The Chilean Road to Socialism


CHAPTER 1

Multinational Corporations and Chile

THE MULTINATIONALS

An original article for this volume based upon research by the Chile Research Group
of Rutgers University. James Cockcroft is Associate Professor of Sociology at Rutgers;
Henry Frundt is a teaching assistant and graduate student at Rutgers.

JAMES D. COCKCROFT, HENRY FRUNDT, and DALE L. JOHNSON

How important is the multinational corporation? Burton Teague, in a study published last September by the Conference Board, a nonprofit, business-sponsored research organization, put it this way:

"Of a gross world product of $3-trillion, approximately one-third is produced in the United States, one-third in the industrial nations of Europe, Canada, Japan and Australia, and the remaining one-third in Russia, Eastern Europe, China and the developing nations elsewhere in the world.

"About 15 per cent, or $450-billion, is accounted for by multinational enterprises; $200-billion of this by U.S.-based companies; $100-billion by foreign-based companies which also operate in the U.S., and $150-billion by interproduction in other countries.

"The proportion contributed by multinational corporations is growing at a rate of 10 per cent per year. At this rate the multinational companies will generate one-half of the gross world product in less than 30 years." [1]

As important as copper may be to Chile, from the point of view of U.S. investors and the Chileans themselves the strategic sector affected by Chile's economic nationalism and incipient socialism is not mining but industry. For the Chileans, the question is one of achieving economic independence in order to promote national development. For the multinational corporate investors, the questions are the potential loss of a multimillion-dollar investment, the closure of opportunities to expand operations in a strategic South American location, and the effect that Chile's economic nationalism may have on other Third World countries.

At the time Allende assumed office, more than one hundred U.S. corporations had established themselves in Chile. Among these firms were twenty-four of the top thirty U.S.-based multinational corporations. These included the major auto producers, four of the biggest oil companies, Dow and DuPont chemicals, International Telephone & Telegraph (ITT), and other big industrials. In recent years the ranks of the industrials had been joined by multinational banks and corporations operating in the service sectors. Many of these foreign corporations entered Chile during the 1960s.

Thus Chile was very much affected by the most important phenomenon in international economics of the past two decades: the ascendance of multinational corporations in the secondary and tertiary sectors. These corporations are strongly attracted to foreign countries by the availability of cheap labor, penetrable markets, high returns, and other factors. At the same time, they have a strong incentive to expand abroad because of limitations on U.S. domestic markets, higher costs of labor, foreign restrictions on the importation of U.S. finished goods, and the growth and profit imperatives of corporate operations. [2] So intense has been the expansion of these corporations that, based on gross value of production, U.S. companies abroad now constitute the third-wealthiest "nation" in the world, behind the United States and the USSR.

While not as important as Brazil, Mexico, Argentina, and Puerto Rico for U.S. multinationals in Latin America, Chile nevertheless reflects this recent pattern of rapid economic expansion into foreign countries. After Eduardo Frei became President, in 1964, these corporations entered Chile with the full co-operation of the Chilean state. For example, all four of Chile's petrochemical companies arrived after 1967, as did two of the three rubber companies and three of the four manufacturers of electrical equipment. Most of the eighteen foreign automotive assembly plants were established in the 1960s. During these years foreign investments in manufacturing and commerce more than doubled.

Patterns of Corporate Expansion

There are three basic patterns of multinational expansion into the urban economies of underdeveloped countries that can be analyzed in the Chilean case. The traditional pattern is investment by long-established firms in utilities and transportation facilities. ITT's Chile Telephone Company is an example. But ITT's rapid ascendance as the world's number one "conglomerate" also serves to illustrate a second pattern: penetration into diverse sectors by modern conglomerates. In the specific case of Chile, the International Basic Economy Corporation serves as an even better example of this mode of expansion than ITT. A third pattern is direct investment by corporations in heavy and highly technological industries. We will use the 1967 investment of Dow Chemical in Chile to analyze this pattern.

ITT established itself in Chile in 1927 with an investment in the telephone company. Today, after Anaconda Copper ITT has the largest U.S. investment in Chile. The conglomerate owns 70 per cent of the telephone company, with declared assets of $153 million. The Chilean subsidiary is one of ITT's biggest earners abroad, making over $10 million annually. Other ITT properties in Chile include Standard Electric, which operates in twenty-four countries, All America Cables & Radio, two Sheraton hotels, TTT World Directories, and ITT World Communications.

Allende was elected on a platform that promised to socialize monopolies such as that of ITT. Negotiations for government purchase of the telephone company began early in 1971, after years of unbelievably bad service and abortive attempts by the Frei government (1964-70) to persuade the monopoly to provide adequate service.

