...
...1 4 Kennecott was less dependent on Chile for its profits than Anaconda,* but its interests in El Teniente, even after Chileanization, were enormously remunerative...
...and 4) the absence of a definite copper policy during the unstable Videla-Ibanez administrations (19461958...
...World Bank affiliate) $8.74 million CODELCO $.875 million U.S...
...cit., p. 176...
...For example, the largest producer of grinding balls (which are used extensively in the copper crushing process) is ARMCO Steel's Chilean subsidiary...
...cit., pp...
...In 1952, the Chilean government reacted by increasing taxation on the copper companies and establishing the right of the Chilean Central Bank to sell all Chilean copper abroad...
...N 7/71 All major copper mines...
...Le Monde Weekly...
...Morgan, Henry Clay Frick, and Ogden Mills, who pooled together $10 million to take over the historic Cerro de Pasco mine in Peru which had been producing copper, lead, zinc, silver, and bismuth since the Spanish colonial era...
...6 percent (195354...
...Workers at the Ford Motor Company seized that plant when Ford attempted to lay off its 600 employees and close down its assembly line...
...Table VII Percent of Non-Socialist World Primary Copper Production By Nation 1963 1969 United States 27.7% 24.0% Chile 15.2 12.0 Zambia 14.9 12.5 Canada 10.6 9.0 the Congo 6.8 5.5 Peru 4.4 4.0 Source: Wall Street Journal, September 8, 1964, p.8...
...wanted a continuous flow of copper during the Korean War and agreed to purchase Chilean copper in return for various conditions to which Chile agreed...
...The government's total revenue participation (taxes plus equity dividends) as a share of total value of production actually declined with Chileanization...
...owned by the Hochschild interests who owned the Bolivian tin mines...
...CORFO now owns 100...
...As an incentive, Kennecott's effective tax rate was reduced from 86 to 44 percent...
...The Wall Street Journal, October 22, 1970, and April 21, 1971...
...Grace...
...It was relaxed after World War II when copper shortages (and the danger that high copper prices might encourage substitution) developed in the United States...
...cents per pound)* 1952 1955 1959 1964 1965 1966 1967 1968 Jan...
...2 3 C. The Giants Desire Price Stability The copper companies must keep the price of copper in line with the price of competitive substitute materials such as aluminum, plastics and the new alloyed steels...
...After all, that's what put our name on the map in the first place...
...Tariff Commission, The Tariff Schedule of the United States Annotated (Washington, D.C.: 1967...
...U.S...
...Mamalakis and Reynolds, op...
...The copper giants sell their copper outside the United States through their own sales organization to their "old contract-customers" at prices below the LME price...
...3 3 on Chile in 1951 by the United States, forbidding the Chilean government from trading its copper with socialist countries...
...Peruvian Times, July 12, 1969, p. 4. 13...
...K. Griffin, op...
...Second-class postage paid at New York, New York.-3Intervention Many of the nationalizations were carried out under legislation passed in the 1930's which provided for government "intervention" in and temporary administration of factories not meeting government production norms...
...How important were these properties to the U.S...
...consumption) from its stockpile in 1965 to thwart a price rise caused by a 38 percent increase in U.S...
...copper producer, Phelps Dodge...
...Abbreviations: ** A law passed in 1932, under President Carlos Davila's administration allows the government to send officials ("intervenors") to oversee production should a private firm operate below capacity...
...Department of Commerce, Market for U.S...
...newspapers...
...5. News from Chile, Embassy of Chile, Washington, D.C., January 28, 1971...
...In 1966 Washington coerced Chile to sell 90,000 tons of copper to its strategic reserve at a price of 36 cents per pound, when the world market price averaged 60 cents per pound, resulting in a loss to Chile of an estimated $200 million.57 This international robbery is compounded by having the sales of Chilean copper in the hands of the copper giants, who, as mentioned before, either sell copper to the fabricating subsidiaries in the United States at the low New York metals market price--the so-called "producers' price"-or sell abroad at favored prices to long-standing established customers...
...producers during periods of slack demand to support prices and favor producers...
...In return, Anaconda's tax rates were reduced from over 70 percent to an average (on its three mines) of 53 percent...
...Table IXb Employment in Chilean Copper Mines (Number of Workers) Gran Mineria Small & Medium Mines 1940 18,390 4,285 1943 20,550 8,528 1954 11,057 12,650 1957 13,154 15,064 source: Mario Vera Valenzuela, op...
...cit., p. 378...
...41-42...
...Anonima Cuprifera de Sazasca, a $32.5 million joint venture between U.S...
...That mist must be destroyed by a great tempest to break the habit, seagull, of weeping...
...r.ainn control nf distribution the State Conner Corp...
...In many cases they hold on to unexploited resources as future reserves and, more importantly, to prevent others from exploiting them...
...funds," that is, dollars, thus creating a severe drain on the foreign exchange position of the host countries...
...The 1967 Kennecott Annual Report chimed, "Kennecott (has) voluntarily and enthusiastically entered into an agreement with the Chilean government...
...In the history of Latin American nationalizations, only the assets expropriated in the Cuban Revolution surpassed the value of these copper mines...
...According to the International Monetary Fund and the U.N.'s Economic Commission for Latin America, a study of direct foreign investment in Chile shows that, in the words of Ambassador Letelier, between 1950 and 1967, 17 years, $450 million flowed into Chile as direct investments...
...Had it not been for "investment income, including dividends from Chile, the company would probably have shown an operating loss...
...32-33...
...4 2 ** The $157 million Cerro Rio Blanco project, which was begun in the late '60s, was financed as follows: U.S...
...The entire expansion was financed largely through retained earnings, or funds held in Chile under the catch-all account of "reserves...
...a Chilean government ad in The New York Times, January 25, 1971...
...Ltd., in 1929...
...2) the possibility of open pit mining, which is far cheaper than underground mining...
...For example, in 1967, gold and silver extracted from copper ores processed in Chile brought $2.2 million into the Chilean treasury.- 27 - These costs were allocated by the parent company to its subsidiaries...
...producer, accounting for 85% of Chile's coal output...
...NIBSA), workers...
...976,000 tons of copper were sold at a price of $354.20 per ton whereas the Washington Convention price had been set at $170.00 per ton...
...That is, they control a substantial part of the entire copper production process, owning mines, smelters and refineries, as well as fabricating subsidiaries...
...As soon as the UP government took power, Allende sent Congress a constitutional amendment which empowered him to seize the foreign copper properties immediately and provide data for determining compensation later, thus abrogating the "Chileanization" agreements...
...Minera Guanaco, Chilean investors with CORFO equity holdings to develop copper deposits near Iquique in 1970...
...The copper companies reacted to the new incentives by increasing capital outlays for expansion by an estimated $200 million.* Meanwhile, government copper revenues fell drastically: in 1955 taxation of the copper firms brought in $156 million, while in 1961, it brought in only $68 million...
...Fortune, May 1966, p. 18...
...cit., p. 2 2 . Note: This chart illustrates the employment "problem" in the large mining sector (Gran Mineria...
...to invest in the E1l Salvado mine, the Chilean government had to grant And the right to repatriate not only all profits but also the right to rapidly recover its ini tial investment...
...owned companies and increasing government revenues...
...6 The companies involved in the small and medium mining sector are detailed in Table III below...
...Furthermore, the higher wages of the copper workers make them a relative "aristocracy," thereby making them an easier pray to bread-and-butter unionism, such as that sponsored by the American Institute for Free Labor Development (AIFLD...
...Anaconda refused to hire any former workers from that mine in order to avoid bidding up the wage level in Northern Chile...
...8 7 During 1969-70, Chile received 52 percent in taxes on income and dividends from Anaconda's Chile Exploration Co., and 50 percent from the Andes Copper Co., 8 8 while Cerro Corporation's new Rio Blanco mine was to be taxed at 15 percent on income and 30 percent (withholding tax) on interest and dividends distributed to the parent...
...domestic copper production in the 1930's accounted for nearly 50 percent of world production, little was exported and Chile supplied about two-thirds of the metal that entered the world market...
...8- 12 - tralia, as well as half a dozen undeveloped ore sources...
...Integrated operations allow these firms to adapt the rates of expansion, extraction and innovation at their mines to their worldwide plans...
...This feeling was accentuated by the poor deal made under the first Chileanization plan and the very high world copper prices prevailing in the late 1960's...
...SP 12/70 Cia...
...producers demanded and obtained in mid-1932 a 4 cent per pound tariff, which effectively sealed off the U.S...
...Minera y Comercial Sali Hochschild of the Hochschild family, owns the sixth largest Chilean copper mine...
...account.59 Another hidden source of profits is the payment of interest by the Chilean subsidiaries on loans granted to them by the parent company...
...PABLO NERUDA-5Socialism by Decree...
...From coast to coast...
...and for the first time in many yea s, Chilean factories worked at full capacity...
...a paper presented at the 97th annual meeting of the American Institute of Mining, Metallurgical, and Petroleum Engineers, New York, February 28, 1968, p. 9. 80...
...plant Workers occupied the plant after the company had announced the layoff of 400 workers (out of a total of 600...
...These policies reinforce Chilean exports of unprocessed copper while handicapping its exports of fabricated copper products...
...5. Santiago Mining Co., a subsidiary of Anaconda Co., mined the La Africana mine from 1917 to 1970 when it sold the depleted concession to Chilean investors...
