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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. I 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.
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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CHILE
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: