CHILE

   
"Cooper is the wage of Chile"
  
By Norman Gall
    

August 1972

Chile is now the owner of its mines, and the workers must know that copper is the wage of Chile, its principal wealth. Copper earns 83 per cent of Chile’s foreign exchange income. Of Chile’s total exports of $1.15 billion, copper produces $800 million, and provides 25 per cent of the government budget. So copper is fundamental. For this reason you copper workers bear the greatest responsibility and should be prouder than all other workers in Chile, because you not only provide for our basic needs, but also contribute through your work to the breaking of Chile’s economic dependence and to raising the living standards of the great mass of people. President Salvador Allende, speech to the workers at the Chuquicamata copper mine, October 1971. 

Chuquicamata, the world’s largest and richest open-pit copper mine, is an enclave of alien life 10.000 feet high in the Atacama desert of northern Chile, an industrial marvel and an incongruously ­situated monument of its time. Shortly before nationalization, an American mine engineering journal called Chuqui “a mine that staggers the imagination… the granddaddy of them all,”’ by itself earning one-third of Chile’s desperately needed foreign exchange income each year. The pit forms a gray-green eliptical amphitheater, two miles long and one mile wide, graded down toward its ever-deepening bottom by terraced benches 100 feet wide, blasted into existence over the past half-­century by dynamite explosions and excavations that have removed 1.2 billion tons of material. The labor of creating Chuquicamata in the beginning depended heavily on burros and Bolivian highland Indians who lived in caves that they themselves dug in the surrounding hillsides; today the prodigious task of moving ore and rock out of the mine is done with huge machines— 100-ton trucks and shovels with a bite of 13 cubic yards—whose move­ments have been carefully programmed to create economies of scale and to reduce the risk of human failure.

The great mine is approached by an asphalt road from the Pacific Coast port of Antofagasta through the reddish desert, past the ghost towns of aban­doned nitrate oficinas which, a half-century after the collapse of Chile’s nitrate boom, look like archeological relics caked with sand and blown into absurd shapes by the night winds of one of the driest regions on earth. This whole mineral-rich coastal desert was wrested by Chile from Bolivia in the War of the Pacific (1879-1884), which deprived Bolivia of her access to the sea but converted Chile from an agricultural republic, tied physically and psychologically to her fertile Central Valley heart­land, into a leading supplier of nitrates and copper to the world’s industrializing economy. Although the surface outcroppings of Chuquicamata’s copper had been continuously exploited since pre­Colombian times, it was not until the Guggen­heim interests brought in steamshovels from the Panama Canal to dig the huge, stadium-like pit that Chiquicamata was launched into its spectacular career as a contributor to United States corporate balance sheets. When the Guggenheims sold 51 per cent of Chuquicamata in 1923 for $77 million, it was then the biggest cash deal in Wall Street his­tory. Although Anaconda made a net investment of only $93 million between 1930 and 1965 in its two Chile operations—Chuqui and the smaller El Salvador - Potrerillos mine in the same barren mountain region—Chuquicamata alone generated $810 million in profits in the quarter-century from 1945 to 1969, with 60 per cent of these earnings coming in the 1959-1969 period. In 1967, as the Vietnam War pushed world demand and prices for copper to unprecedented heights, Anaconda’s Chilean operations accounted for $4.05 of the company’s total earnings per share of $4.31. After the newly installed Marxist regime of Presi­dent Salvador Allende in 1971 quickly consum­mated the nationalization of the big foreign copper companies in Chile, Anaconda President John B. M. Place said: “The confiscation of Anaconda’s Chilean properties was a rough body blow that took away two-thirds of our copper production and three-fourths of our earnings.”

The kind of conflicts that led to the nationaliza­tion of Big Copper in Chile is the most sensitive area in the economic relations between the indus­trialized and underdeveloped nations of the world. As Raymond F. Mikesell has written:

It is estimated that in 1964, 42 per cent of the exports of the developing countries consisted of petroleum and nonfuel min­erals and metals. These commodities have accounted for about two-thirds of the rise in exports of the developing countries over the past decade, and they give promise of making the largest contribution to the expansion of exports by developing coun­tries over the coming decade. Between 1953-1955 and 1964 the value of develop­ing-country exports of minerals and base metals grew at a rate of 5.2 per cent per annum and the value of fuel exports (almost entirely petroleum) grew at the rate of 7.4 per cent per annum. On the other hand, developing-country exports of agricultural products over the same period grew at an annual average rate of only 2.1 per cent per annum.

Until recently Chuquicamata had been a care­fully structured American-style community of 30,000 persons, with all the power and the glory residing in the so-called “American Camp” on a hill occupied by the company-owned houses of the 450-odd Americans and Chileans on what was known as the “gold roll”: those professional and technical contract employees who earned their sal­aries in dollars. Today, however, it is a community in crisis, a “sick giant” as President Allende described it on July 11, 1971, the day nationaliza­tion was formally proclaimed. When I visited Chuquicamata for 10 days in February 1972, it was clear that the old hierarchical structure had been swept away, and that no working order or consensus had been created to replace it. Rising political tension at the mine and an alarming drop in production since nationalization were among the signs that the “sick giant” was entangled in a Lilliputian struggle for power among Communists and Socialists and Nationals and Christian Democrats.