Complaints about telephone service in Chile are legendary. Incomplete calls and wrong numbers are the norm. ITT's technology is obsolete. People wait for years in vain hope of installation, and there is practically no rural service. In 1967 the Frei regime concluded an agreement with the phone company to provide 147,000 lines by 1971. By the middle of 1971 only seventy thousand lines had been extended, and the vast amount of materials bought by the Chilean Government for telephone extension remained unused in warehouses.

During the 1971 negotiation period, the Popular Unity government prevented ITT from converting its assets into dollars. The negotiations broke down in August, and on September 2 the telephone company's bank accounts were blocked. On September 23 the Chilean state officially "intervened" the company—substituting state and worker-committee management for ITT management. After company records were examined, the former general manager of the company and three other officials were arrested on charges of fraud in company dealings.

Before the Chilean Government could determine the amount of compensation for the property, ITT filed a claim against its investment insurance held by the Overseas Private Investment Corporation (OPIC). This quasi-public agency of the U. S. Government, under de facto control of the corporate elite who sit on its advisory council, encourages overseas investment and reduces risks by insuring investors against expropriation and incovertibil-ity of assets. (More details on ITT in Chile, its conflict with and attempt to undermine the Allende government, and the OPIC are provided in Chapter 2.)

The final episode in ITT's history in Chile is now being recorded. In March 1972 columnist Jack Anderson published secret papers from ITT files that document that the corporation applied considerable pressure on the U. S. Government and powers inside Chile to reverse the popular election of Salvador Allende as President of Chile in 1970. [3] The secret papers reveal that ITT co-operated with the CIA in the agency's plans to prevent Allende from taking office, including efforts to create economic chaos and provoke a military intervention. ITT, of course, is no longer welcome in Chile.

ITT is not the only "traditional" investor in Chile's non-mining economic sectors; Grace Lines began handling Chile's foreign trade in 1881. W. R. Grace expanded into textiles as early as 1914 and by 1918 into the export-import business. By the 1960s W. R. Grace, like ITT, had become a huge conglomerate and was heavily involved in Chile in processed foods, petrochemicals, textiles, paints, electric lamps, and the import business.

Viewed in a world context, ITT is one of the best examples of the multinational conglomerate phenomenon. These are corporations that grow by taking control of and absorbing other firms. In the United States, ITT is the eighth-largest industrial concern. In ten years the corporation has grown from an $800-million communications company to a diversified giant worth $6.4 billion. This growth is a result of ITT's rapid expansion abroad and its take-over of about a hundred U.S. corporations, including Hartford Fire Insurance, Sheraton Hotels, Continental Baking, and Avis. This growth has also been facilitated by the U. S. Government's unwillingness to prevent most ITT take-overs through anti-trust-law enforcement and its awarding of large defense contracts to the corporation.

Revelations concerning ITT's friendly ties to the CIA in its Chile operations and to the Attorney General's office and the Republican Party (through ITT-Sheraton's offer of four hundred thousand dollars to subsidize the 1972 Republican Convention allegedly in return for a favorable settlement of an anti-trust suit) symbolize one aspect of the conglomerate's relationship to the U.S. Government. Moreover, with $233 million in defense business in 1971, ITT ranked number twenty-three on the Defense Department's list of prime contractors. Defense-related activities include the Ballistic Missile Early Warning System, various communications-satellite systems, an ITT space division working on top-secret Department of Defense contracts, electronic air-warfare devices being used in Indochina, and a major integrated communications system for U.S. military forces in South Vietnam. Former Senior Vice-President of ITT Charles Ireland is a retired lieutenant colonel of the U. S. Marine Corps.

ITT is among the very largest of U.S.-based multinational corporations. In 1970, 47 per cent of ITT's assets and sales were located abroad and 59 per cent of its profits flowed from foreign operations. Growth abroad proceeds at an even more rapid clip than ITT's sensational expansion inside the United States. With about $3 billion of its assets abroad, ITT operates in more than sixty countries, including twelve in Latin America. Like all multinationals, ITT views economic nationalism—especially when combined with efforts to construct socialism, as in Chile—as a fundamental threat to its interests.

ITT's expansion as a conglomerate in Chile, however, proceeded on a more modest scale than in the United States and Europe. Its operations were also more integrated, that is, related to its traditional communications business. After establishing the telephone company (1927), ITT began a plant (1942), Standard Electric, to manufacture telephone equipment, and opened international communications services. It got into non-communications business with its recent U.S. acquisition of the Sheraton Hotel chain. Given the revelations of the "ITT-Chile" papers released by Jack Anderson, it is not hard to imagine ITT officials in serious conversation with CIA agents and the Chilean equivalent of the Republican National Committee in a luxurious suite at Sheraton's Hotel Carrera in Santiago. Toward the end of the Frei regime, ITT began to establish links through an insurance company, La Trasandina, with a powerful and aggressive Chilean economic group that prospered under Frei and centered itself in the Banco Hipotecario (a group termed in Chile the Pirañas, after the ferocious South American fish). In Chile (as in the United States with ITT's successful take-over of Hartford Fire Insurance) insurance companies provide access to capital necessary for conglomerates to continue their acquisitions of penetrable companies.