...ducers, which in 1964 accounted for about 87% of industry's capacity...
...Anaconda, 25 Broadway, New York, N.Y...
...In that year Chilean copper mines employed one seventh the number of workers employed in the Northern Rhodesian (now Zambian) copper mines (which had at least the same ore quality), but produced 14 percent more copper...
...The New York Times, September 21, 1970...
...cit., pp...
...Brown and Butler, op...
...212, 244, 252...
...A look at the price policies of the two U.S...
...6 3 And yet Chile, instead of increasing the value of its copper exports by exporting processed instead of unprocessed copper, has in fact experienced a fall in the proportion of its exported domestically refined ores...
...price and fluctuates more during copper shortages.** It is commonplace for the price of copper to fluctuate wildly with business cycles in the industrialized countries...
...Italy 5.4 11.8 France - 9.0 Sweden - 5.6 Japan - 4.6 Chile - 3.8 Brazil - 1.6 Argentina - 1.1 Netherlands 8.2 - sources: Libro del Cobre, Braden Copper Co., (Santiago, 1960), pp...
...Subscription price: $5 per year for individuals...
...The New York Times, January 24, 1971...
...value to reduce "exposure...
...These three companies, Anaconda, Kennecott, and Cerro* controlled the five largest mines (the * Kennecott was originally organized by the Guggenheims, for generations a key family in the American and world mining community (they also owned Chile's nitrate industry through the Anglo Lautaro Nitrate Co...
...and ADELA (25 percent...
...Marc Herold *In January 1970, Chile paid $174 million in promissary notes...
...Thus, Kennecott would be able to almost double its capacity in Chile without putting up one new cent...
...71-83...
...2 9 Only since 1968 have Chilean copper exports been traded at LME prices (as a result of the Chileanization agreements...
...The U.S...
...producers decided to restrict production at their mines in the U.S., Chile, and Peru, . . . There was a limitation in output by nearly all the world's leading producers . . . the results were stability in prices in the U.S...
...Ibid...
...and subject to prife fluctuations...
...SP n.a...
...When it's completed in 1973 we'll be the fourth largest producer of aluminum in the U.S...
...Most imports by the large mining companies, Anaconda, Kennecott, Cerro, Bethlehem and Anglo Lautaro, are made in New York through the centralized purchasing offices of these companies...
...firms...
...Chile wants as high an export price as possible, whereas the U.S...
...Finally, as of August, 1971, the government had purchased the assets of 19 of the nation's 26 private banks, including the Bank of London and South America (BOLSA) and the Bank of America...
...The U.S...
...interest...
...On may 24 workers simultaneously seized 14 textile mills in Santiago...
...Anaconda makes it in America...
...Fiat will operate the plant and assemble 3000 trucks annually...
...The London copper market is thus "thin...
...4 8- 23 - The Myth of Promoting Greater Employment Yet another argument advanced by U.S...
...In another example, the concession granted to the Cerro Corp...
...The Anglo Lautaro mine operated at a lower per man productivity, and, conforming with bourgeois economics, paid a lower wage...
...Cia...
...4. Chilean government ad in The New York Times, January 25, 1971...
...copper firms...
...The seizures were followed by government intervention to maintian production...
...Chilean government ad in The New York Times, January 25, 1971...
...mines in Chile produced less copper in 1961 than in 1943...
...smelting capacity...
...Lead...
...The relatively high copper wages lead to such irrationalities as the following: Anaconda's Chuquicamata personnel department had a policy of never hiring workers from the nearby Anglo Lautaro nitrate mine...
...In 1969, with the price of copper at 66 cents per pound, production costs were 19 cents per pound, company earnings 21 cents and Chile government revenues 26 cents per pound, or 55 percent of the final value of production...
...In other words, a U.S...
...copper oligopolists also operate a transfer pricing scheme on production inputs.* Kennecott, for example, by charging its Chilean subsidiary more for capital equipment imported from the United States than is paid on the U.S...
...It remains to be seen whether nationalization can be transformed from a simple legal act on the part of the state to true socialization, that is, into efficient and effective control and administration by the State...
...The Wall Street Journal, July 27, 1970...
...D. The Two-Price System The "Two-Price System," also called the producer price system, enables the U.S...
...Reserves are frequently used by foreign firms to inflate the actual amount of capital invested in a country, so as to reduce the return on capital to a more "reasonable" level...
...copper companies control over 50 percent of U.S...
...87, June 1970, p. 33...
...copper producers to allocate their supplies of copper to selected fabricating customers, including of course their own sizeable fabricating subsidiaries...
...The UP had promised in its platform to carry out a sweeping agrarian reform and was pushed even further in this direction by hundreds of land seizures during the first months of 1971...
...companies that have been exploiting Chile's copper, nitrate and iron resources collected earnings of $10.8 billion in the course of the past sixty years...
...SP - Stock Purchase...
...in 1965 the large mines accounted for 24 percent of exports to South American countries, in 1970, 43 percent...
...The companies were jubilant over their deal with the government...
...Cia...
...It is likely that, in view of foreign firms' multi-plant and multi-country operations, the optimum export mix for them leads to a less than optimum mix from Chile's point of view...
...A. Zimbalist, op...
...West Germany 9.0 21.5 U.S.A...
...Reflecting dependence on demand in the industrialized nations, smaller-scale mining in Chile expanded during the 1950 and 1960's...
...Anaconda will retain 49 percent...
...the UP will obviously press hard for limited compensation...
...COIo purchased a 51 percent in the two largest Anacond smines...
...producers' price, which was much lower than the world market price...
...Herfindahl, op...
...Furthermore, when copper ores are shipped abroad, ore byproducts, such as silver, gold and molybdenum, are recovered abroad.* In addition, Chile bore the burden of excessive costs for sales agencies, overhead expenses and representation abroad by the U.S...
...Since Chile exports nearly all its copper, it does not participate in the large secondary (recycled) or scrap copper market, which in the industrialized nations accounts for between 25 and 35 percent of annual consumption...
...tariff scales, and liberal Chilean import regulations...
...Table X Comparison of Copper Prices In U.S...
...Brown and Butler, op...
...But in 1905, the sell-outs began...
...Since 1910, when Albert C. Burrage, a Boston capitalist, acquired Chuquicamata, the largest open pit copper mine in the world, U.S...
...CODELCO I.F.C...
...Baklanoff, op...
...For example, transfering funds out of a country with high taxes to a country with low taxes...
...WS 5/71 Ford Motor Co...
...However, even these new steps toward gaining control over Chile's natural resources did not alter the fundamental pattern of ownership and production: the flow of the country's basic resources was to remain essentially in private and foreign hands for some years to come, thereby preventing autonomous national social and economic development...
...Discriminatory U.S...
...Thus, costs in Chile were increased, taxable income in Chile was reduced and taxes paid by the subsidiaries to the Chilean government were reduced...
...125 million expansion of its Chilean telephone subsidiary in 1965-66 came from retained earnings and funds from its (Chilean) telephone subsidiaries 4 0 ** Reference is made here to Frei's Chileanizationprogram, whereby the copper firms sold 51 percent of their Chilean holdings to the State and were granted reduced taxes and low-cost loans to finance expansion of their copper mines...
...and in Europe...
...Reynolds, op...
...In 1966 70 percent of the entire "free world's" copper was produced by nine corporations: Anaconda, Kennecott, Noranda Mines, International Nickel, Union Mineire du HautKatanga, American Smelting and Refining (ASARCO), Newmont Mining, Anglo-American and the Roan Selection Trust...
...8 The government also intervened in Chile's two largest cement plants, El Melon and Cerro Blanco (which produce 87 percent of the country's cement) when they slowed production, thus threatening the entire nation's construction industry...
...cit., p. 128...
...Cia...
...Fearing substitu** Companies that use copper in their production process will seek substitutes if the copper price fluctuates too much since companies desire stable (predictable) costs...
...6 4 The U.S...
...In contrast, imports from the United States will become cheaper in the poor countries...
...Industrias NIBCO SGM Sudamericana, the largest producer of brass valves and fittings in Chile, supplying over one third of the entire Chilean market, is a subsidiary (50 percent) of the Northern Indiana Brass Co...
...12-15...
...2/71 -- Chile announced sale of copper directly to China...
...Copper refining, aided by government assistance, also developed more rapidly in the small and medium mining sector...
...Peruvian Times, July 18, 1969, p. 4. 89...
...For the Latin American reaction to the Nixon economic policy see the San Francisco Chronicle, Sept...
...a percentage that includes the increase by the small and medium sized mining sector which registered an increase of 157 percent during the same period (a Chilean government advertisement in The New York Times, January 25, 1971...
...To meet the nation's growing need for metals...
...3) customs duties to be levied on all imports used in the copper industry...
...Punto Final, a leftist Chilean journal...
...The New York copper price has been consistently below the world copper quotation, especially during times of acute demand (see Table X...
...producers kept the domestic price down, 2 6 the U.S...
...The Myth of Capital Inflow One of the arguments advanced by foreign investors in defending their operations abroad is that their investments inject badly needed capital funds into developing economies...
...copper companies...
...The Wall Street Journal, September 8, 1967...
...The exploitation of Chile's natural resources by foreign capitalist interests means that the nation is subject to the institutionalized discrimination embedded in world capitalism...
...and Spanish mines, and they began selling out to U.S...
...Sociedad Minera Andromeda Ltd., with Japanese interests...