The curious thing about the nationalization of Big Copper in Chile is that it was the product of a movement gathering strength throughout the post­war period and embracing conservative business leaders as well as Marxist and Christian Democratic politicians. During these years, the big American copper companies in Chile—Anaconda and Kenne­cott—had developed an experienced and disciplined staff of Chilean mining engineers, geologists, and other supervisory personnel who, it was widely viewed, could be expected to run the mines if and when they were nationalized. Outright nationaliza­tion followed hard upon the “Chilenization” pro­gram of Christian Democratic President Eduardo Frei (1964-1970), which increased Chilean State financial participation in the copper industry while, at the same time, inducing the foreign companies to make major new investments for a pro­jected doubling of Big Copper’s production capac­ity by l972. Instead of buying a period of polit­ical stability for the companies, however, the “Chilenization” deals of the mid-1960s and the high copper prices and corporate profits of the Vietnam War period merely fueled the pressures for nationalization. By 1969 President Frei had announced a “pacted nationalization” of Ana­conda’s properties providing for 51 per cent government ownership immediately and the right to purchase the remaining stock after 1972. Indeed, most of the battle over nationalization was decided before Salvador Allende, the candidate of the Marxist Unidad Popular coalition headed by the Communists and Socialists, surprised the hem­isphere and threw Chile into confusion with his narrow September 1970 election victory—with only 36 per cent of the vote and a 1.4 per cent plurality —over the conservative ex-President Jorge Alessandri in a three-way race. 0 By 1970 the Chilean treasury was receiving 84 per cent of Big Copper’s profits in the form of taxes and stock dividends.

The nationalization of Big Copper was com­pleted, with a great increase in sound and fury, in the months following Allende’s inauguration. By 1971, all parties in the Chilean Congress had joined in supporting a government-proposed constitu­tional amendment empowering Allende to retroac­tively deduct all excess profits above 10 per cent of book value since 1955 from the compensation to be paid Anaconda and Kennecott. Acting on a Controller-General’s financial assessment, Allende two months later decreed $774 million in penalties against the two copper companies for excess prof­its and alleged defects in the planning and execu­tion of their respective mine expansion programs. Because these penalties were greater than the book value of the mines, the government claimed that it owed the companies no indemnification. This national consensus on the nationalization of Big Copper represented much more than the euphoria of a newly-installed leftist government and its hatred for big foreign corporations. It also reflected a growing hostility and mistrust by leading conservative businessmen and politicians toward Anaconda and Kennecott, especially after the companies’ failure to plow more money into a needed expansion of their Chilean operations even after generous investment incentives were granted them under the 1955 “New Deal” (Nuevo Trato) copper legislation. Indeed, while Kennecott was taking advantage of the tax and foreign exchange concessions enacted under the “New Deal” to extract profits averaging 37,9 per cent yearly in the 1955-1960 period from its El Teniente mine, it apparently went against the intent of the new Chilean legislation that lavished such big favors on the copper industry by spending $100 million to build a huge refinery to process Chilean copper in Chile! With the arrival of the Alliance for Prog­ress, the fate of the copper companies was placed on the same legislative trading block as the Chris­tian Democrats’ agrarian reform program, which had threatened conservative interests. In 1969 the conservative National Party President Sergio Ono­fre Jarpa acidly remarked: “The United States told us to have an Agrarian Reform with a 30-year term of payment. I think we ought to apply the same system to the Gran Minería [Anaconda and Kenne­cott] and I am sure that the United States won’t object.” As early as 1961 the leading conser­vative Senator Francisco Bulnes voiced the growing bitterness with the copper companies in a signed editorial on “Chile and the Alliance for Progress” that appeared in the right-wing newspaper, El Diario Ilustrado:

There is no need for social change in Chile, since the country has had many social laws on the books for over 50 years. It would be better if the United States quit stirring up our economic and social problems… Whit the country does deed is huge new investments in copper production. The Nuevo Trato has been a failure—merely the granting of exaggerated concessions to the companies in return for almost nothing. Therefore, if the companies can­not be made to launch a huge new pro­gram and let the proceeds flow to develop Chile as the Alliance envisions, the govern­ment should nationalize them!

All through the postwar period the word dependencia was gaining currency as an expression of economic nationalism, but at Chuquicamata over the years the word had developed a very special meaning. Every day the American manager of Chuquicamata spoke by short-wave radio with Anaconda’s headquarters in New York to report the day’s production and his plans for the next day’s work. At the same time, the New York office performed Chuqui’s general accounting functions as well as its research and development, planning, budgeting, sales, purchasing of about $20 million worth of spare parts annually and design of the new industrial equipment for the major expansion program being completed in 1971 when full nationalization was decreed. If a piece of major equipment broke down and could not be immedi­ately repaired, Chuqui’s managers were on the radio to New York for instructions. If the consul­tation by radio failed to produce satisfactory results, a technician was flown down to Chile from the United States to set things right. Apart from all this logistical support, Chuqui was a privileged community because its workers were among the best-paid in Chile, because its 450 supervisors lived in free company housing and earned their salaries in dollars (which gave them substantial advantages in trading for inflation-debased Chilean escudos on the black market), because food and imported consumer goods were cheap and plentiful in the com­pany stores and because Chuqui had its own schools and a luxurious company hospital that stands on a promontory like a Greek temple, with a commanding view of the houses and mills and great pit of the sprawling mine complex and of the desert and mountains beyond.