Whatever plans ITT may have had for further expansion in Chile were rudely interrupted by the Allende government's nationalization bill sent to Congress after the scandal of ITT's interference in Chile's internal politics.

Another case of penetration by conglomerates is the Rockefellers' International Basic Economy Corporation. IBEC operates in thirty-three countries and in 1970 derived 60 per cent of its profits from Latin America, although only 33 per cent of its assets were in the region. In Chile, IBEC has a ready-mix cement plant, a petroleum-products manufacturing and marketing concern, a construction firm, a mining enterprise, and four investment and management companies. Through these investment companies Rockefeller interests have penetrated many Chilean firms. IBEC now participates in thirteen of the twenty-five largest Chilean corporations and controls over 50 per cent of the stock in three of them. In short, IBEC in Chile operates as ITT does everywhere: it grows by achieving financial control of more and more independent firms.

One of the characteristics of conglomerates is that they expand by financial manipulation rather than through producing. The conglomerates do not usually bring any significant capital of their own into an underdeveloped country; their aim is to use other people's money to keep expanding and to take capital out. Most new foreign investment, in Chile as in other Third World countries, has been based on locally generated capital funds rather than new direct investment or large external loans. As The Rockefeller Report on the Americas candidly states, "The United States is but one partner in a development effort which is about 90 per cent financed by the other American republics." [4]

The third pattern of foreign investment evident in the Chilean case is the establishment of large industrials in chemicals, consumer durables, and machinery and equipment. These are all industries that require large initial investments and technological resources, investments that are very difficult for most underdeveloped countries to undertake without some form of dependence on foreign financing and expertise. The price—in terms of capital drains and loss of control over the economy—that an underdeveloped country has to pay for plants to produce automobiles, chemicals, electrical appliances and machinery, consumer niceties, pharmaceuticals, etc., is very high. Such investments are nevertheless facilitated by local business interests and governments in many underdeveloped countries, as well as by the U. S. Government.

An example of how both the Chilean Government and the U. S. Government facilitated this pattern of foreign investment is Dow Chemical's financing of a petrochemical complex. Dow Chemical, recently in ascendance as a multinational, came to Chile in 1967 to manufacture chemicals for the textile and paper industries in Chile. With an investment of $6.6 million, Dow provided but a fraction of the funds needed to finance its Chilean subsidiary. The U. S. Export-Import Bank—the chief function of which is to underwrite U.S. exports and corporate expansion overseas—together with the Bank of America provided the bulk of the capital, $17 million in credits. Chile provided $4.3 million, for a total investment of $31.3 million, including $2 million in value accorded Dow's technical know-how and a $1.4-million credit from the parent company. Petrodow Chilena must pay Dow Chemical Corporation 3.5 per cent to 4.5 per cent royalties on sales of specified products. While sales are in Chilean currency, royalties must be paid in dollars earned through copper exports. The Frei regime placed no restrictions on profit remissions, and Dow is entitled to amortize the total investment, including the loans and value arbitrarily placed on technical know-how, at the rate of 10 per cent per year. No customs duties are levied on Petrodow's imports. Tax stability is guaranteed for fifteen years. Dow Chemical retains 70 per cent of the stock and therefore control of decision making.

The long-range implications of this deal for capital transfers out of Chile are obvious. The investment came to Chile largely in the form of machinery and equipment (probably at inflated transfer prices from the parent corporation). The investment is amortized and profits repatriated, however, in hard currency. Chile must therefore dig into its scarce dollar reserves to repay Petrodow's loans and royalties and provide dollars for amortization allowances and profit transfers. With the sharp decline in copper prices since Allende took office, these reserves have all but disappeared.

Scope of Multinational Penetration

In general, by the time Allende became President most of Chile's important areas of industry and finance had passed into foreign hands. Of the eighteen largest non-bariking corporations, all but two had participation of foreign capital. Two fifths of Chile's largest one hundred corporations were under foreign control, while many more were mixed ventures that allowed external influence or effective control.

As the cases of ITT, Dow, and IBEC suggest, some of the world's largest corporations are involved in Chile. By 1970 there were over a hundred U.S.-controlled corporations operating in the country, with investments worth more than $1 billion. The big U.S.-based multinationals (European and Japanese corporations are present but not greatly significant) dominate the most modern, dynamic areas of the Chilean economy. In addition to copper mining and nitrates, these areas include:

—machinery and equipment, 50% foreign control (including Xerox, National Cash Register, ITT, GE)
—iron, steel, and metal products, 60% foreign (including Bethlehem and ARMCO Steel, Koppers, Kaiser, Singer, Hoover)
—petroleum products and distribution, over 50% foreign (Standard Oil of N.J., IBEC, Gulf, Mobil)
—industrial and other chemicals, 60% foreign (Dow, Monsanto, W. R. Grace)
—rubber products, 45% foreign (General Tire, Firestone)
—automotive assembly, 100% foreign (including Ford, GM, Chrysler)
—radio and television, nearly 100% foreign (RCA, Phillips, General Telephone and Electronics)
—pharmaceuticals, nearly 100% foreign (American Cyanamid, Pfizer, Parke-Davis)
—office equipment, nearly 100% foreign (Sperry Rand, Remington, Xerox)
—copper fabricating, 100% foreign (Phelps Dodge, Northern Indiana Brass Co., General Cable)
—tobacco, 100% foreign (British-American Tobacco Co.)
—advertising, 90% foreign (J. Walter Thompson, McCann-Erickson, etc.)

Sectors of the economy developed over the course of a half century by Chilean entrepreneurs, such as processed foods and textiles, are now significantly penetrated by foreign capital. In manufactured foodstuffs, for example, W. R. Grace has a decided presence, along with CPC International, Ralston Purina (now nationalized), General Mills, and the inevitable Coca-Cola.

Of the top thirty U.S.-controlled multinational corporations, twenty-four operate in Chile (see table). These same twenty-four corporate giants are increasingly dependent on foreign ventures: they now derive 40 per cent or more of their sales and income from foreign operations. With few exceptions, they rank among the principal contractors of the U. S. Department of Defense, thus turning over additional profits flowing from the U.S. military's defense of corporate interests overseas against the forces of nationalism and socialism.

Chilean Dependence

The essential impact of the increase in multinational corporate penetration in any given Third World economy is to exacerbate dependence at every level. By dependence we mean the inability to freely make decisions that affect one's economic, social, and political life and destiny; and, from a different angle, the suffering of the consequences of decisions that are made or significantly shaped by other parties. This can be seen in the Chilean case at the macroeconomic level and in terms of what we call the "denationalization of the national bourgeoisie." [5]

In the twentieth century, Chile's economy developed in two directions: On the one hand, the economy became heavily dependent upon copper exports. On the other hand, the collapse of the international economy during the Depression and World War II loosened the previous bonds of international dependence sufficiently to make possible a process of industrial development under the control of Chilean entrepreneurs.

In the non-mining sectors of the economy, development under control of Chilean entrepreneurs had come to a practical end by the mid-1950s. Since that period, Chile has suffered runaway inflation of over 25 per cent annually, combined with the virtual stagnation of the economy as a whole. The influx of foreign capital in the 1960s did not ameliorate any of the grave structural problems of the economy. In fact, during the period of greatest foreign investment, from 1967 to 1970, there was a negative per-capita rate of economic growth. Allende's successful economic policies in 1971 reversed the trend. Unemployment rates of up to 10 per cent, combined with disguised unemployment in the inflated services sector, have made real unemployment approach 30 per cent. The capital-intensive nature of foreign enterprise did not permit significant increases in employment. Moreover, production by foreign corporations of goods superfluous to the needs of three fourths of the consuming population (cars, durable consumer and luxury items, etc.) constitutes no real contribution to Chilean development, especially when one takes into account Chile's deficient food production, widespread undernourishment, inadequate housing, and lack of medical and social services. The Allende government will undoubtedly shift some investment away from heavy industry and consumer goods only the affluent can afford, toward meeting the basic needs of the Chilean people.

Foreign enterprise has created strong tendencies toward decapitalization. In the following article on copper, we document the very substantial flow of capital out of Chile due to foreign ownership of natural resources. In industry, U.S. investment approximately doubled during the 1960s, while profits went up sevenfold, of which part was repatriated and part reinvested in expanding Chilean operations. Chileans also paid out more and more for foreign licenses and patents, as illustrated in the case of Dow Chemical. Profit repatriation, payments for foreign licenses, and debt payments put enormous pressures upon available foreign exchange.

We do not have access to exact figures for Chile, but with respect to other Latin American nations, as much as 60 per cent of any given country's foreign exchange is consumed in repatriation of profits by foreign investors, debt and service payments to foreign creditors, and other charges and services on foreign transactions. The long-range effect of foreign investment in manufacturing, commerce, and services is the same as in mining—the transfer of wealth and decision making from the underdeveloped country to the home offices of the multinational corporations. Over the past two decades, U.S. corporations have concentrated more and more of the economic life of other countries in their hands, while taking out of the underdeveloped nations almost three times as much capital as they invested. At the same time, they increased threefold the value of their assets there.

Dependence is further accentuated by the integration of local businessmen with foreign capital. In the case of Chile, the business community contributed to what amounted to a virtual de-Chileanization of the economy in the 1960s. In part, this occurred because Chilean capitalists profited from business arrangements with foreigners; in other cases, Chileans could not compete with the greater assets possessed by foreigners in capital, technology, and credit. As a result, the Chilean bourgeoisie became a local partner of foreign capital, serving the interests of foreigners rather than those of national development. In this sense, the bourgeoisie was "denationalized."

One example is the association of the Yarur Chilean textile interests with W. R. Grace. Capital generated from that associative venture was used by Grace in thd 1960s to acquire the Hucke Candy and Biscuit Company, the Eperva Fishmeal Company, COIA (Chile's largest paint producer and a major sugar refinery), and various sugar, wine, and distribution concerns. Another example is the Rockefellers' IBEC. The IBEC tactic in Chile has been to recruit close business associates from the local business elite, to buy into local businesses (using funds generated within the country from mutual funds, insurance companies, and other business), and then to put their men on the boards. This increases the concentration of decision making in the hands of local oligarchs serving foreign interests. Agustin Edwards of the oligarchic Edwards family, owners of the major Santiago newspaper and a wide assortment of other firms, is a stockholder and former president of a principal IBEC Chilean subsidiary. The Edwardses also had a 20 per cent participation in the Ralston Purina subsidiary intervened by the Popular Unity government in 1970. Shortly after Allende's election, Agustin Edwards went into voluntary exile in New York to become Vice-President of Pepsi-Cola Corporation, a firm he had also been associated with in Chile (see Chapter 21).

Yet another example is the First National City Bank, which made its ties to top Chilean businessmen and expanded its influence in the Chilean economy through National Finance, S.A. ("Finansa," 50 per cent First National City's), an investment firm linked to the Chilean economic group Las Pirañas.

The above examples are but a few among many. The comprador, dependent nature of the Chilean bourgeoisie is also revealed in the facts uncovered by Maurice Zeitlin, Lynda Ann Ewen, and Richard Ratcliff. [6] They studied the affiliations of 285 Chilean officers and directors of the fifty largest non-financial corporations during the mid-1960s. The researchers identified four interest groups of Chilean families, who controlled twenty-one of the top fifty corporations. Two thirds of the officers and directors of the top fifty had either personal or close family ties to foreign interests.

Moreover, dependence extends beyond the denationalized bourgeoisie to other strata of a Third World nation'! society. A stratum of administrators and technicians re cruited by foreigners from the upper and middle classes emerges to represent the interests of foreign capital. Until the Allende regime passed a law forbidding it, Chileai employees of some foreign firms were paid in dollar rather than escudos, which they then transferred abroac or sold on the black market. This sizable stratum, thoroughly acculturated to American values of consumerism, constitutes a principal social base of right-wing op position to the Popular Unity governing coalition. Women of this stratum and some of their domestic servants have engaged in militant demonstrations such as the December 1971 "march of the empty pots" protesting shortages o: consumer goods (shortages were caused by Allende's economic policies, which increased the purchasing power of workers and therefore demand). Many middle- and upper-class people watch TV programs such as "I Spy" and "I Love Lucy," read Selecciones del Reader's Digest, and generally imitate American life styles.

Prominent Chileans go back and forth between politics and employment with foreign companies. Dragomir Tomic, brother of the Christian Democrats' 1970 presidential candidate, was one of Anaconda's lawyers defending its interests in the enormous Chuquicamata mine. Rodolfo Michells, an ex-senator from the Radical Party, became a Vice-President of Anaconda. Arturo Matte, from an oligarchic Chilean family associated with the Alessandri family (Alessandri is ex-President of Chile and opponent of Allende in the 1970 election), was identified in the Anderson "ITT-Chile" papers as a coconspirator with ITT and the CIA to prevent Allende from taking office.

Important decisions shaping Chile's underdevelopment have increasingly been made in the board rooms of U.S. corporations and passed on through the informal linkages connecting foreign companies to the local ruling class, and from this class to the pre-Allende state. The use of the Chilean state by the dependent bourgeoisie and foreign capitalists to achieve their ends proceeded further under the Christian Democratic regime of Eduardo Frei (1964-70) than under any other government since the early days of penetration by nitrate and copper interests (1891 through the 1920s). In 1969 the Frei administration agreed that ITT's phone company be permitted an annual 10 per cent return on an overvalued investment, provided capital for expansion, and allowed special foreign-exchange arrangements. The extremely favorable terms awarded Dow Chemical for its 1967 investment have already been mentioned.

One of the most dramatic examples of the state's generosity to foreign investors was the Frei administration's "Chileanization" of the copper mines. The "Chileanization" began with government purchase of 51 per cent of El Teniente mine. Critics claimed that the value of the property was no more than the book value of $72 million. Nevertheless, President Frei accepted the appraisal by Kennecott of $160 million and paid $81 million for 51 per cent. The majority stock held by Chile did not mean very much, as management control and sales offices were retained by Kennecott. In essence, the program was meant to provide incentives to the copper companies to increase production substantially by giving them subsidies, tax advantages, guarantees—and an alternative to the Left's proposed nationalization. As noted m the next article on copper nationalization, none of the aims and production goals were even remotely achieved.

Chilean Nationalism vs. Corporate Internationalism

The government of Salvador Allende and the Popular Unity is determined to reclaim the pillars of the industrial economy from foreign control. In attempting to do so, the Chileans are directly confronting the greates concentration of economic power the world has ever seen.

It is important to understand that the multinational are not simply a series of unrelated business concern that happen to be operating in a number of countries The big ones are American (the term "multinational" is misleading), they enjoy the full support of the U. S Government abroad as at home, and they tend to conn together at the level of ownership and control.

What emerges from our research is a picture of a series of corporate interest groups —Rockefellers, First Nation City, Morgans, Mellons, and others—which also form web of corporate power brought together by common interests, complementary activities in the international sphere, and a good deal of overlapping and interpenetration among the top officers of the multinationals.

The Rockefellers' world empire extends into Chile The Rockefeller brothers have IBEC, which will no longer be able to take over Chilean firms. Their Standan Oil of New Jersey markets petroleum products and own lubes-blending and plasticizer plants. The Allende government plans to create a state enterprise to distributi petroleum products, which will also affect other oil companies in which Rockefellers have a part interest. The Rockefellers are linked to many other U.S. firms operating in Chile through having their men on the boards o directors. Six of the twenty-four largest multinationals ii Chile share directors with the Rockefellers' Chase Manhattan Bank and seven with the Chemical Bank of New York, also under Rockefeller influence.

First National City Bank's eight branches in Chili played an important role in the financial aspect of corporate expansion into Chile during the 1960s. This principal seat of economic power will be directly affected by Chile's economic nationalism. The Stillman-Rockefellersl of First National City share control of Anaconda Copper with the Morgan interest group. Ten of the twenty-four top multinationals in Chile share directors with First National City Bank.

The Morgan interest groups has a strong presence in Chile through its ties to Kennecott Copper and other corporations present in the country. The Morgans also have an interest in Anaconda copper (as well as another major copper producer not in Chile, American Smelting and Refining) and control Coca-Cola International, which operates in Chile as everywhere. Kennecott in turn maintains ties to the Guggenheim family, founder of El Teniente copper mine in 1903, who owned the Anglo-Lautaro Nitrate Corporation, now nationalized, which exploited Chile's vast natural nitrate deposits since the 1920s. Kennecott is also associated with the fiftieth-largest U.S. industrial, also big in Chile: W. R. Grace & Co. Eight of the twenty-four largest multinationals in Chile have interlocking directors with Morgan Guaranty Trust and four with Bankers Trust, the Morgans' other financial control center.

Other principal corporate interest groups are also present in Chile, at least at the level of sharing top personnel with a number of the twenty-four multinationals there. The Mellon family firm, Koppers Company, has a cement plant and an engineering and construction firm. Three of the twenty-four multinationals present in Chile have top corporate personnel from the Mellon interest group.

Presumably "independent" corporations such as ITT and Dow Chemical, which are not within the sphere of control of any of these groups, nevertheless have high-level personnel in close interrelationship with one or more of the established corporate interest groups and other "independent" multinationals. Eugene Black, for example, a director of ITT, is also associated with the Rockefellers' Chase Manhattan Bank, as well as with Equitable Life Assurance and American Express Company, in which Rockefellers have a strong interest. Eugene Black came to the Board of ITT after fifteen years as President of the World Bank. The World Bank, together with U.S. creditors, pushed Chile hard on its 1972 renegotiation of the huge debt that Allende inherited from previous regimes. ITT also maintains interlocking directorates with the Rockefeller-influenced Chemical Bank of New York and Morgan Guaranty Trust.

In general, half of the twenty-four corporate giants in Chile share three or more interlocking directorates with each other, and every one of them is linked through the sharing of a director of some third corporation.

We cite the apparent existence of distinct "interest groups" that emerge from our data, because there seem to be some important differences among them with respect to modes of foreign expansion and ways in which they seek to utilize U. S. Government power in furthering corporate goals abroad. Of course, many of the indicated cases of interlocking directorates among the principal multinational industrials and banks serve mainly to facilitate business transactions and an easygoing, monopolistic competition on a world scale. We indicate the interlocking nature of the multinationals as a whole in order to emphasize the communications links among them at the policy level and the essential commonality of interest that unites them as the world center of economic and political power.

It remains in the next chapter to show how this web of economic power that Chile is in the process of confronting relates to the formation of the foreign policy of the United States Government. [7]


Notes:

1. New York Times, March 12, 1972.

2. The economic basis of corporate expansion is explained by Harry Magdoff, The Age of Imperialism (New York: Monthly Review Press, 1969).

3. "Secret Memos from ITT," NACLA's Latin America and Empire Report, VI, April 1972.