...In 1913, the Guggenheims formed the Chile Copper Company to hold CHILEX stock and issued bonds to finance the development of Chuquicamata...
...The MIR article printed in the March NACLA Newsletter discusses this question at length as do Debray and Allende in their interview.13 At this time in Chile, the government is concentrating on the preliminary phases of the construction of socialism - the elimination of the foreign and domestic economic interests which have blocked development...
...This creates similar variations in Chile's internal revenues...
...Kennecott Annual Report of President Frank Milliken, March 22, 1962...
...government again clamped a ceiling on the price of copper (24,5 cents per pound) in June 1950, at the infamous "Washington Convention" mentioned above...
...Another method of nationalization used by the UP administration is outright purchase of foreign and domestic companies...
...In 1951, the tariff was made conditional on the U.S...
...These favored customers were getting copper cheaper than other less-fortunate fabricators who had to buy heavily on the more expensive world market...
...A source sympathetic to the copper corporations reported, "It is likely that this deal was related to a U.S...
...Joh Gerassi, The Great Fear in Latin America (New York: 1965), p. 364...
...Cont...
...Anaconda has simply kept this land as a potential reserve, maintaining her monopolistic position and preventing others from developing the possible mineral resources located there -- much like the latifundistas have monopolized the topsoil rights...
...The copper mining operation of $30 million employs about 1,200 workers...
...which was (financed) totally by borrowing...
...8. Business Week, April 10, 1971...
...Chile wants most processing of the copper ores done within the country in order to recoup more of the value-added,** to provide more jobs, more salaried positions, more tax revenues, and more sales of finished copper products within the country...
...Quarterly Economic Review of Chile, December 1965, p. 12...
...The government plans to acquire the majority of the stock of all steel manufacturing firms - INDAC, RODINSA, ARMCO, COMPAC, SOCOMETAL, and INCHALEM - to build a major integrated metallurgical complex...
...As can be seen below, whatever advantages might accrue to developing countries from these funds are far outweighed by the total decapitalization which comes as an inevitable consequence of their investments...
...For example, to encourage Kennecotts' production expansion plans in the mid-60's, the company's tax rate was reduced by 50 percent...
...The copper was either sold to Anaconda's established customers around the world or shipped to the company's major refinery in Perth Amboy, New Jersey, thus "insuring a steady flow...
...Acero del Pacifico Nationalization of vital industries...
...128, p. 4.) * Chile's nitrate and iron resources are discussed in a separate section of this study which will be published by NACLA soon...
...The UP government also moved quickly in foreign affairs...
...8 1 ** As long as the main link of the U.S...
...ARMCO's equity...
...Anaconda had strongly resisted Chileanization...
...the figure at which corporavalue of their assets in their It is set at an arbitrarily low taxes and limit the firm'sTable V Anaconda & Kennecott Profitability and Investments, 1969 percentage investments investments investments worldwide in Chile in Chile Anaconda $1,116,170,000 $199,030,000 16.642 Kennecott 1,108,155,000 145,877,000 13.16 percentage profits profits profits worldwide in Chile in Chile Anaconda $ 99,313,000 $78,692,000 79.242 Kennecott 165,395,000 35,338,000 21.37 rate of return in Chile 39 ;5 24.12 source: Chilean government advertisement in The New York Times, January 25...
...5 The Fundamental Chore The Unidad Popular administration wasted no time in pushing the other, more long-range projects that related to its "fundamental chore" -ending the power of the imperialists, the monopolists and the landholding oligarchy...
...Valenzuela, op...
...ExportImport Bank...
...Brown and J. Butler, The Production, Marketing and Consumption of Copper and Aluminum (New York: 1968), p. 50...
...9, 18...
...The third large copper producer, the Cerro Corporation, was founded in 1902 by a group of financiers, including J.P...
...Because of economic and technical reasons which are not likely to change in the future, no metal is expected to replace it on a large scale...
...176-183...
...Cont...
...Forbes, July 15, 1971, p. 33...
...1 8 III...
...1 2 And this was an investment calculated in 1970 at a book value** of $167.6 million...
...6 The legislation was originally enacted to prevent lock-outs during the Depression of the 1930's, but the Allende government imaginatively used the law to "intervene" where specific companies were deliberately producing below capacity...
...1 0 It also owns 17 copper fabricating*plants in the United States through its two wholly owned subsidiaries--Anaconda American Brass Co...
...J. Petras, op...
...3 0 Only briefly (1952-1954) did the Chilean Government, through its Central Bank, actually buy copper from the companies and sell it (at about a 45 percent markup) either directly or through intermediaries...
...cents per pound . . . the Chilean economy suffered a loss in potential taxation revenue of $47'million a year and of foreign exchange of $115 million (a year) through the failure to raise exports of refined copper...
...In 1964, Mantos Blancos acquired minority rights (28 percent equity) in the largest Chilean producer of sulphur, Sociedad Azufrera Aucanquilcha (which in 1969, produced 56 percent of Chile's sulphur...
...At no time does Allende pretend the UP government is a final answer...
...That history must be killed with a final shot, so that dawns will rain on my land, your sea...
...ExportImport Bank in the form of loans another 23 percent by contributions from the Chilean government and less than two percent by fresh new capital from the companies...
...Herfindahl, Copper Costs and Prices 18701957 (Baltimore: 1959), pp...
...The capital-intensity in the large Chilean mines is partly responsible for the relatively * An "export enclave" is a pocket of industrial (mining) or agricultural (banana plantations) activity with very few economic links to the country in which it is located...
...cit., p. 5; Bohan and Pomeranz, op...
...5 5 OUR NATION CONTINUED TO BE EXPLOITED total- 25 - The Myth of Mutually Beneficial Interests in Pricing In justifying their operations in underdeveloped countries such as Chile, U.S...
...The New York Times, September 9, 1970...
...Most of the information for this section comes from-the Chilean government's "Bitacura," or "Ship's Log" of government actions, which was published in February, 1971...
...A people's health train with doctors, dentists and pharmicists gave free treatment to peasants during a 35 day tour of the southern provinces...
...When production in the copper mines mysteriously sagged, government officials appeared at the three largest mines, and full nationalization followed shortly thereafter...
...and INSA (with General Tire equity), the largest producer of tires and batteries - 8/71 Ford Motor Co...
...PEL, 128, 1965, p. 6. 85...
...The gringo has stolen even the air, he robs the land and the sea and a heavy mist of blood drenches us ceaselessly...
...This growth was stimulated by the increased demand for copper by German and Japanese smelters and refineries...
...Gaining control of distribution...
...jTHE NATION DEMANDS COPPER FOR CHILE Table VI Major Chilean Copper Mines 1970 Chilean state participation foreign investor (CORFO) output in metric tons per year Chuquicamata El Teniente El Salvador and Portrerillos La Exotica Rio Blanco Sagasca Anaconda Kennecott Anaconda Anaconda Cerro U.S...
...SP 2/71 R.C.A...
...and The New York Times, December 22, 1970...
...As an incentive, the Chilean governments have granted generous concessions to the foreign investors...
...This dynamic is discussed elsewhere in a section of this study to be published soon by NACLA...
...New jointly-owned mixed companies were then formed by the foreign companies and the Chilean State...
...An integrated firm is insulated against any fall in the world market price of the raw material it uses, since any decline in the price at one stage of production can be made up at another stage...
...The freeing of the dollar and the subsequent devaluation of the dollar relative to foreign currencies and the ten percent import surcharge will make it harder fot the poor nations to sell their products in the United States, the largest market in the world...
...Note: This chart shows the dramatic decrease in employment in copper mining (at a time when production was increasing...
...and "Chile Economic Notes," CORFO (Santiago), June 14, 1931...
...State purchased the 8 branches B of A assets for $2.5 million...
...Including Canada and Mexico...
...The 1952 legislation remained in effect until 1955 and enabled Chile to recoup $190 million of her potential surplus.** This artificial reduction of the Chilean copper price occurred again during the U.S...
...This transaction wad carried out, however, with the blessing of the U.S...
...T. have formed a joint venture to explore copper deposits in northern Chile...
...Ibid., p. 50...
...Chuquicmta and El Salvador...
...1 5 Kennecott In addition to its Chilean mining operations, Kennecott owns a large U.S...
...The New York Times reported that "in 1967, the earn ing ratio (net profit to net worth) on capital invested in mining enterprises was 27.3 percent...
...Operations are to begin in 1971...
...The multinational corporations are interested in making profits in those places which most benefit their worldwide operations, whereas the host country is interested in keeping as much of the proceeds as possible within its boundaries...
...Chilean government ad in The New York Times, January 25, 1971...
...2. Empresa Minera de Mantos Blancos S.A...
...Nationalization in itself means little," points out Regis Debray, and looking back over past Latin American nationalization, (such as the Bolivian tin mines and the Mexican and Argentine oil Industries), it is easy to understand Debray's point...
...cit., p. 345...
...With the remaining 50 percent, the companies could expand their Chilean opera tions, thus avoiding bringing in new capital.A * Other foreign investors also finance through locally generated profits, thus avoiding bringing in new funds...
...And if it does try to break through, won't it be overthrown...
...2) all copper sales made on the world market to be carried out by the Central Bank...
...cit., p. 27 quoting Norman Girven, 'Multimational Corporation and Dependent Underdevelopment in Mineral Exporting Economies," Yale Economic Center, Paper No...
