50 years of nationalized copper in Chile

Last July 11th, 50 years of one of the most important processes were commemorated. Nationalizing copper, a state policy driven by Salvador Allende, was a turning point for mining in our company, an industry which by those times, was exploited by foreign companies. How was the process triggered? How was the day after July 11th, 1971? We are going to talk to María Celia Baros, History Degree, Universidad de Chile and specialised in Social History of great mining.

“There is an isolated precedent, which I haven’t been able to confirm, about a proposal of nationalizing in 1915, probably related to the beginning of Chuquicamata in Calama because that is the date in which modern extraction started” explains historian María Celia Baros while analyzing the precedents which allowed Chile to nationalize its main exportation product, copper on July 11th, 1971.

Nevertheless, it is agreed that the facts that encouraged this state policy, started in the 1950s with an early stage of charging taxes. “The Chilean state realized that the American companies with large deposits were practically autonomous due to the fact that they were private. Therefore, they took most of the production, leaving no benefit to Chile.

The first part was a consecutive tax charge to copper production which was enlarged throughout time. Those were the years in which great mining wasn´t mentioned yet. “Later on, the first law arose, known as ‘del Nuevo Trato´ in 1955. It was said that ´fine, such companies can go on producing but under new conditions´”

After that,  chilenization of copper took place in 1967, 51% of deposit shares were bought. Therefore, mixed partnerships were formed with each explosive company. It ended in 1971 with the nationalization of copper where the state bought the remaining 49% of shares and companies were completely nationalized.

-How was the process which finally arrived with the law promulgation? Which were the consequences?

The state not only had a proposal, furthermore, there was a position in relation to it, passing through the governments of Alessandri, Frei Montalva and Allende. In addition, the Northamericans felt rather threatened in the beginning so they were making decisions accordingly, such as, claiming about taxes. Even if they finally paid them. Later on, there were conversations with each of the companies and finally, by law chilenization and nationalization took place.

The Northamerican companies worked under a high level of industrial exploitation, meaning real transnational corporations. Chile was not considering the idea of copper yet as they were still regretting the loss of saltpeter. Due to this fact, copper was not considered a national income and therefore there was no awareness of how local mining impacted regions.

 -Was there a lack of information?

I have always believed that Chileans know little about copper and should know much more. We ought to be conscious about the meaning of copper for us and for the international economy.

Due to this matter, political restlessness was very strong, much more than knowing how this metal was produced. Effects were not minor, Northamerican companies started to handle the idea of accepting that it would be a transfer, a gradual transaction. Nevertheless, afterwards, they felt expropriated, so conversations got tough and finally the state dictated reform article 10 of 1925’s Constitution, in which the state declares itself the absolute, exclusive, inalienable owner of mineral resources in Chile. Within this reform, nothing could be done.

-How was the decision handled by the market?

The markets were closed automatically. This affected each mine at different levels. An example of such is Chuquicamata, which was undergoing a general enlargement and El Teniente had started a transfer plan with Operation Valle 1967. Andina had just opened at the moment of nationalization and could not be properly part of this process. It had not even reached the first programmed production. Andina took 25 years to start production. Potrerillos and El Salvador had 10 existing years, dealing with minor productions.

Meanwhile, the international area was dealing with huge problems. First, the Northamerican companies set up lawsuits in The Hague regarding this process. Secondly, some markets were closed because the clients were Northamerican companies, not us. Blockades began, spare parts became scarce. There were cases of foreclosures of copper production which were already traveling to their destination. Anaconda Copper said ”Chileans must eat their copper”. Challenges were complex. The political decision was one but the reality of the deposits and the moment of copper production was another one.

This process was left behind and several people were not aware of what really happened. It was hard, there were industrial plants which could not be stopped all of a sudden. Once a grinder, a foundry or a mill were started, they needed to be on or turned off completely. Nevertheless, once a machine is paralized, it is very hard to be restarted; information only the people working on it know.

The technical part is very relevant and I’m interested in highlighting the professional role of the Chilean workers. If there hadn’t been experienced Chilean workers in each of the deposits, this would have been extremely dramatic. On the other hand, there were Chilean engineers who gradually took over the administration. Some of them were very young at the time, nowadays, seniors in Codelco.

– How do you consider the importance of the government of “Unidad Popular” concerning the previous and later agreements of nationalization?

I wouldn´t stand out only the government of “Unidad Popular” because it is the one who culminates the process. It finally made the move to turn into a full negotiation. It was said to be a negotiation without last names because each government provided an important role. Tax charges could have provoked resistance from the northamerican companies and the lawsuits in The Hague could have gone into debt, at the moment. Luckily, conversations arose and facts were progressively handled.

A simple example is that nobody can turn minerals into metal, even if the biggest mine in the world  is found. Copper and mining work is a team work, many people are required in order to operate a plant. Whenever speaking about great mining, we are speaking about tons of fine metric in the foreign market and there is a need to commit to the requirements of the London Metal Exchange. This was a very complex process and according to my opinion, each Chilean government was adding initiatives up. A few days ago, a well known mining lawyer, established that 14 presidents needed to go through in order to set this event. The final push was given by “Unidad Popular” and Allende’s government by making the decision and nationalizing it completely.