4. The Rockefeller Report on the Americas (Chicago: Quadrangle Books, 1969).

5. For a theoretical clarification of the concept of dependence, and analysis of many questions raised by this paper, see James D. Cockcroft, Andre Gunder Frank, and Dale L. Johnson, Dependence and Underdevelopment (Garden City, N.Y.: Doubleday Anchor, 1972)

6. Landlords and Capitalists (New York: Harper & Row, forthcoming, 1973).

7. The empirical parts of this research have been greatly facilitated by the North American Congress on Latin America's painstaking compilation of data on foreign investment in Chile, NACLA (ed.), New Chile. This excellent volume contains selections of Chilean materials and is available from NACLA at P. O. Box 226, Berkeley, Calif. 94701. We have also relied on a major study by Victor Wallis, "Foreign Investment and Chilean Politics" (Columbia University Ph.D. dissertation, 1970) as well as numerous Chilean sources (see selections in Chapters 5, 21, and 24). Some of the ideas and facts herein were previously incorporated in Dale L. Johnson, John Pollock, and Jane Sweeney, "ITT and the CIA: The Making of a Foreign Policy," The Progressive, May 1972.


CHILE'S NATIONALIZATION OF COPPER

CHILE RESEARCH GROUP, RUTGERS UNIVERSITY

An original article for this volume. Members of the Chile Research Group
who contributed to this article are James Cockcroft, David Eisenhower,
Henry Frundt, Dale Johnson, John Pollock, and Jane Sweeney.

On July 16, 1971, the Chilean Congress unanimously approved an amendment to the nation's Constitution making the country's vast resources of copper the property of Qiile. The government assumed formal public ownership of all minerals in the nation's subsoil, and operational control of the Anaconda, Kennecott, and Cerro mines.

The constitutional amendment stipulated compensation for the value of the installations and authorized the government to make certain reasonable deductions from the book value of the properties to arrive at their true worth. In October 1971 the Controller General of Chile ruled that after appropriate deductions from the book value, no compensation for the nationalized properties was due Anaconda and Kennecott and that Anaconda owed Chile $68 million and Kennecott owed $310 million. This occurred after Chilean authorities determined that the two copper giants had repatriated $774 million in excess profits (computed on the basis of 12 per cent as a "fair return") between 1955 and 1970, and after other adjustments were made for faulty equipment, disrepair of the works, etc. On the other hand, Chile will probably assume debts of the local subsidiaries of Anaconda and Kennecott that amount to the approximate book value of the corporations' installations. Cerro Corporation, which began mining copper in a joint venture with the Chilean state in 1967, will be paid $33 million plus $3 million in interest for its investment. Cerro will be compensated in full because, unlike Anaconda and Kennecott, the smaller corporation had not repatriated excessive profits or engaged in other activities injurious to the mines or the national interest of Chile. This article examines the operations of the foreign-owned copper corporations in relation to Chile's underdevelopment and the benefits that Chile may derive from nationalization of its principal natural resource. The analysis is based on a rather exhaustive review of materials on copper published in Chile, as well as on U.S. Government documents, statements by Anaconda and Kennecott, and studies by American researchers.

Copper, Chile's Wages of Toil

Copper has been Chile's principal export since the collapse of the world market for natural nitrates after the First World War. The benefits that accrue to Chile have been largely in the form of foreign exchange and tax revenues. Seventy-five per cent of Chile's foreign exchange and a fluctuating but substantial proportion of government revenues derive from copper exports. The enormous size of the operations—in recent years the mines have exported over six hundred thousand tons of copper annually—also involves large local expenditures for operating supplies. The mines employ about eighteen thousand workers, who, after long and bloody labor struggles, are relatively well paid. Kennecott Copper Corp. has pointed out some of the benefits from their Chilean operations:

The El Teniente mine, in its 67 years of operation, employed more than 100,000 people with economic, social and educational benefits to Chile. Chileans were trained to fill managerial, professional and technical positions throughout the Braden organization, in line with the Company policy to develop Chileans for every available position. (At the time of expropriation in 1971, out of a total of 10,000 employees, only two were U.S. citizens.)

Braden assisted in developing through its education and financing program a broad spectrum of independent Chilean entrepreneurial enterprises which provided materials and services to El Teniente and others throughout Chile.

For the employees who operated the mine at Sewell, high in the Andes, housing was constructed and maintained by the Company and provided at minimum rent. Streets, mostly stairways, were built; power and telephone lines were installed, and shops, churches, social clubs, schools, a gymnasium, a theater, and a highly efficient hospital were provided. Similar facilities were built in the towns of Caletones and Coya. The Company's investment in housing for its employees totaled over $45 million. [1]

Nevertheless, all these benefits are small in comparison to those derived by the American copper corporations.