...2.625 million TOTAL $32.500 million (International Finance Corporation (I.F.C...
...The producers seek to maximize and rationalize their operations through integrating production...
...7 1 Other Disadvantages for Chile from U.S...
...Finally the share of copper in total Chilean exports has increased over the past twenty years,** *Anaconda expanded Chuquicamata with $43 million and replaced its depleted Potrerillos mine with a new operation, El Salvador, at a cost of $108 million...
...Eximbank Sumitomo, Nippon and Mitsubishi Cerro Corp...
...When it reaches full production in 1973, Cerro's mine will be the fifth largest copper mine in Chile...
...had earnings of $178 million during 1965-1971 (the Miami Herald, March 3, 1971...
...price not falling below 24 cents per pound...
...Under this policy,copper companies in Chile had to pay more dollars per escudo than the official exchange rate when purchasing local currency to pay for local operating expenses...
...The 1971 $32.5 million copper mining venture of U,S...
...Frank, Capitalism and Underdevelopment in Latin America (New York, 1967...
...Eight U.S...
...This led one U.S...
...As long as the Korean War lasted this was a highly beneficial operation for Chile, returning an additional $190 million to the country between 1952-1955.32 The attempt by the Chilean government to market its own copper, however, was hindered by several factors: 1) the absence of established ties to consuming units...
...2 0 In 1956, the four U.S...
...Department of Conmerce, Supplement to International Commerce on Chile (Washington, D.C.: November 1966), p. 49...
...On the shores of America you are the ruler of the sea I am a slave in my own land, my continent, breadless, Blood keeps falling, seagull, on us both, the Yankee laughs silently, seagull, let us stop him...
...A source sympathetic to the copper giants reports, "In 1961 certain major U.S...
...has claimed the mineral rights to huge tracts of land in Chile...
...PEL, 126, 1965, p. 16...
...cit., p. 176...
...59 percent), CORFO (25 percent), International Finance Corporation of the World Bank (15 percent), and forty private Chilean investors (1 percent...
...Although U.S...
...3/71 The three largest copper "Delegate directors" were sent to the mines to mines, Chuquicamata, El investigate mismanagement...
...Washington Post, February 13, 1971...
...owned Anglo-Lautaro corporation...
...19-20...
...Wages were raised as much as 60 percent, and most prices were fixed...
...Otherwise, they would be forced to fluctuate the price of their own products as the price of copper fluctuates...
...So in 1923, in the greatest financial La Exotica The La Exotica mine, (which is scheduled to become Chile's fourth largest copper mine in * The Guggenheims then shifted their interest to Chilean nitrates purchasing the Britishowned Anglo-Chilean Nitrate and Railway Co...
...State took over the America (BOLSA) with 10 first foreign private commercial bank, with combranches pensation to be paid over 5 years...
...Eximbank...
...The production of copper in Chile was not brought about by these U.S...
...allowing economies of scale), smaller taxation, and control of the destiny of the final out put (market control...
...Since taking power in November, 1970, the Allende government has concentrated on achieving what its Program of Government (see the NACLA newsletter, March, 1971) set forth as the "fundamental chore" of the people's government: "to end the dominion of the imperialists, the monopolists, and the landholding oligarchy...
...N - Nationalization...
...Chile's share of "returned value" dropped from 64 percent in 1964 to 57 percent in 1969,92 while even during the conservative Alessandri regime, this share was 56 percent...
...consumption during the Vietnam build-up (19631966).24 Just before the 1970 Chilean presidential elections, the United States also reduced its copper stockpile 2 5 in a move possibly aimed at depressing the world copper price to put pressure on Chile...
...Indeed, with the curtailment of profits from Chile, in the first quarter of 1971, Anaconda earned, in the words of Forbes magazine, a "mere $4 million" on its $1.7 billion worldwide assets...
...Action* Date Company & Its Size Rationale for Action & Form of Compensation R 11/70 largest woolen textile Operated below capacity firm, Fabrica de Panos Bellavista Tome, owned by Yarur interests and W.R...
...It is interesting to note that in 1971 copper mining was still becoming increasingly capital-intensive...
...example, in December, 1970, Allende began his well-publicized free distribution of half a liter of milk for all children...
...Prices at which Chilean copper (from the Gran Mineria) is sold in the United States...
...Zimbalist, op...
...London prices rose and the market returned to normal...
...The United States, for example, released 200,000 tons (or nine percent of total annual U.S...
...12, 19...
...For example, as mentioned earlier, when the United States needed large amounts of copper for use in the Vietnam War in 1966, the Chilean Copper Corporation, CODELCO, authorized the Anaconda sales subsidiary in Chile to sell 90,000 tons of blister copper (about one seventh of total Chilean copper production that year) to U.S...
...then, in 1971...
...The second ad appeared in such places as the U.S...
...When copper prices are high there is a pressure to expand production...
...Further, the UP government, announcing that salaries in the executive branch of the government were unnecessarily high, cut many of them and imposed a ceiling on all government salaries, thus fulfilling a UP pledge to limit government salaries to a "figure that is compatible with the situation of our country...
...cit.,p...
...The option ran until 1980 and could be exercised when the government had paid at least 60 percent of the $197 million...
...In return for 1) lower tax rates, 2) an agreement providing tax stability over the next twenty years and 3) low-cost longterm loans, the copper companies agreed to start an expansion program of $450 million.* 9 0 The main elements of Frei's Chileanization plan, finally approved by Congress in 1967, were the following: 1) CORFO purchased 51 percent equity in Kennecott's El Teniente mine, forming the new mixed company Sociedad Mineria Mixta El Teniente...
...Teniente & El Salvador (belonging to Anaconda & Kennecott) SP 3/71 Bethlehem-Chile Iron Mines, Recovery of basic resources...
...HOW IMPORTANT IS CHILE TO THE U.S...
...Frei's "Chileanization" thus allowed the companies "to almost triple their normal profits without running a financial risk...
...Zimbalist, op...
...4.875 $1.625 $1.260 million million million loans Dowa Mining (Japan) (Japan) $10.0 million I.F.C...
...76 IV...
...copper companies (and foreign investors in general) do not deny the profitability of their investments, they usually excuse this "by-product" by emphasizing that . 1 v provided Chile with needed capital, gen: ed employment, introduced advanced technology and aided in diversifying the local economy...
...PEL, 323, June 1970, p. 45...
...News & World Report and The Wall Street Journal in August, 1971, just after the copper nationalization amendment was passed unanimously in Chile...
...Since the copper firms have increasingly relied on debt-financing as opposed to equity investment, this hidden form of profit repatriation looms larger...
...Mario Vera Valenzuela, La politics economics del cobre en Chile (Santiago: 1961), p. 208...
...Minera Loica Ltd., with foreign capital, to develop a new mine in1971...
...3 8 The original investment by U.S...
...With only 17 percent of its investments in Chile, it netted 80 percent of its profits there...
...4 6 The superior resources of foreign firms backed by policies of their respective governments (financing through the Export-Import Bank...
...The Wall Street Journal, May 22, 1969.- 32 Footnotes 1. Der Spiegel (Germany), August 9, 1971, p. 70...
...In turn, Kennecott was to lend this sum to CODELCO at 5 & 3/4 percent annual interest to help finance the expansion program which was to raise output from 180,000 to 280,000 metric tons per year by 1970...
...bankruptcy, having not paid its 900 workers for 4 weeks...
...We've been making metals in America, for America since way back in 1895 when copper was first a gleam in the nation's eye...
...to oscillate widely over relatively short time periods, having a serious impact on returned value, government revenues, and investment in the export sector...
...cit., p. 371...
...These large mining companies are thus now vertically integrated...
...Washington Post, July 12, 1971, p. 8. 43...
...Birson Petroleum and Minerals Ltd...
...The large U.S...
...1,350 workers...
...Annual Report 1970, p. 19...
...The new joint ventures following the corporate maxim of having debt as a hedge against nationalization meanwhile contracted debts of $632.4 million to pay for their expansion programs...
...In 1912, the Guggenheim mining interests in New York organized the Chile Exploration Company (CHILEX) to take over the Burrage option...
...A recent example of such "links" was provided during the expansion of Kennecott's facilities under the Chileanization program, when Kennecott granted multimillion dollar contracts to three large U.S...
...Technological developments that took place between 1900 and 1910 made the possession of large-scale, vertically integrated operations in Chile more attractive to U.S...
...Copper * Figures in parentheses are projected production figures due in mid-1970's...
...companies...
...Since the elections, the UP has maintained that the American copper companies have extracted excess profits, let their properties run down, and mismanaged the mines...
...Table VIII Profile of Major Copper Producers 1968 production (in millions of pounds) Anaconda Phelps Dodge Anglo-American Kennecott Roan Selection Trust 1109.7 998.2 771.4 756.4 736.3 net income (in millions of dollars) 99.2 89.4 52.0 165.3 70.8 Source: Forbes, March 1, 1970, p. 33...
...We're making it in America...
...Kennecott diversified into coal production in the United States by acquiring the Peabody Coal Co...
...8 Anaconda In addition to its recently nationalized operations in Chile, Anaconda has copper mines in the United States, Canada, Mexico and Aus** In August 1971 Mexico announced the nationalization of its copper industry...
...1 The government extended social security to newspaper vendors, who are among Chile's poorest workers...
...This concession also require( Cerro to reinvest an absurdly low minimum of four percent of net profits annually in Chile...