The trepidation with which this privileged com­munity, isolated by the desert from the rest of Chile, received the news of nationalization was understandable. When President Frei went to Chuqui in July 1969 to explain the “pacted nation­alization” agreement with Anaconda, he tried to calm the fears of many workers and technicians that had been aroused by his nationalization announcement. “Many people play a strange role.” Frei wryly said in a speech in Chuqui’s gymnasium. “In Santiago they demand of me an immediate and violent nationalization. And here, among the workers, they say: ‘What is going to happen to you now? Now the State is going to take over. We are all going to become public employees. Our wonder­ful company hospital will become part of the National Health Service. They are going to take away our indemnification for years of service, and all our guarantees.’” Frei’s failure to relieve the Chuquicamata community’s fears about its future showed in the local results of the 1970 presidential election, which the conservative ex-President Alessandri—always a friend of the copper com­panies—won in the traditionally leftist-voting mine community because he was the only one of the three candidates to take a clear stand against further nationalization. Allende won a big plurality in the rest of the old Socialist stronghold of Antofagasta Province.

The workers of Chuquicamata were privileged in yet another important sense, in that they have a very powerful labor union with the capacity to par­alyze production and inflict great damage on Chile’s economy by either formally declared gen­eral strikes or by wildcat stoppages in any of sev­eral key sections. In these wildcat strikes the workers would simply withdraw to their lunch­rooms and refuse to talk to their supervisors until their union leaders and management’s industrial relations representatives appeared on the scene to settle the dispute. “These ‘partial stoppages’ became increasingly frequent during the 1960s because the price of copper was very high and it was unthinkable to let all production stop because of a petty conflict over discipline or work rules,” one veteran supervisor told me. “The government in Santiago exerted constant pressure on the com­pany to settle these problems quickly so there would be no loss in tax revenues, because Chile’s need for dollars is constant and the flow of dollars must be kept constant; somebody has to put his finger in the dike very fast.” As a young Commu­nist mining engineer, who is a pillar of the present management, explained to me: “The beginnings of the labor movement at Chuqui were very difficult. Between 1948 and 1952, after passage of the so-called Law for Defense of Democracy that outlawed the Communist Party, some 2,000 workers—many of them union activists—were fired from Chuqui under the accusation of being Communists. But the labor movement gained strength steadily during the 1950s, especially after all the unions of the copper industry joined in 1956 to form the Copper Workers Confederation under Communist and Socialist leadership. During the l960s, with rising copper prices and increasing political conflict over the future of Big Copper, the sindicato was transformed from an instrument for the defense of the workers into an offensive weapon.” The effects of the decline in industrial discipline—both before and after nationalization—were vividly described by President Allende in a blunt speech to the workers of Chuquicamata a year after his election:

Within one month in the sulfide concen­trating plant five mill-supports have been burned out; one recently-imported motor was burned out for lack of oiling, and a new locomotive was destroyed on its first day of operation because a rail was left out of place [sic]. Besides this, there is theft, compañeros. Yesterday a truck-driver was arrested who was carrying copper bars with other things inside some barrels. Things cannot go on this way, compañeros, because you are the owners of this enterprise and are obliged to guard, care for and impede destruction of what is the patrimony of yourselves and all Chileans. Compañeros, last year [1970] after the union contract was signed, we lost $36 million worth of production because of wildcat stoppages that lasted hours or days in different sections. This year [1971] we have lost 12,000 tons of production for the same cause, at a cost of $12 million. ... So there are vices that must end, compañeros, inherited vices such as the loss of production time in the smelters, 30 minutes at the end of each shift and 15 minutes at the start, 45 min­utes in all. .... Losses of production for lunches and dinners and tea-breaks that stretch out. Then there is the question of overtime for repair work that is inherited from the old days. For example, it is necessary sometimes to pay 60 days’ wages for a job that takes 20 days, or for some other work that requires four hours’ work the workers ask for 40 hours’ pay and, after some haggling, settle for 16.

 II

During my visit to Chuquicamata last February, I had a long talk with David Silberman, the new Communist manager of the mining complex, who soon after his appointment had become the central figure in a struggle for control of the mine between the union leadership and the Communist Party cadres who had been assigned executive positions. A tall, lean, high-strung engineer in his mid-thirties who had spent nearly all of his professional career at government desk jobs in Santiago, Silberman is one of several Communists and Socialists named by Allende to key posts in Big Copper without any previous experience in the industry. “There are few people who know about copper and have the government’s confidence,” he told me. “The problems in the mines are mainly political and social. Our technicians don’t seem to have the interest or capacity for solving political and social problems, and don’t seem aware of what’s happening in Chile today. The Americans have left Chuqui, but the American way of life has remained in the way the technicians and professionals live and in the ways that the Americans imposed on the workers. Presi­dent Allende specifically insisted that the new general manager reside in Chuqui, instead of in Santiago as in the past, and have a certain amount of political experience, and understading of the roles of the workers and the technicians, and of the political moment which the country is living.

