Saturday, November 10, 2007

Ransacking Chile - Fabulous Profits for Multinationals

The rise in copper prices has produced euphoria in the government and ruling elites, despite relative complications for certain exporters. The price rise seems not to be a momentary phenomenon. Although abundance is not noticeable in the daily life of Chileans, three out of four expect that the price rise will raise their living standards. Everything is looking good. But a kind of conspiracy of silence hides something basic. The ones who do best out of the copper price are the multinationals who manage two thirds of Big Mining, not Chile. The multinationals are the main winners : they pay low taxes and walk off with colossal profits.

The figures are startling. With copper at US$2.60 per pound, the profits leaving Chile for production in 2006 will be US$16 billion. More than twice the surplus of CODELCO One is dealing with real plunder, the culmination of an open handed policy towards the multinationals that began with the dictatorship and has been maintained to the present day and which, apparently, President Bachelet wants to continue. Punto Final talked to the economist Orlando Caputo of the Study Centre CETES, an academic and expert in copper and the world economy.

PF. What is the situation relating to multinational profits in Big Mining of copper during this period of high prices?

OC. The profits of the foreign companies that control 70% of Chilean copper are so high that they are equivalent to more than twice the surplus of CODELCO. El Mercurio (3) on April 30th reported that in the first quarter the profits of Escondida (4) were US$1.136 billion, which means more than US$5 billion for the whole year, including taxes. One has to take in the general panorama and we can use data from recent studies. There is no information from the multinationals since they are not obliged to publish accounts. We can only make deductions. There are figures for profits sent overseas resulting from direct foreign investment, which are after-tax profits. The significant figures are these : 1999, US$1.603 billion; 2002, US$2.557 billion; 2003, US$4629 billion; 2004, US$8.231 billion; and 2005, US$11.088 billion.

These figures include the total of foreign direct investment but help us get to the figures for the mining multinationals. If we discount profits of foreign non-mining companies, we arrive at the companies that are, namely, the copper mining companies. To their profits we need to add remittances made up of accelerated depreciation and other items that we can consider as earnings. We can conclude from these calculations that the surpluses of the mining multinationals were approximately US$10 billion in 2005. This year however, when prices and their trends are higher, the surpluses of the copper mining multinationals are around US$16 billion. A figure that would finance the new social program announced by Michelle Bachelet for 27 years.

To appreciate what these earnings mean we can establish other relations. One is that which exists with the material investments made, which together with labour and the natural resource itself, constitute the source of those profits. According to the Foreign Investments Committee, that investment in the mining sector for the period 1991 - 2004, that is to say the democratic period, was US$16 billion in round figures. That figure is practically the same as the earnings for 2006. In just one year the multinationals will earn the same amount that they invested over 14 years, and the investments in the democratic period represent more than 80% of the investment in copper Big Mining since 1974.

Here is the full article.