...million to be paid over 17 years beginning July, 1973...
...And we don't expect to achieve socialism overnight...
...1 9 Maor Anonda Hong hI Ci - Jun e 1 * In July 199, . part of the Frei Adminiatration's .aord 'Chilenisation" pien...
...PEL, 153, 1966, p. 7. 59...
...Chilean women in the revolutionary process...
...The New York Times, December 22, 1970...
...companies took out of our country an amount greater than that created by Chileans in terms of industries, highways, cities, ports, schools, hospitals, trade, etc...
...government clamped an 11.5 cents per pound ceiling on the price of copper, a price far below the world market quotation...
...This is due to the monopolistic buying position of the smelterrefiner, with its large initial fixed costs * and economies of scale** (ihich also provide an effective barrier to potential competition...
...We produce Zinc...
...It also shows the relative decline in the importtance of copper and nitrates in total employment (at a time when there was no relative drop in production...
...Table XI Chilean Copper Production (as percent of world production) Date % Date % 1821-30 11 1948 21 1876 62 1953-54 11.6 1890-1900 6 1963-64 11 1921-25 14 1969-70 13 sources: Reynolds, op...
...It was at this time that Anaconda and Kennecott entered Chile...
...Over the longer period (1925-68) there was a net movement of * And the profit remittances have been increasing: "...the withdrawal of foreign currency in the form of profits on foreign capital increased from $58 million in 1950 to $201 million in 1967, a figure representing almost 20 percent of total currency income" (CORFO, Chile Economic Notes, March, 1971, p. 4).- 22 capital out of Chile of $2.455.billion.** 44 The four big U.S...
...8 2 In their efforts to stabilize and control world production of copper, the multinational giants not only restrict production at mines already in operation (as mentioned above), they also seek to gain control over potential copper mines...
...While world copper production increased by 31 percent in the period 1960 to 1969, Chilean production rose by only 27 percent...
...PEL, 323, June 1970, p. 40...
...companies...
...Unexpectedly, in 1969, Chile bought a 51 percent interest in the two largest Anaconda mines which had escaped Chileanization in the mid 1960's, Chuquicamata and El Salvador...
...copper oligopolists desire low export prices in order to reduce their refining costs in the United States...
...companies acquire their mining properties in Chile...
...For a discussion of worker control of factories, see Gladys Diaz, "Socialismo o Capitalismo del Estado," Punto Final (Santiago), May 25, 1971...
...Copyright ( 1971 by the North American Congress on Latin America, Inc...
...Aluminum foil for packag...
...Cont...
...New laws were passed to increase funds for medical care and to increase and extend social security benefits...
...It is estimated that between 1935 and 1970 such costs amounted to $538 million...
...cit., p. 378...
...Products in Chile (Washington, D.C., December, 1961), pp...
...In 1968, it was 26 percent...
...Cerro Corporation Annual Report, 1971, p. 3. 51...
...Employment in the entire copper mining industry fell from 24,770 in 1943 to 17,085 in 1960.52 This capital-intensity results from the importation of technology suited to and developed in the industrialized nations...
...copper strike when Anaconda and Kennecott were able to withstand a halt in U.S...
...For a discussion of this "deal" see PEL, 45, April 1962...
...Charter Consolidated of Britain (a Londonbased mining and finance co.and 49 percent of equity) and ENAMI have formed a joint venture to explore copper deposits in Taltal...
...I,, v -r-7in Chile (October 1970 -- August 1971 ) Approx...
...R - Requisitioning...
...company leased a national copper deposit located on Chilean territory to the Chilean state...
...investors in justifying their exploitation is that their presence generates additional employment...
...The same bleak picture appears with the firms furnishing inputs to the copper industry...
...to handle the distribution and sales of liquid gases, combustibles, lubricants and petroleum by products...
...Economies of scale refers to the fact that the more units produced, the lower the cost per unit...
...But its Chilean copper operations were its prize...
...The government took over administration of the plant on March 27, 1971.11 Workers also took over Chile's brewing monopoly, Cervecerias Unidas, which was owned by the Edwards family, and Chile's largest tire producer, INSA, a subsidiary of the T.S.-owned General Tire Corporation...
...Constitutional ammend(Anaconda, Kennecott & ment for the nationalization of the copper mines Cerro subsidiaries) passed unanimously by the Chilean Congress...
...the governmentducer of grinding balls for owned Cia...
...In March, Bethlehem-Chile Iron Mines, a subsidiary of Bethlehem Steel, agreed to sell all its shares in its large iron mining venture to the state-owned Compania Acero del Pacifico (CAP...
...In 1916 Anaconda organized the Andes Copper Mining Company to take over this operation...
...during the country's entire history...
...Value added to a commodity at a given stage of production is calculated by taking the price of the commodity at the end of that stage of production and subtracting from it the costs of all inputs produced at all earlier stages of production...
...market for the same equipment, can transfer surplus out of Chile and make it appear on its U.S...
...We make metal products...
...3 7 The surplus received by the Chilean State and the wealthy Chilean elite has not been channeled into productive investment, social services or income redistribution but rather has been squandered on extravagant consumption ** In the early 1960's, the Soviet Union offered to buy 300,000 metric tons over five years, at a price of 1.6 cents per poung 5 higher than the highest London market price.- 20 - and/or investments yielding quick returns.* Thus investment funds have not been forthcoming from domestic sources and past Chilean governments have sought, instead, to attract foreign funds to finance development...
...9 3 This poor deal for Chile reflects the enormous amount of political and economic leverage 9 4 American investors had in a Chile unwilling to take radical steps to break away from dependence on the world capitalist web...
...The LME price tends to be higher than the U.S...
...In fact, however, this policy only stimulated production and failed to provide the planned benefits to Chile...
...4. Press Conference, Orlando Letelier, Ambassador from Chile to the United States, San Francisco, July 30, 1971...
...Allende Interview with Saul Landau," NACLA Newsletter, March, 1971...
...The U.S...
...The Wall Street Journal, April 1, 1971...
...It also owns additional fabricating and manufacturing operations in Brazil and Mexico...
...Forbes, June 15, 1971...
...N 1/71 Carbonifera Lota Schwager, Recovery of basic resources...
...of $197 million.* As of December, 1972, the Chilean State was to have the option of purchasing the remaining 49 percent from Anaconda...
...As a result, inflation was held to 7.5 percent for the first five months of 1971, compared to 22 percent for the first five months of 1970...
...Copper is the life-blood of the export-oriented Chilean economy, accounting for 80 percent of export earnings...
...In the same period the outflow of profits and dividends just on investments was $1.056 billion about four times the net investment.* 43 During Alessandri's conservative proforeign investment presidency (1958-64), there was a net movement of capital (public and private) into Chile of $667.3 million, whereas between 1944-1968 there was a net outflow of capital (private and public) from Chile of $1.5 billion...
...As a consequence, Chile loses another 30 percent of potential returned value** As a result of its low level of basic inddustrialization, Chile is almost totally dependent upon imports of equipment for its vital mining industry: 7 2 from the United States (62 percent), France (14 percent), and Germany (14 percent...
...SP 1/71 private Chilean commercial The Central Bank began buying stock in the combanks mercial banks...
...copper companies theoretically lost some of their holdings in Chile, they received large profits as a result of the high world price of copper...
...In particular, these companies want to control alternate sources of supply which can be made available at any time...
...9. Christian Science Monitor, February 26, 1971...
...thus increasing the vulnerability of the Chilean economy to fluctuations in the world copper market...
...16 Elizabeth Farnsworth For footnotes, see page 32...
...cit., p. 118...
...The copper giants rely almost exclusively on imported capital equipment and machinery (largely financed through U.S...
...From North to South...
...8. Keith Griffin, Underdevelopment in Spanish America, (Cambridge, Mass.: 1970), p. 151...
...Labor costs more in these countries and there has been a strong tendency towards mechanization...
...6. See the table elsewhere in this newsletter for a listing of nationalizations...
...V, No...
...copper companies meanwhile increased their investments in marginal highercost mines in the United States (Montana and Utah), while postponing capital outlays in Chile...
...9 7 Previously its revenues were based on the copper giants' export prices, which, as shown above, were artificially low...
...Kennecott ia also the world's second largest producer of molybdenum, which is mined largely at El Teniente...
...Most of this terrain has never been explored and none of it has been exploited...
...and the Cerro Wire and Cable Co., each with four plants...
...3 Production at Rio Blanco, Chile's fifth largest copper mine, began in 1971, El Teniente In 1905, William Braden, a North American mining expert, sometimes referred to in U.S...
...David Beitelman, a top agrarian reform official, predicted the end of latifundism by 1973.12 I MET BOLIVAR ONE LONG MORNING, IN MADRID AT THE ENTRANCE TO THE FIFTH REGIMENT, I SAID, FATHER, ARE YOU OR ARE YOU NOT, OR WHO ARE YOU...
...the struggle for agrarian reform in Chile...
...M. Mamalakis and C. Reynolds, Essays on The Chilean Economy (Illinois: 1965), p. 246...
...The Morgan banking group joined the Guggenheims in expanding Kennecott in 1915, and since then it has been in the Morgan financial sphere with a strong continuing Guggenheim participation...
...The tariff on imported copper grew out of the conflict between U.S...
...triated dividends and freedom for Cerro to retain abroad all proceeds from copper sales side of Chile...