“I admit that the government has committed serious errors at Chuqui,” Silberman continued. “First, the general management of the company in Santiago was in the hands of people who called themselves technicians, but were neither techni­cians nor politicians. Second, many people came here as political appointees with big salaries and company ears at their disposal, which offended a lot of people, and also there are many young people without much experience in responsible jobs. In one year some recent graduates have risen from jobs as beginning engineers to become section chiefs. Many technical problems in the past were solved by Anaconda flying down engineers from the United States for three days or a week, but this practice has left no residual benefit for us. Now we can’t do this anymore, and we must think and solve these problems for ourselves. On the other hand, the Anaconda era has left behind many labor vices. For example, the workers refuse to do a full day’s work, yet are always pushing and maneuvering to be assigned overtime. On an eight-hour shift, a worker barely performs five or five-and-a-half hours of work. Nearly a whole hour is lost in each change of shifts, while machines go unat­tended risking accidents. This week, when the con­veyor belt that brings concentrates into the smelter broke down, the workers asked for 40 hours’ pay to do a job that took them less than six hours to perform. The workers don’t want to go to political meetings because they lose overtime. Recently we have seen a clash between workers and bosses, involving some political parties and a struggle for power at the mine. The rightist enemies of the Unidad Popular have chosen Chuqui as one of their principal themes, because there are problems they can exploit politically.”

My visit to Chuquicamata came at a very critical tine. The mine was in crisis operationally because it was nationalized just as a major expansion program was being completed, which is usually a prob­lem-ridden stage in the life of any mining enter­prise, and this crisis was aggravated by the departure of nearly half of the 466 supervisors working at the mine at the time of Allende’s election. Of these, 40 were fired after an abortive supervisors’ strike in August. Copper production at Chuqui for the first four months of 1972 was running at 20 per cent below the average for the corresponding four months of the previous five years, while world copper prices had declined proportionately even further below the levels of the 1967-1971 period. The supervisors who left the mine in the months after Allende’s election were replaced either by their less-experienced subordinates, or by other technicians—many of them recent graduates— brought in from outside. Moreover, the professional or supervisory payroll was swollen by swarms of new nontechnical personnel, such as sociologists and psychologists and public relations men, who plunged into political work on behalf of the Unidad Popular or infantile rivalries among themselves.

The operational crisis and the rivalries among the political appointees representing the six Unidad Popular parties became interlaced with the power struggle between the union leaders and the new political appointees who held key management positions. A few days before my arrival at Chuqui the respected production manager of the mine, Andrés Zausquevich, resigned in protest against “several tendencies within the Unidad Popular lighting for maximum control of activities at the mine. ... My resignation is a consequence of attitudes and actions of certain personages, high­-ranking executives in some cases, who fly their own flags and who interpret Government policy in their own way.”

The sindicato at Chuquicamata is controlled by a group of dissident Socialists, the Unión Socialista Popular (USOPO), which was the most anti-Communist faction of Chile’s Socialist party until it left the party altogether in 1969. The USOPO union leaders and the Communist managers at Chuqui had been jockeying for position for months, but the occasion for a major confront­ation came almost by chance over the fate of an obscure smelter work-gang capataz (foreman) named Juan Titichoca, whose apparent negligence resulted in a bizarre industrial accident that polar­ized the struggle for power at the mine. As the union lawyer later explained to me, “Titiehoca was a pawn and meant nothing to us. His case was just a pretext to begin the fight between the Commu­nist management and the USOPO union leaders to see who was boss at Chuquicamata.”

Juan Titichoca is a husky, round-faced man in his late thirties who has the surname and the phys­ical appearance of a Bolivian highland Indian. He and his four brothers—three of whom also work at the mine—come from the nearby ancient oasis of San Pedro de Atacama that was an obligatory stop on the pre-Colombian trading routes connecting what is now Chile with the higher Andean civiliza­tions further north. “We were all natural children, and I had only a fifth grade education,” Titichoca told me. “I came here to Calama [the satellite com­munity six miles away from Chuqui] to perform my military service at the army barracks there. After that it was easy for me to get work at Chuqui, because my three older brothers were already working here and still do. One works in the ore-assaying office and the other two have been driving the big Lectra trucks inside the mine, although one of them recently was switched to other work because he has silicosis.” Juan Titichoca was assigned to the smelter several years ago, and under the union’s strict seniority rules rose to the job of assistant capataz with responsi­bility for Converter No. 4, one of the huge cylin­drical ovens into which molten copper is poured for its final stage of heat purification.

