Recent new investments in Chile by major multinationals, and promises of more to come, suggest that the Junta’s aggressive “open doors” policy toward foreign capital may finally bear
fruit for the dictatorship. Frustrated by four years of cautious, “wait-and-see” attitudes by most foreign companies, the Junta is billing this spurt of new investments as the opening of a new stage in the country’s economic development. While these investments do represent a significant boost to the dictatorship (and for that reason they have been condemned by human rights activists and Chile solidarity groups in the U.S.), and despite the Junta’s official optimism, there are still some sizeable clouds on Chile’s investment horizon.
Perhaps the most important element in Chile’s new investment picture is EXXON’s puchase of the copper mine La Disputada de las Condes for $107 million, with the possibility of up to $1 billion in further investments over the next five to ten years. EXXON is the world’s largest industrial corporation,
with net profits of $2.4 billion and gross revenues of $58 billion in 1977 – more than five times the Chilean GNP.
According to Business Latin America, EXXON’s decision to
invest heavily in Chile “constitutes a public relations break-
through as much as an economic milestone for the country. Not
only is it the largest single investment by a U.S. firm in
many years, but it has been-made by a large, image-conscious
corporation, indicating that international business is giving its blessing to the Chilean military regime.”
Chile’s mining sector has attracted other investments as well. Canada’s Noranda Mines has contracted to buy the Andacollo copper mine for about $350 million, with long-term investment possibilities similar to the EXXON deal. (It appears, however, that the investment will not be finalized unless and until there is a substantial increase in the price of copper on the world market; Noranda reportedly will be making a final decision on the investment in late 1978.) A consortium of U.S.
and Canadian companies, headed by the Superior Oil Co., have
made a tentative commitment to invest $500-$700 million in the
Quebrada Blanca copper mine over several years, and another
group is reportedly interested in the much larger El Abra mine. St. Joseph, another U.S. firm, has invested $100 million in Chile’s largest gold mine, El Indio.
OIL & GAS INVESTMENTS
In addition to these mining investments, the Junta is actively
promoting foreign investment in oil and natural gas deposits.
Chile’s state-owned oil industry, ENAP, has sold off part of its interest in potential off-shore oil deposits to a partnership formed by Atlantic Richfield (ARCO) and Amerada Hess Co. An initial $11 million is to be spent on exploration, followed by a guaranteed investment of at least $250 million over the next 30 years if initial explorations are successful. ARCO is also a major partner in a project to export Chilean natural gas to the U.S. and other countries, a project slated to grow to $400 million over the next 5-10 years. Chile has applied for a $100 million credit from the Inter-American
Development Bank to help finance this project.
Continuing its policy of “denationalization” – selling off
Chilean industries to foreign multinationals, or, in a few
cases, to Chilean monopolies – the Junta has recently sold the
largest tire factory in Chile, INSA, to Goodyear for $34
million. Goodyear is already the largest tire manufacturer in
Latin America.
These recent investments – in the mining, oil and manufacturing sectors – can be seen as a direct response to the economic policies pursued by the Junta since the coup. These policies – including keeping the cost of labor down by the most brutal means – were devised and administered by the Junta’s team of U.S.-trained economists, the so-called “Chicago Boys,” who learned their economics under Milton Friedman and Arnold Harberger at the University of Chicago.
Labor that is cheap and tightly controlled is not the only
bait held out to foreign capital. In 1976, Chile withdrew from
the Andean Common Market in order to avoid adopting its
restrictions on the export of profits by foreign investors. In
early 1977, the Junta enacted Decree Law No. 600, a Statute
on Foreign Investments which provides foreign corporations
with all the rights and privileges enjoyed by Chilean firms. Since then, according to official year-end statistics, the regime has approved some $1.1 billion in new investments (actual or projected), predominantly in the mining sector.
While these figures do reflect a new situation that is somewhat more favorable to the Junta’s economic project, there are several important contingencies to be taken into account. Most of the largest new investments are to be spread out over a period of years and even decades. In many cases they are also contingent upon successful preliminary explorations (in the case of oil) or on a sharp improvement in the price of copper on the world market. This last factor has the Chilean regime very worried, since the average price of copper throughout 1977 was well below its projections. Chile, along with Indonesia, has even broken ranks with CIPEC, the Association of Copper Exporting Countries, in refusing to reduce copper production; in fact, Chile increased production in 1977, although not enough to offset the fall in price.
STATE REVENUES
The continued low price of copper affects not only future
investments, but also the foreign revenues that Chile receives from the sales of government-owned mines. Thus, the surplus in the balance of payments forecast by the Junta at the beginning of 1977 evaporated during that year. Chile was forced to borrow over $1.4 billion in 1977, while paying out $1.2 billion – or a record 48% of export revenues – to service its foreign debt.
Through this spiral of “borrowing from Peter to pay Paul,”
Chile’s overall foreign debt has escalated to over $5.2 billion. And although demand for copper is expected to increase somewhat in 1978, new mines will also be coming into production in other countries, and a downturn in the present “recovery” from world recession, forecast by some, could seriously depress demand and prices. Under such conditions,
Chile’s investment bubble could burst loudly, throwing the regime into a very major economic crisis.
Clearly, internal political developments in Chile, and particularly the strength of the resistance movement and broad-based opposition to the regime’s brutalities, will have a determinant effect on the Junta’s ability to create a “favorable investment climate” for foreign multinationals. In the United States, human rights and Chile solidarity organizations are mobilizing campaigns to exert crucial pressure on U.S. corporations, such as EXXON, ARCO and Goodyear, aimed at forcing them to reconsider and revoke the vote of confidence they have given to one of the most repressive and regressive regimes in the hemisphere.
For further information on foreign investment in Chile and
the current status of campaigns, write or call on-Intervention in Chile (NICH) at P.O. Box 800, Berkeley, Ca. 94701, phone
(415) 548-3221 or 339 Lafayette St., New York, N.Y. 10012, phone (212) 228-8272.