...While the Gran Mineria accounts for about 80 percent of total copper mined, these figures show how the small and medium mine sector actually employs more workers.- 24 - Table IXa Employment in the "Large Mining Companies" 1940 copper iron ore coal nitrates petroleum 18,390 417 13,758 21,383 1950 11,053 542 15,426 22,746 670 53,948 50,437 1958 12,932 3,044 13,542 15,115 1,749 46,382 high wages paid to copper workers, which are four times greater than those paid to the average Chilean industrial worker...
...9 1 If one calculates the benefits and the costs on each transaction for the three companies and the Chilean government, one finds that only in the case of Cerro were the net benefits accruing to the Chilean government greater than those won by the foreign companies.* The y to understanding these results is that, on the one hand, the assets of the companies were overvalued so that Chile bought 51 percent of an over-valued property (in the Kennecott deal, El Teniente was evaluated at $160 million, while its book value was $65.7 million), and on the other hand, Chile granted these companies exorbitant "incentives," in the form of tax reductions and low-interest loans...
...Special thanks to Alejandro Stuart for the cover photograph and the other photos of Chilean wall paintings...
...Not all copper in Europe, however, is purchased on the LME...
...Zimbalist, op...
...Cont...
...Three Japanese firms--Dowa Mining, Mitsubishi Metal Mining, and Mitsui Mlining-put up $10 million in loans for the financing in return for the right to purchase 50 percent of the copper and ship it to Japan...
...Allende/Debray Interview," Punto Final (Santiago), March 16, 1971, p. 56...
...71 Anaonnd Sale Cnr...
...Roughly 75 percent or more of the program was financed by external captal put up largely by the U.S...
...However, expansions of productive capacity takes three to five years to complete, by which time the price may have fallen...
...Those few larger firms in Chile supplying inputs to the mining industry are ** Even during the period of the "Nuevo Trato" under Alessandri, when copper companies were granted generous investment incentives, the profits (value) of large-scale copper mining that did not return to Chile amounted to $383 million, while new investments by the companies were much lower--$139 million--only 36 percent of the outflow...
...Punto Final, (Santiago), January 19, 1971, p. 11.- 11 - Partly because of these factors, the companies have made enormous profits from their Chilean ventures: the average annual net profit during the years 1965-1970 for all three large mines--Chuquicamata, El Salvador, and El Teniente--was $110 million, or more than a 30 percent annual return on investment.* * Even during the nationalist period (19501955) when the Chilean government taxed the copper companies a stiff 80 percent (on their income), Anaconda's subsidiary, CHILEX, averaged 18 percent net profit on its capital, while Kennecott's El Teniente operation averaged a 25 percent return on its capital...
...Translated by Claudia Niles-4 - ruary, 1970, the government bought the assets of Chile's largest magazine publisher, Zig Zag...
...Mantos Blancos has diversified and produces agricultural tools and light machinery under license of a British firm...
...The Cerro Corp...
...Within nine months, most of the textile, iron, automobile and copper industries, as well as over 60 percent of the nation's banks belonged to the Chilean people...
...The earlier ad was placed in leading U.S...
...Christian Science Monitor, August 31, 1971...
...For example, most of IT&T's COPPER IS 75% OF THE FEDERAL TAX INCOME: THE YANKEES TAKE AWAY THE OTHER HALF.- 21 - Allende's Ambassador to Washington, Orlando Letelier, recently explained that expansion of mine production during the Frei administration had been financed largely by international loans...
...4) the maintenance of the discriminatory exchange rate policy...
...2) interference and competition by the integrated copper giants...
...The pre-1968 arrangement allowed U.S...
...firms, such as Boyles Drilling Co., Arthur McKee, Morrison Knudsen, Ralph M. Parsons, and Utah Construction and Mining, rather than to local Chilean construction firms...
...In the United States, Anaconda, Kennecott and Phelps Dodge accounted for 75 percent of the nation's copper production...
...But it is a handful of large multinational corporations, rather than these countries, that control the mining, smelting and refining of copper...
...Mario Vera Valenzuela, "Anaconda y Kennecott se han llevado en Chile entero," PEL (Havana), June 1970, p. 40...
...intensity of the British-American mines in Africa in 1951...
...Mantos de la Luna mines which were taken over in 1964 by Wells (Chile) Overseas Ltd.(British) and later sold to ENAMI, the state mining corporation...
...and Canadian Javelin Ltd.-- a natural resources development company of Newfoundland-- have formed a joint venture in 1970 to develop copper deposits near Antofagasta...
...Mamalakis and Reynolds, op...
...customers at 36 cents per pound instead of the authorized producer price of 42 cents, not to speak of the London Metals Exchange price of 69 cents per pound...
...Before...
...4 7 * The import tarriff is used by U.S...
...in 1924, and the British-domiciled but Chileancontrolled Lautaro Nitrate Co...
...Our fabricating companies cover the territory...
...copper oligopolists reacted to the reforms by reducing production in Chile...
...For example, in 1961, Andes Copper the smaller Anaconda Chilean subsidiary, paid the parent company almost $3 million in interest payments alone...
...THREE ATTEMPTS AT COPPER REFORM Nationalism in 1952 Chileans have long been aware that they were being grossly exploited by the U.S...
...51.8 17...
...2 - E a NACLA NEWSLETTER Vol...
...or, returns to Chile out of the total value of production fell from 78 percent in 1955 to 56 percent in 1959 (Reynolds, op...
...CORFO, the Chilean State Development Corporation, acquired 25 percent of Sociedad Minera Mixta with Anaconda holding the remaining shares...
...All kinds of products...
...Mineral Investments in a Nationalistic Setting...
...The government also began public works to employ the unemployed, and in January, 1971, the Ministry of Public Works announced that it had created nearly 10,000 new jobs...
...fittings and valves...
...Book value is tions state the account books...
...to be the (CAP), Chile's largest base of a new national metallurgical complex...
...He also asked the people not to send him Christmas presents and forbade any government official from receiving presents from the general public...
...Peruvian Times, September 6, 1968, p. 14...
...The Rio Blanco mine's copper ore concentrates were scheduled to be shipped to Japanese smelters or smelted at the state mining corporation's (ENAMI's) Las Ventanas smelter and then sold abroad by the Cerro Sales Corporation.17 * Sumitomo, Nippon, and Mitsuibishi contracted to purchase 75 percent of the Rio Blanco mine's output for the first five years (1971-76...
...Noticias, January 15, 1964, p. 5; Peruvian Times, January 3, 1969, p. 11...
...interests...
...Cia...
...This policy naturally hinders the underdeveloped producing countries (such as Chile) from increasing their revenues during the period of high demand...
...These two firms were merged in 1951 as the Anglo-Lautaro Nitrate Co., Chile's nitrate monopoly.- 10 - 1972) was located on the large Chuquicamata concession...
...And in the U.S...
...2 8 Thus, in 1966, the LME handled only about 15 percent of the world copper sales...
...But the government found that when it raised taxation, the companies responded by increasing capital-intensive imports...
...Vietnam buildup...
...the reaction of the United States to Allende's victory...
...10 for institutions...
...6, No...
...this partnership arrangement will be mutually advantageous to the Chilean government and Kennecott...
...In May, the government announced it had expropriated 700 large farms and would expropriate 455 more by January, 1972...
...The Early Measures The first government measures dramatized the popular nature of the government and elicited nearly universal enthusiasm...
...7 Northern Indiana Brass Company's Chilean subsidiary, NIBSA, the leading producer of brass valves and other fittings, cut production soon after the elections...
...He places the UP victory in a continuum moving from the open reformism of the Christian Democratic government of yesterday to the possible future seizure of real power by the people in the future...
...Heavier taxation induced the international corporation to shift production away from Chile, or at least to curtail any expansion of productive capacity in the country...
...copper extractors and Chile's interests involves the processing (smelting, refining, fabricating) of the copper ores...
...However there were also several underlying causes...
...The AIFLD and its activities in Chile will be discussed in a future NACLA publication...
...also dominated by foreign concerns...
...Copper, nitrates and iron ore mining are largely under foreign control...
...6 0 The Myth of Mutually Beneficial Interests in processing A further conflict between the interests of the U.S...
...This highly trained mobile, tactical unit was supplied and trained under the auspices of the U.S...
...In 1966, 70 percent of the non-socialist world's known copper reserves were held by ten corporations...
...The lower tax rates and the tax stabilization agreement were two concessions which the copper giants had sought in 1960 but which they had failed to secure due to the opposition in Congress by Frei's Christian Democrats.- 30 - 3) The Cerro Corporation sold a 25 percent (and later 30 percent) interest in its new mine, Rio Blanco, and had its tax rate reduced to 56 percent...
...In the process, Chile's status as a dependent economy was compounded and it lost the impetus toward the dynamic, internally-generated growth it had experienced during the second quarter of the 19th century...
...6 6 In fact, it has been estimated (that) on the basis of 1963 production at a copper price of 29 U.S...
...The Christian Science Monitor, May 27, 1970...
...This was the first jointly owned firm in the new "mixed" sector, as 9 called for in the UP Program...
...5 / Sepfember, 1971 Published monthly, except May-June and July-August, when it is published by-monthly, at 160 Claremont Ave., New York, New York 10027...
...Minera y Comercial Sali Hochschild to develop copper deposits near Antofagasta...
...Such uncertainties cannot be tolerated by these world-embracing corporations...