The main smelter at Chuquicamata is housed in a high, cathedral-like shed with light streaming in from the far end, as if through a distant stained-glass window, to give a monumental and spiritual aspect to the noisy, sluggish movements of the giant vats moving back and forth on stationary cranes above the smelter floor to receive the molten copper poured in glowing bursts of light and heat from the rotating maws of the converters. The smelter floor is strewn with slag and discarded pieces of machinery; the slag is recovered by bull­dozers that crawl over the floor near the con­verters, driven by sweating, sallow-eyed men wearing industrial helmets as well as masks to protect themselves from the noxious fumes. The other work crews are found along the catwalks behind the converters, often sleeping or reading newspapers, sometimes walking over to the railing of the catwalk to peer into the converter to see how the copper is “cooking.” Once in a while, often at the prodding of the supervisors, they would don asbestos suits and masks and gloves to perform the unpleasant task of poking steel rods into the tubing of the converter to clean them and send more air into the molten bath, an operation that provokes sudden emissions of fumes and sparks. To avoid performing this stoking operation, the converter crews have taken to tilting the mouth of the converters at an extreme angle, so air will enter the bath without stoking, but endangering the converter with destruction by the molten copper burning through the wall of the converter near the lip. This practice has caused constant recrimination and bickering between the workers and their supervisors, as has the custom of the con­verter crews walking off their jobs a half-hour before the end of each shift—leaving the converters unattended—to wash up and catch the microbus that leaves the smelter precisely at the hour when each shift ends. In April 1971 there had been a wildcat strike of 40 men in the smelter who wanted the shower rooms to be opened two hours before each shift ended instead of the present half-hour. “They used to be open all the time, but we had to do something to keep the men on the job,” one supervisor said. The converter section had always been an extremely sensitive spot in labor-management relations because a wildcat stoppage of a few men in the smelter could paralyze all of Chuqui­camata.

At 7:30 A.M. on the morning of December 8, 1971 the capataz Juan Titichoca left his job on the night shift, as usual, a half-hour ahead of schedule, leaving his Converter No. 4 cooking at a very high temperature and tilted at the dangerous angle that had been the cause of so much recrimination in the past. When the next work crew arrived on the job at 8 A.M., the men found that the molten copper had burned a hole about the size of a Volkswagen in the wall of the converter and had spilled onto the smelter floor. This was the third major accident in the smelter within a month. The Chuqui­camata management immediately suspended Titichoca and conducted a formal inquiry, which was required by law before any worker could be fired.

Titichoca’s dismissal had been delayed because the union and management were engaged in deli­cate negotiations for a new contract. These nego­tiations lasted throughout December 1971, and by the time they concluded the political climate at Chuquicamata had been profoundly disturbed by Zausquevich’s dramatic resignation. Also, a tenden­tious but penetrating three-part “Inside Chuqui­camata” series had appeared in El Mercúrio of Santiago, the leading opposition newspaper, that made detailed accusations of mismanagement and political meddling on the part of the new Unidad Popular executives, concluding with the prediction that, “undoubtedly, the Communist Party will control Chuquicamata in a very short time.” The appointment of Silberman, a Communist, as the new general manager of Chuqui was the signal for the all-out political struggle to begin. Whereas the union previously had acquiesced to the firing of Titichoca, his name suddenly became the watch­word for the defense of labor’s tights. The union pushed the matter into a wildcat strike that shut down the smelter for four days, costing the Chilean economy an estimated $4 million. In a radio speech during the strike, Silberman threatened to prosecute the union leaders for subversion under the State Internal Security Law. When the smelter workers suddenly walked off the job, they refused to empty the molten copper then cooking in the converters; if three supervisors and one worker had not stepped in to empty the converters and the copper had been allowed to solidify inside, major damage would have resulted which would have cut off the smelter’s output for weeks or months. Nevertheless, under pressure from Santiago, the new management gave in to the union’s demand for Titichoca’s reinstatement with back pay and the wildcat strike ended. A union delegation then traveled to Santiago to present a bill of complaints personally to President Allende. After Allende refused to see them, the 5,000-word document was leaked to El Mercúrio, which spread it over a full page of newsprint, headlining the union leaders contention that “the sectarianism at the mine, the bitter struggle among some parties to obtain this or that post, the denial of recognition to our union for effective participation of the workers in directing production of our copper, will produce chaos and drag us all to the abyss....”

The test of strength over the fate of Juan Titichoca revealed not only the degree to which political rivalry had affected the day-to-day func­tioning of Chuquicamata, but also the thin line of continuity in the life of this economic giant that could be snapped at any point. Beyond this, it showed the workers’ essentially conservative and proprietary interest in their jobs and in the mine, and the ease with which the whole Chilean economy could be held hostage and its largest operation sabotaged by a small number of recalcitrant workers. Nevertheless, apart from these labor and political conflicts, the functioning of the mine was kept under stress by two general problems; that of maintenance and of continually replacing the 130,000 different spare parts kept in stock in Chuqui’s warehouses, and that of solving the diffi­culties arising from nationalization before the $150 million expansion program then under way could be completed—including the bringing into produc­tion of the new satellite Exótica mine. The expan­sion was to increase Chuqui’s smelting capacity by half to about 1,200 tons of copper daily, but instead of rising production had declined in 1972 from the previous level of 800 tons daily to about 500 tons at the time of my visit. Because of mechanical breakdowns in the smelter, ore concen­trates that normally would be processed at Chuqui were being shipped in rented trucks to other smelters hundreds of miles further south along the coast, which greatly increased production costs.