The day after

Without further information about the nationalized deposits and markets being closed for Chilean copper embarking, the country had to start an exhausting process in order to rebuild the mining structure we know nowadays.

-What was missing to achieve nationalization?

In the area of the institution, a Corporation of Copper was created which finally was named Codelco. In relation to the economical issue, the state needed to organize itself in order to receive the copper incomes. Because, normally the incomes went to large private companies. Taxes were collected gradually within the Ministry of Finance for state coffers. Nevertheless, there was no legislation regarding procedure nor the final outcome.

Partly, due to this fact, Comisión Chilena del Cobre (Cochilco) was created with the purpose of dealing with matters such as commercializing abroad, auditing and general statistics. On the other hand, legally speaking, mining law as well as property law were required to be changed, reforming more laws. Therefore, chilenization and nationalization are the first part of a starting process.

-In relation to closing markets, how was the opening to other countries like?

A process in which Chile was the new copper owner was informed. As a conclusion, the productor took the leadership role of the old companies.. It needed to respond regarding the stopped productions in foreign ports which often were confiscated, therefore, taken back to Chile.

On the other hand, strong international relations took place. The military government had to deal with the matter of compensation. There is a specific chapter which concerns responses to lawsuits of The Hague  and international trials. To the extent that answers were provided, pending compensations were assumed; maybe not all the money requested by the North Americans was paid but large amounts were. Due to that fact, foreclosures were canceled and lawsuits against the Chilean government ended. A brave face was needed and saying “ We want copper and we buy it”. The custody had an unknown cost, millions of dollars were paid, though less than expected. A good foreign relations management was made to spread out the process of nationalization, winning a natural Chilean resource.

-What is your opinion concerning the way in which the process was dealt? Was there concern that it wouldn’t work?

The point of view of the governments at the time was optimistic, it could go on regardless of its difficulty. On the other hand, the human resource was very important. The departure of the North American companies resulted in their professionals leaving their knowledge as well. The focus was centered on the remains of the deposits. One of the main concerns was the geologic issue, due to the fact that the amount of copper was unknown because geology and the reservations were always a “safe box” for private companies. It was managed by foreign geologists and the information was sent to the United States. So the question for the government was: “ We have copper today but are we going to have copper in the future?”. That is why the most important role belonged to the Chilean engineer who was just getting to know the field.

In some of the companies, like El Teniente there was a previous training as a transition. In Chuquicamata there were just some engineers in some positions, but only a few, the ones left and they knew what was left and could go on with it. Later came the formation of Corporación del Cobre (Codelco) and its organization, which took 10 or 15 years to achieve administration domination.

In fact and due to the latter, much of the North American internal administration structure remained until a decade ago. There was an exploitation structure of the mining industry on a high scale and engineers emphasized it. That model, created by the North Americans, was very important and allowed it to go on. It also permitted continuing with the deposits and enabled new mining explorations which were confidential in the past. Finally, one of Codelco´s  greatest achievements was having updated explorations which provided new information, such as the one from Chuquicamata and El Teniente which are more than 100 years old, determining at least 50 years of exploitation. The smallest deposits have also expanded but they still count with new reserves.

-What do you think is the importance of achieving this process 50 years ago? How do you see the present and the future of this industry?

Finally, the result was extremely positive. The copper industry is an enormous contribution for Chile. We need to take care of it because we need not to forget that it is a non-renewable resource. During the last decades, the amount of work, initiatives and benefits that this industry had provided Chile is inmmense. There is a huge list of achievements, not only technically, but also prestige as a productor.

One of the things Chile established since it started to re-establish the market was the punctuality for delivering copper units. Codelco keeps an annual sales campaign where company executives manage sales contracts within two or three years in advance. That is the reason why the technical part is important; as long as the reserves are known, it is possible to sell and commit within the market. Therefore, we have earned prestige as copper producers worldwide. We keep on offering a quality product, not only producing copper, but also considering sustainable matters. Besides, we have achieved social responsibility. Massive jobs are provided to thousands of people and region workers.

For each deposit, there is a significant number of collaborators, companies and services that contribute which turns the industry into a source of employment and attraction. As well as mining engineering and other related areas of engineering got together for the sake of education. There are Chilean engineers formed by Codelco and medium engineering who later move to private engineering and then travel around the world. New professional careers specialized in copper. But all the above mentioned, took a long time.

On the other hand, there are cultural aspects involved; camp life, customs, social clubs, sports. The specific way of camp is an architectural matter. I participated along with a group of architects from Universidad Católica in a Fondecyt project studying the classic Company Town. These originated the internal planification of old camps which are being abandoned nowadays but were very important for Chilean urban history as interesting precedents derived from them. Therefore, the contribution of copper is immense and we probably have for more than 50 years due to the reservations that are still being exploited and that are daily determined in each deposit. Nevertheless, we ought to take care of it, it is a non-renewable source which we need to know.

The most important thing to me is to appreciate those people who have worked generation after generation in the deposits, hoping nothing bad happens to them. Do not remember them only whenever there is an accident because they are committed to the country and doing their best to get ahead. We need to respect, know and be grateful for the work done for more than 100 years in an anonymous way by copper workers.