...SP 2/71 Zig-Zag, largest publisher Purchased stock because firm was on the verge of in Chile (publishes Ercilla...
...Greater substitution has occurred in Western Europe where copper is traded on the London Metals Exchange (LME...
...was engaged in real estate business as well as copper mining...
...Sells Out...
...Place, who had sat on Anaconda's board since 1969, was made the mining company's chief executive officer...
...Eric N. Baklanoff, "U.S...
...Ralston Purina's subsidiary was placed under state supervision for having imported depreciated machinery instead of the new equipment it had declared...
...By the mid-1850's Chile was the world's largest ore-producer and native capitalists had set up their own smelting industry...
...The book, which will be published in 1972, will cover such topics as the following: a background to the 1970 election...
...corporations controlled 80 percent of total Chilean copper production until they were nationalized in July, 1971...
...We're building a big new aluminum reduction plant in Sebree, Kentucky...
...For example, Cerro's recently nationalized Rio Blanco, the newest large cogger mine, uses special labor-saving methods...
...The UP government quickly implemented its short-term economic plan to stimulate production and curb inflation...
...cit., p. 270...
...buying on the world market for the Vietnam buildup) a huge gap opened between the U.S...
...in the 60's provided for a ten percent annual rate of depreciation, free importation of all goods needed for the project, a low 15 percent income tax rate and a 30 percent (withholding) tax applicable to repa* The Chilean elites did not invest in productive undertakings because given the structure of world capitalism and exploitive relationships (on the international as well as the domestic levels), it was not in their class interests to do so...
...As a result, industrial production in the first five months of 1971 was 35 percent higher than in the same period the previous year...
...Ernesto Laclau, "Imperialism in Latin America," New Left Review, May-June 1971...
...investors with the Chilean economy was taxation , there was a contradiction between increasing taxation of the U.S...
...Although Socialist Bloc nations** had repeatedly offered to buy Chilean copper in the early 1960's, often at prices in excess of the LME price, the copper companies continually blocked such sales...
...There were several positive results for Chile from this new policy, including: 1) an additional $190 million in revenues,* and 2) Chile gained new markets...
...On the contrary, some of these deposits had been mined by Chileans as long ago as 1749, when Chile exported copper bars to the Viceroyalty of Peru for processing into cannon...
...7/71 Kennecott Gaining control of distribution...
...4. Chile Canadian Mines S.A., a subsidiary of Noranda Mines Ltd., (U.S...
...7 0 It became only too apparent to the Chilean government that copper mining, and the existing level of refining carried out in the country, was inadequate to provide the stimulus to growth that might reasonably be expected of it...
...Its 49 percent interest in the Sociedad Minera El Teniente, (61 percent of which was owned by the Chilean government), returned, on the average, $10 million in dividends per quarter over recent years ($10.6 million in the third quarter of 1969, and $9.4 million in the first quarter of 1970 on an investment calculated at a book value of $76.8 million in 1970.16 * In 1960 Kennecott's Chilean subsidiary contributed 30.5 Dercent of the firm's total net profits...
...COPPER COMPANIES Chilean copper deposits are attractive to American companies because of: 1) the high degree of purity of Chilean ore (1.8 percent) relative to that of ore deposits in the United States (between 0.5 and 1 percent...
...AID police training program (Office of Public Safety) and was infamous for its brutal repression and arrest of rural and urban land invaders and of student demonstrators...
...agreed (4th largest copper mine to sell its Rio Blanco mine for $55 million, if in Chile) the government will take over its $56 million debt to the U.S...
...and Le Monde, August 8, 1969...
...The "Pequena y Mediana Mineria" (Small and Medium Mines): While totally dominating the large mining sector, foreign interests, sometimes joined by prominent Chilean families, are also well represented in the medium and small mining sectors...
...45 The Myth of Promoting Locally-Owned Industrialization Another argument often advanced by the copper companies is that their presence stimulates the development of locally-owned industries using copper...
...cit., p. 86...
...Aside from its recently nationalized Rio Blanco mine in Chile, Cerro operates six mines in Peru and a variety of smaller mines in Tasmania and Canada...
...And we'll keep on making it...
...The seizures were followed by state requisitioning to maintain production...
...I** 11/70 A subsidiary of Northern Production dropped and the firm laid off its 280 Indiana Brass Co...
...For details on Chileanization, see p. 29 below...
...Compare this to the $10.5 billion total gross national product which has been achieved throughout the entire existence of Chile...
...Peruvian Times, May 22, 1970, p. 7. 90...
...companies have, in the past, had more power than the Chilean government, they have had their way...
...The New York Times, June 26, 1969...
...The fixed costs are the costs of setting up the plant and equipment...
...3. For an excellent description of the Rio Blanco mine see Peruvian Times, September 6, 1968, pp...
...In its final form, the amendment gives the UP administration wide leeway in determining compensation...
...cit., p. 20...
...Table III SMALL & MEDIUM MINES IN CHILE (in order of production in 1969) 1. Cia...
...Since he "wasn't about to let useless workers get paid from company reserves," the NIBSA manager laid off 280 workers...
...This is usually excused by saying that the difference is due to shipping, insurance and refining charges...
...As a part of Frei's "Chileanization" program (1965-1967)** CHILEX leased the La Exotica mine to the Chileanized firm, Sociedad Minera Mixta La Exotica, for 99 years...
...CODELCO took over sales of copper produced at El Teniente...
...Rio Blanco The Rio'Blanco deposit was discovered by Chileans in 1840 and was worked briefly in the 1860's, but because it lay in difficult terrain, it was bypassed by many companies until 1955 when the Cerro Corporation acquired a majority interest in the property from Chileans...
...Minera Carolina de Michilla, a $6.7 million jioint venture between CORFO (30 percent) and Cia...
...For example, in 19651966, by not selling 90,000 tons (one seventh of Chile's total production) at the LME price but rather at the U.S...
...Chile granted a management contract to Anacnnda to continue operating the mines.** The immediate reason underlying this sudden move in 1969 was that Anaconda had overstepped its rights by undertaking explorations in northern Chile without government authorization...
...On the average, between 1926-1959, export earnings from copper fluctuated 22 percent from year to year...
...Compania Minera de Cananea, a wholly-owned Anaconda subsidiary that provides 60 percent of Mexico's copper will be "Mexicanized" in 1972...
...see also First National Bank of Chicago, Monthly Bulletin, March 1971, pp...
...AND HE SAID, LOOKING AT THE BARRACKS ON THE MOUNTAIN: "I AWAKE EACH ONE HUNDRED YEARS WHEN THE PEOPLE WAKE UP...
...Kennecott maintained control of the operation as well as of the sales organization through a management contract...
...Copper Investments Foreign ownership over Chilean natural resources has led to further negative consequences for the country...
...Anaconda, organized in 1899 by the Rockefeller Standard Oil interests is largely within the orbit of the Rockefeller family's two major banks, the First National City Bank and the Chase Manhattan Bank...
...As Potrerillos became depleted in the 1950's, Anaconda's Andes Co...
...Electric power cable...
...The government also acquired the remaining controlling stock in Chile's major nitrate and iodine producer from the U.S...
...market...
...Did their exploitation of copper help Chile's economy...
...CORFO purchased stock controlled by the Guggen- for $8 million payable in 10 years...
...The new Cerro mine was to employ 1,200 workers** and produce 50 metric tons per worker, whereas in 1960 the Gran Mineria employed 17,000 workers and produced 28 metric tons per worker, whereas in 1960 the Gran Mineria employed 17,000 workers and produced 28 metric tons per worker...
...Fortune, May 1966, p. 118...
...strategic stockpile was reduced, and "special agreements" were "negotiated" with Chile, to ensure a continued flow of imports at the U.S...
...Brown and Butler, op...
...Costs are then reduced and profits are increased in the United States, where taxes are lighter.* During World War II, with copper in great demand, the U.S...
...copper companies as de facto marketing agents in exchange for the payment of a small tax to the government...
...cit., p. 177...
...in fact, net disinvestment occurred in the Chilean copper mines during this period 7 9 Finally, they increased the use of imported factors of production (such as larger electric shovels, and other capital-intensive factors) since the discriminatory exchange rate policy had raised local costs...
...in 1968...
...Recognizing this, the Socialist government of Salvador Allende and the Unidad Popular have nationalized the copper holdings of the three giant U.S...
...There is little evidence of large-scale worker control of factories 1 4 and little evidence of mass mobilization of the Chilean people to further and defend their revolution...
...Beitelman said this in an interview with Timothy Harding and Donald Bray in June, 1971...
...3.5 million in processing plant...
...Continental Copper & Steel Industries was financed by: share capital For example, take the new expansion plan** started during the past (Frei) administration...
...In July, 1968,when demand slackened somewhat, it was reimposed...
...Cia...
...Little is known in the United States about the dynamics of copper exploitation, refining and marketing in Chile...
...Three giant U.S...
...In November and December the UP gave away land for popular resorts to poor schools and to the central labor council...
...Future newsletters will announce the book's publication and availability.-6Major Interventions and Nationalizations Approx...
...8 3 **Production of the Gran Mineria increased at an annual compound rate of less than .5 percent between 1946 and 1966...
...Andrew Zimbalist, "Dependence and Underdevelopment in Chile," (unpublished paper, Harvard University), January 1971...
...Anaconda Annual Report, 1970...
...7 7 The U.S...