In our interview, Silberman told me that “only 17 of our 35 Lectra-Haul trucks are working now because of maintenance and operational probl­ems.” These giant vehicles, with a 100-ton load capacity, were purchased by Anaconda shortly before nationalization at a cost of $263,000 each and are the mainstay of the carefully programmed extraction from the great pit at the rate of 90,000 tons of ore and 55,000 tons of waste material each day. Careful maintenance of these trucks is indispensable for making Chuquicamata’s enormous investment in mine machinery—including 17 electric excavating shovels that cost $1.2 million each—an economically rational operation. Replacement parts for the huge trucks are very expensive. A new diesel-electric motor costs $30,000. A single Lectra-Haul tire stands eight feel high and has a landed cost in Chile of $4,000. At the time of my visit to Chuqui, the expropriated copper companies cast doubt on the possibility of regularly obtaining spare parts in the United States by obtaining a Federal court order freezing all Chilean govern­ment bank accounts there because of Chile’s failure to pay creditor’s notes that had fallen due from Frei’s “Chilenization” agreements. Meanwhile, rush orders for cheaper Japanese copies of the Lectra-­Haul tires, 250 of them, had been made and the first shipments were being flown to Chile from Japan. Improvisations like these, however, do little to relieve the overall dependence of great mines like Chuquicamata or El Teniente on United States suppliers for the time being to obtain spare parts for the complex and expensive American machin­ery that are the basic components of their indus­trial apparatus. In this sense the dependence on United States technology has been a much greater factor in the nationalization of the Chilean copper industry than, say, Fidel Castro’s nationalization of the Cuban sugar industry in 1959-60, since the newest Cuban sugar mill had been built in 1927. Also the capital- investment and complexity of industrial installations in Chilean copper is almost immeasurably greater than in Cuba’s old sugar mills.

A key maintenance supervisor, an appointee of the new administration, told me: “Every week there are two or three crashes of our vehicles. In the few months that I’ve been here, 15 trucks have been scrapped because of crashes, and another eight are idle because of a lack of spare parts. The Americans didn’t give cars to any damn fool with­out a license, so there weren’t the kind of stupid crackups there are now. Our worst spare parts problem is tires, big ones and little ones. They’re supposed to be manufactured here in Chile, but the big tire factory in Santiago has just been taken over by the government and they haven’t been able to import rubber because of the dollar shortage.”

The acquisition of spare parts had been greatly complicated by the decision of the Allende administration to concentrate the entire $50 million in annual purchases for all the nationalized copper mines in a newly-created Purchasing Department in the Santiago headquarters of CODELCO. However, there were very few people available who had any experience in the extremely complicated and technical business of ordering from abroad such an overwhelming volume and variety of industrial equipment for these huge enterprises.

Sergio Cuevas, Chuqui’s new supply and main­tenance manager, expressed great impatience with having to deal with all the problems arising from a lack of spare parts and yet to depend for supplies on the chaotic workings of CODELCO’s central­ized purchasing organization. Cuevas is a bald, high-spirited man who had just returned from a buying trip to the United States when I spoke with him, and was about to leave for Japan the next week to close a deal for some heavy mining machinery. “We are fighting for more autonomy here in Chuqui so we won’t have to depend on the bureaucracy in Santiago for all we need” he told me, lacing his talk with the nationalism of the New Men at Chuquicamata. “We know we will have problems, but in some way we will solve them. The freezing of our New York bank accounts lasted only a few days, and this kind of thing does not seem now to prevent us from buying supplies in the United States. However, if we can’t get spare parts and industrial supplies in the United States, we’ll get them elsewhere. Japanese equipment may not always be as good as American equipment, but at least we have a sure source of supply. Switching from one supplier to another may mean a regres­sion from our present level of technology and a decline in production. Yet we know that Chile has taken a great step in nationalization of her copper resources, and we must produce copper—one way or another—because there is nothing else we can do to survive. The nationalization of Big Copper does not come gratis, and these problems are the price and tribute of nationalization.”

 III

When President Eduardo Frei went to Chuqui­camata in July 1969, he explained why he had opted for a “pacted nationalization” as opposed to the “violent nationalization” urged on him by his Marxist opposition that would have brought Chile into conflict with the copper companies and perhaps also the United States government. Frei said that his main reason for adopting the “pacted nationalization” approach was “not to disturb what we were doing: so the work to bring into production the new Exótica mine would continue, and also the expansion program at El Teniente. Because if we would have broken the law, we would have done things in an unjust way. The out­side world would have cut its credits to Chile and the people who are investing would have said: ‘How are we going to continue working in Chile if laws or contracts are not respected in that country?’ ”

The main consideration, which was at the heart of Frei’s copper policy, was the $563 million expansion program  which could double Chile’s Big Copper production from around 600,000 tons per year to more than 1.2 million tons by 1972. With the work on these projects still uncompleted when Allende took office in November 1970, the “violent nationalization” of Big Copper by the new Unidad Popular government left Chile in a very vulnerable position.

This vulnerability became apparent soon after nationalization. The new Exótica mine went into production shortly before Allende’s election, but there promptly arose serious metallurgical problems in the processing of Exótica’s ores in Chuqui’s old oxide smelter. It was impossible to process Exótica’s copper under any known formula because it is contained in what is known as a frac­tured ore body, in which there are great differences and complexities in the composition of the mate­rial between one part of the deposit and another. As a result of these metallurgical difficulties, the extraction of ore from Exótica has been suspended because large quantities of ore from the mine have been stockpiled awaiting development of an eco­nomically-viable industrial process to transform Exótica’s ore into copper. Recently, Exótica’s heavy trucks and machinery were moved to Chuquicamata to remove a large accumulation of waste material covering the ore body that had caused a major landslide three years ago. At this writing, the investment of $44 million in the opening of Exótica, which involved large expendi­tures for equipment, installations, and the removal of 100 million tons of sterile earth and rock to get at the main ore body, has produced no benefit to the Chilean economy, whereas its scheduled pro­duction was to have meant a 20 per cent increase in Chile’s copper output. A contract for develop­ment of an industrial process for treatment of Exótica’s ores has been given to the Power Gas Company of England, which has just built a minia­ture pilot plant in England that processes the ore in liquid solution at the rate of one gallon per minute; technicians at Exótica doubt whether this process could be mounted on site to treat Exótica’s ores on an industrial scale within the next three years.