...Brown and Butler, op...
...New technology, developed abroad, made it hard for local capitalists to compete with the low prices of copper from U.S...
...Thus, for example in 1958 when a copper surplus existed and prices on the London market were falling, several European nations sold Chilean copper to the Soviet Union, China, Poland and Hungary...
...4, 1967, pp...
...WS 5/71 14 textile mills Workers simultaneously seized 14 textile mills...
...62 In the words of the U.S...
...tariff imposed no duty on copper-bearing ores, a 1.1 cent per pound duty plus a 15 percent ad valorem tax on copper powders, a 4.5 cents per pound duty on copper seamless pipes and tubes, a 14 percent ad valorem tax on thumbtacks made of copper...
...The company had shown symptoms of bankruptcy and had not paid its 900 workers for over a month...
...5 While the large mines exported to the industrialized nations, the smaller mines exported to South American nations (although the share of these exports was later pre-empted by the large mines...
...It calls for indemnification of the American firms' stakes in the mixed companies at December 31, 1970, book value, less outstanding taxes, depreciation, and deductions for obsolescence, depleted lodes and "excess profits...
...The 1968 return on all United States investment in Chile was 17.4 percent...
...As a result, total Chilean copper production decreased by eight percent between 1949 and 1954.78 The share of Chilean copper in world production fell from 21 percent (1948) to 11...
...Furthermore, the devaluation of the dollar reduces the value of the dollar reserves held by foreign central banks...
...Valenzuala op...
...The government intervened...
...3 4 Although the Chilean Copper Corporation (CODELCO) was established in 1955 with the "theoretical right" to market the country's copper, in reality it accepted the U.S...
...cit., pp...
...Since it was so dependent on its Chilean mines for copper (contrary to the other Chileanized companies, Kennecott and Cerro), it feared ' losing control of operations.- 31 - FOOTNOTES: 1. Business Week, May 31, 1969...
...Cerro is also engaged in fabricating operations through its two U.S...
...Thus, in 1969, Chile decided to apply the higher LME copper price to the entire Chilean copper production when calculating its copper export tax...
...By the 1970 electoral compaign, there was widespread agreement that "Chileanization" had benefitted the Americans more than the Chileans...
...ing food...
...This was to be achieved by granting the copper companies lower taxes, accelerated depreciation, and by eliminating the (discriminatory) multiple exchange rate scheme...
...AN EXPLANATORY NOTE: The two Anaconda ads presented here graphically illustrate the sudden shift in the company's orientation that has taken place since July when the Chilean Congress passed a constitutional ammendment completely nationalizing its three big mines...
...Even a superficial look at the large mining industry in Chile will show that exactly the opposite is the case...
...I n.a...
...and Ceat (Italian...
...1971 Anaconda Kennecott rate of return worldwide 8.52 15.0O - 13 - Cerro Cerro was a new-comer to Chile and, compared to Anaconda and Kennecott, it was not heavily dependent on operations there for its profitability...
...8 9 Just as the reduction in direct taxation permitted an increase in the profit share remitted abroad, so the elimination of the discriminatory exchange rate cut operating costs in dollars and raised the companies' profits...
...All the measures that we have taken are measures conducive to revolution...
...U.S...
...For a detailed study of this leverage see Victor Wallis, "Foreign Investment and Chilean Politics," (unpublished Ph.D...
...the state 2 private liquid gas oil agency, ENAP, formed a subsidiary ENADI, producers...
...PEL, 323, June 1970, pp...
...I. DENATIONALIZATION transaction in early mining history, Anaconda purchased over.51 percent of the shares of Chile Copper from the Guggenheims for $77 million, buying the remaining shares six years later.* Potrerillos and El Salvador Chilean interests had mined veins of rich copper in the Potrerillos mine in northern Chile since 1875...
...BroWn and Butler, op...
...dissertation, Columbia University, 1970...
...July 11, the day the amendment was passed, was celebrated in Chile as a "Day of National Dignity...
...These plans are often made without regard for the needs of the various host countries where they operate...
...The following section examines each of these myths, confronting them with the Chilean reality--a reality in which U.S...
...Diversified sources enable the companies to meet contingencies...
...J. Levin, The Export Economies (Cambridge, Mass.: 1960), p. 280...
...N 1/71 Lanera Austral, textile Allende announced the formation of a State textile plant concern, based on the two large expropriated firms, Bellavista-Tome and Lanera Austral...
...WS 8/71 Cervecerias Unidas, the Workers occupied the two large plants, charging brewing monopoly (an Edwards mismanagement...
...copper producers sell directly to long-standing customers...
...U.S...
...Mamalakis and Reynolds, op...
...Anaconda: one of the great natural resources of Amenrica...
...Business Week, March 13, 1965, p. 129...
...In fact, in May 1971, the Chase Manhattan vice-chairman, John B.M...
...copper giants in Chile provides another clear example of how the interests of the American investors and the host countries are opposed, rather than congruent...
...and a history of dependency in Chile...
...El Melon and Cerro Blanco, Intervened because of falling production, thus the 2 largest cement pro- endangering the construction industry...
...With your foam armament, with my avenging dagger, with the gunshot of the moon, with the trigger of the sun...
...Surplus here is used to describe the funds and resources above the necessary costs of production accruing to a society and thus available for future expansion...
...5 3 source: M. Bohan and M. Pomeranz, Investment in Chile (Washington, 1960), p. 83...
...Within three months of assuming power, it had recognized and built relationships with Cuba, North Vietnam, North Korea, the People's Republic of China and East Germany...
...2. For a description of the El Salvador mine see The New York Times, November 6, 1956...
...In June 1971, CORFO purchased NIBSA's the major producer of brass 50% equity for $.3 million...
...I 11/70 A subsidiary of Ralston Had imported depreciated machinery instead of the Purina reported new machines...
...3 9 Most estimates indicate that 50 percent of after-tax profits of the copper giants were repatriated to the United States...
...Assuming the average copper price to be 60 cents per pound and that the mine continues to produce 300,000 metric tons per year, the value of all the copper mined at Chuquicamata over the next fifty years would be $18 billion...
...Wall Street Journal, February 24, 1971...
...Presidential Commission to conclude that "widespread anti-competitive conditions exist in the U.S...
...The talks were more unilateral than bilateral, in that Chile was coerced into agreeing to a pact which was not at all to her advantage...
...and 3) the relatively (to industrialized nations) low wages--three to four dollars a day...
...4 9 This situation is largely due to the large mines since employment in the small and medium mines has increased...
...Even the Christian Democratic presidential candidate, Radomiro Tomic, called for immediate nationalization of the major copper mining operations...
...The result was a decline in employment in the Gran Mineria between 1945 and 1954 from 17,385 to 11,057 (more than a third).80 Thus, Chile's share of world copper production declined despite her comparative advantage of lower production costs: foreign control over Chile's resources held back production...
...In other popular moves, Allende decreed that the government printing office forego its policy of placing the new president's portrait in all government offices thus saving the country an estimated $ 7 0,000...
...Background: A. The Structure of the World Copper Industry Since the industrialized nations determine the very structure of the world copper market, this market reflects and maintains the subordinate position of the underdeveloped copper producing-nations...
...and "the decline was worse than it looked...
...That's 42% more than the year before...
...For the terms of the 1969 Chileanization Agreement, see Business Latin America, July 3, 1969, p. 210...
...copper producers and consumer firms to have all the advantages of the London world copper market and none of its disadvantages...
...This law was supposed to induce an increase in copper production, thereby increasing government revenues from the copper export tax, boosting Chile's *Anaconda's Santiago Mining Co...
...WS - Workers' Seizure & Requisitioning I-8 "They took the copper and left us the holes" INTRODUCTION The story of copper in Chile is the story of international robbery...
...PEL, 153, 1966, p. 8. 66...
...cit., P. 106...
...Copper strip for car radiators...
...Action Date Company & Its Size Rationale for Action & Form of Compensation N 5/71 5 large Yarur textile Placed under state jurisdiction - to be used as plants base of the new state-owned textile industry...
...2. Miami Herald, November 20, 1970 3. "The Unidad Popular Program of Government" The NACLA Newsletter, March, 1971...
...These are factors the multinational copper producers must integrate into their comprehensive worldwide plans and are an incentive to control the copper market.- 19 - tion, U.S...
...firm was to receive $80 million payable in two years for the sale...
...Miami Herald, June 20, 1971...
...mining circles as "the Father of the Andes," acquired a mining property in Chile which had long been known for its rich copper deposits...
...Cananea produces 60 percent of Mexico's copper.- 18 - For multinational corporations such as the copper giants to plan on a worldwide basis they must necessarily 1) eliminate as many uncertainties and risks as possible, that is, be able to accurately predict what will happen at each stage of their operations, and 2) plan on as comprehensive and worldwide a scale as possible...
...Cerro's Rio Blanco mine Recovery of basic resources...
...Gold and Silver...
...In the 50's, in order to attract Anaconda s Andes Co...
...5/71 Kennecott's El Teniente Minister of Mines delegated 8 government-appointed copper mine administrators to operate the mine after production fell...
...Acero del Pacifico purchased 35.7% of the mining industry...
...Many large U.S...
...CODELCO local short-term borrowing TOTAL $56.4 million $32.1 million $43.4 million $18.6 million $6.5 million $157.0 million (Peruvian Times, April 25, 1969), p. 11...
...You, Companero President, know better