It was impossible for a layman such as myself, in interviews with engineers and geologists at Exótica, to determine whether this major setback for Chile’s copper industry was anticipated by Ana­conda in the years before nationalization, whether this failure was the result of the company’s negli­gence, or whether Anaconda may possibly have untested formulas for the solution of this problem in its files. The Exótica affair, however, is evidence of Chile’s continuing dependence on the world’s technological centers, and of the consequences of plunging blindly into the tough business of nationalizing major industries without finding solutions first to problems like these. As Theodore H. Moran wrote in his penetrating study of the polit­ical economy of Chilean copper in the postwar years: “The trick for the nationalist is to take as full advantage of the foreign corporations as he can while they are within his range, and not to push them out before he has learned or can learn to duplicate their feats on the international as well as national scene.”

An even graver problem, politically akin to the difficulties of processing Exótica’s oxide ores, occurred in the “violent nationalization” of El Teniente, the world’s largest underground metal mine, in which the Frei government had acquired a 51 per cent interest from Kennecott a few years before under its “Chilenization” program. At the time that government interventors were sent by the new Allende administration to take over control of El Teniente, a $247 million expansion program was being completed to increase production from 180,000 to 280,000 tons per year of copper. The basic principle behind this big increase in smelting capacity was a pioneering oxygen-injection process by which cold concentrates could be fed directly into the cylindrical converters without passing first through the reverberatory furnaces, which represented a large saving in both smelting time and operating costs. Although this oxygeninjection principle had been working in Japan since the mid-1950s, it had never been applied on such a large scale as at El Teniente or with such a high ratio (three-to-one at El Teniente, compared with one-to-one in Japan) of raw concentrates to molten copper mixed in the converters. This technological breakthrough had been designed on contract by a pair of large United States engineering firms, West­ern Knapp and Bechtel Corporation, and several Chilean technicians from the El Teniente smelter were sent to the United States to be trained in the new process, including one engineer who spent 20 months there helping to develop a system of computer control of the mixture of oxygen, concentrates, and molten copper inside the converters. Today the new computer console, still unused, gathers dust in a corner of the El Teniente smelter, and production at the smelter in 1971 declined by nearly 20 per cent instead of increasing by 55 per cent, as programmed in the expansion plan. The Chilean technicians trained to bring this new process into production have all left to work in other countries—some say they were invited to leave by Communist and Socialist union leaders; others say they were lured into new jobs abroad by Kennecott. In any event, at Chuqui-Exótica as well as El Teniente, a great deal of copper income has been lost through unnecessary political conflict, and the Chilean economy has been crippled as a result.

In the battle over nationalization of Big Copper in Chile, it soon became apparent that the opposing sides were fighting with different weapons. The weapons used by the Chilean nationalists were almost wholly political, while those used by Anaconda and Kennecott were mainly technological. It also became clear that, while Chile had lived off the copper industry in world trade for most of this century, relatively few Chileans were sufficiently experienced in the mining and processing of copper to run the indus­try, and even fewer had any experience in the intri­cacies of the overseas trade. Unfortunately, for var­ious reasons, many of the most qualified Chileans had left the nationalized industry by the beginning of 1972.

Internationally, Big Copper until recently was an “integrated industry” in which 10 big corporations controlled 75 per cent of the West’s produc­tion in 1967, and were also heavily engaged in “upstream” activities such as the manufacture of brass, wire, and other copper products. The power of this oligopoly has been sharply curtailed by the copper nationalizations over the past few years in Chile, Zambia, and the Congo, and the threat of this in Peru. These four nations generate three-­fourths of the world copper trade and have joined together in CIPEC (Intergovernmental Council of Copper-Exporting Countries) in a thus-far unsuc­cessful effort to coordinate prices and production.

Discussing the impact of these developments on the world copper industry, Moran concludes:

Economic nationalism hurt the multina­tional copper companies not only in the loss of revenues from the mines. The com­panies have been hurt more by the chal­lenge to their position, or to their very existence, as viable integrated corpora­tions. Without the necessity of alleging either malice or conspiracy, it is evident that the large copper companies are acting to the extent of their powers to protect themselves. The large multinational corporations are by no means all-powerful. But they still have the ability perhaps— depending upon the pricing and marketing strategies of the new nationalistic “inde­pendent” producers in the CIPEC coun­tries—of eroding the position of the governments that have nationalized their former operations, if not undermining the position of those governments in the inter­national industry entirely. There is nothing in history or logic to suggest that the major producers or fabricators or consumers will stand still and have the terms and prices of production dictated to them by outsiders. The nationalists may currently prize their “independence” precisely because they believe, on the basis of the great copper shortage during the Vietnam War, that they have achieved this dictatorial bliss. Most corporate boards of directors have no such future in mind…. More properly, the argument should be put that the large industrial countries need secure sources of raw materials so badly that they will pay the price of neutralizing economic nationalists who threaten to up­set the old and dependable system.

Moran argues that Chile nationalized its Big Copper just at the time when scarcity was being replaced by abundance in the world copper market because of a return to normal from the extraordi­nary demand of the Vietnam War years and the opening of new mines in the early 1970s by the multinational corporations in “safer” areas like Canada, Australia, Iran, New Guinea, and Mexico. Indeed, the downward pressure on prices would be much greater than it is today if Chile were not going through its present postnationalization pro­duction difficulties and Zambia, which together with Chile produces half the world’s export copper, were still not suffering the consequences of a disastrous mine cave-in in 1970. Of greater long-range importance, Moran writes, the newly-nation­alized enterprises may be placing themselves into the position of “suppliers of last resort” by trying to take fullest advantage of momentary upward fluctuations in world copper prices while having “broken the ties of corporate integration without building vertical ties into the industrial markets— into Western Europe, Japan, the United States, Eastern Europe, even China—on their own.” In other words, by remaining outside the established international system of long-term contracts at agreed prices that assure stable markets to pro­ducers and secure sources of supply to consumers, Chile would tend to edge into the role of a mar­ginal producer and fail “to gain a greater share from exploiting the industrial consumer with nationalized production than the country has been doing for years under the system of corporate inte­gration.”

The monopolization of new copper technology by the metropolitan corporate establishment, coupled with these recent trends in the world copper market, has amplified the effects of the political and production difficulties at Chuqui­camata. These difficulties, unfortunately, have undermined the potential advantages of socialism, which is not state ownership as an end in itself, but rather to rationalize the production and distribu­tion of a limited quantity of resources. But this rationality is impaired when both the production and the terms of trade of Chilean copper are reduced because of rash political acts, the conse­quences of which could easily have been foreseen. It probably would have cost Chile much less in the long run if an agreement would have been reached with the copper companies for indemnification pegged to the completion of the mammoth expan­sion programs at Chuqui and El Teniente and the realization of the production increases planned when these investments were undertaken. At the time of “violent nationalization” in 1971 the tech­nological inputs to which Anaconda and Kennecott were committed and for which only they could be held responsible were desperately needed. The Allende regime’s mishandling of this transition to state ownership of the mines may be one of its most enduring economic legacies.

While Anaconda was caught virtually defenseless by Allende’s “violent nationalization” of Chuqui, Exótica, and El Salvador—it had financed the $150 million Chuqui-Exótica expansion program from its own funds and then had allowed its United States government expropriation insurance to lapse—Kennecott had been much more astute in protecting itself against political uncertainties. In its offer to the Frei regime to sell the government 51 per cent of El Teniente under the “Chilenirzation” program, Kennecott remained as manager and 49 per cent owner of a company worth four times as much as before “Chilenization” and pro­ducing 64 per cent more than before, while its tax rates were halved. Moreover, not one cent of new Kennecott money went into the $247 million expansion plan at El Teniente. The expansion was financed by the $80 million paid by Chile for its share in El Teniente and a $110 million loan from the United States Export-Import Bank; repayment of this $190 million total was guaranteed by both the Chilean and United States governments in case of expropriation. Another $45 million was raised by long-term future sales of copper to banks and fabricators in Europe and Japan. “The aim of these arrangements,” said Robert Haldeman. head of Kennecott’s Chilean operations, “is to insure that nobody expropriates Kennecott without upsetting relations to customers, creditors and governments on three continents.”

Chilean nationalists long have been mystified and infuriated by this kind of corporate manipu­lation, and it was this fury that perhaps made nationalization inevitable. Although, for example, there were only five Americans among the roughly 600 supervisors working at El Teniente at the time of Allende’s election and there was widespread belief in industry circles in the capacity of Chilean technicians to run the mining and smelting opera­tions, production at Chile’s two biggest mines soon began to decline because of political trouble. If these political problems had not contributed to the departure of large numbers of Chilean technicians, it might have been possible to deal more success­fully with the technological and maintenance prob­lems that arose from Allende’s swift nationaliza­tion while the big mine expansion program was still going on. The nationalization was carried out in such a way as to virtually insure disturbance of the flow of badly-needed supplies and technology into the copper industry. Yet it is still to be hoped that the present difficulties at Chuquicamata and El Teniente are temporary. Nevertheless, Big Copper in Chile is confronted today with the specter of the nationalized tin mines in neighboring Bolivia, where production declined by one-half after nationalization in 1952 and the effective control of the mines fell into the hands of the leftist miners’ sindicatos until, in 1965, the army was sent into the mines to break up the unions and to install a repressive managerial regime of the state mining corporation. The tragedy of the Allende regime, however, is that the political and produc­tion difficulties at Chuqui and El Tcniente can be projected on a much larger screen. The state sector of the economy has expanded enormously since Allende came to power in November 1970, but the operation of the newly seized and/or expropriated farms and factories and distributorships has been paralyzed by political rivalries—like those in Big Copper—among the Marxist parties of the Unidad Popular, whose managers in general have little experience in production and have relegated eco­nomic considerations to a secondary level. For these reasons Chile today is experiencing its worst economic crisis since the Great Depression.

 

   

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