Since their establishment in the early part of this century, Kennecott and Anaconda have, in our judgment, operated in the worst tradition of corporate imperialism:

1) The copper corporations have taken out billions of dollars in profits, with minimal reinvestment of earnings to the benefit of the Chilean economy.

Foreign capital began extracting copper in Chile early in the century with an investment of $3.5 million. Since that time, most of the profits—several billions of dollars —from the exploitation of Chile's principal natural resource have been transferred to the home offices of the U.S. corporations. Enough profits have been retained and reinvested to bring the present value of the mines, together with other investment capital, to about $600 million. Still, the basic truth is that foreign capital has appropriated the wealth of Chile, while reinvestments or new investments by the corporations have been a fraction of total profits. According to the U. S. Department of Commerce, in the period between 1953 and 1968 U.S. mining and smelting operations in Chile (about 90 per cent copper) earned $1,036 million, while new investments and reinvestment of profits together totaled only $71 million. The "Chileanization" agreements reached with the previous government called for new investments and required the companies to double production between 1966 and 1972. But the only increase was in corporate profits, which totaled $426 million for Anaconda and $198 rnillion for Kennecott between 1965 and 1971. In 1967 and 1968 the return on U.S. investments in Chilean copper was 27 per cent and 26 per cent respectively. In 1969 Anaconda had profits on investments of 39.5 per cent and Kennecott 24.1 per cent. [2]

The profits involved in copper assume great importance because the Chilean Government contends, referring back to Law Nº. 11,828 of 1955, that Chile has a right to define a fair rate of return on the investments of foreign capital that can be repatriated as profits. Considering a 12 per cent annual return on investments as fair, the Allende government has determined that Anaconda and Kennecott took out $774 million in excess profits between 1955 and 1970. This capital is generated by the exploitation of Chile's natural resources; it is logical that Chileans feel strongly that these huge sums should be utilized for national development rather than lining the pockets of wealthy stockholders, enabling the copper corporations to expand copper production elsewhere in the world to create competition for Chilean exports, or investing in the corporations' copper-fabricating activities located in the United States.

2) The corporations have exported partially refined copper to markets in the United States and Europe, resisted refining copper within Chile, and made no attempt to initiate the fabrication of copper products in Chile.

During the 1950s the Chilean Government insisted on smelting the ore and refining the copper in Chile. Up to 85 per cent of exports then were refined copper. By the 1960s only 40-45 per cent of exports were refined copper. The Chileans estimate that this cost them over $100 million a year during this period. In this, as in other instances, the U. S. Government backed corporate interests by imposing a tariff on the import of refined copper, with even higher duties on copper products. No duties are levied on the kind of copper imported by Anaconda and Kennecott for their fabricating plants located in the United States. In its loss of the complete refining process, Chile has also lost the industries developed from copper processing, such as sulfuric acid, as well as valuable byproducts such as molybdenite, gold, and silver. This costs Chile additional millions each year.

In general, the copper monopolies seek to realize profits on all facets of production. Their Chilean subsidiaries mine and concentrate ore, smelt and refine part of it in Chile, and complete the refining in the United States, and then sell in European markets or to American subsidiaries such as Kennecott's Chase Brass & Copper Co. and Anaconda's American Brass Company or Anaconda Wire & Cable Co. Anaconda manufactures copper products in seventeen different plants in the United States. There is very little manufacturing activity using copper in Chile, and none by Anaconda or Kennecott.

3) The copper corporations have controlled and manipulated the price of copper to the detriment of Chile. Until the nationalization, Chile had no effective control over the marketing of copper. It was sold to the corporations' subsidiaries or to established clients in Europe. The price at which Chilean copper was sold, export taxes computed, and foreign exchange earned was a "producer's price," set by the corporations. This price was consistently lower during the 1960s than the price quoted on the London Metals Exchange, which roughly reflects world supply and demand for the metal. The difference between the producer's price and what Chile could have gotten for some of its copper in the best world markets has cost the Chilean economy very dearly. The U.S. Government has also acted to deprive Chile of its rightful earnings from copper. In 1966, for example, when the Vietnam build-up was well under way, the United States persuaded Chile to sell ninety thousand tons of copper for the government's strategic reserves at a price of $.36 per pound when the producer's price was $.42 and the world market price was $.60 per pound. Such generosity on the part of Chile's Christian Democratic government was rewarded with an AID loan. The U. S. Government also stockpiles copper and sells it in times of supply shortages to keep prices from rising. A rise of one cent in copper prices means anywhere from $9 to $15 million for Chile. During World War II and the Korean War, the U. S. Government fixed the price of copper at artificially low rates. This hit Chile hard, but the American copper corporations were much less affected, since what they lost in lower metal prices they gained back in reduced raw-material cost for their fabricating operations.

4) The companies have subverted every effort by successive Chilean governments to gain reasonable advantages from the foreign exploitation of national resources.

During 1952-55 Chile tried to gain greater benefits by requiring more refining in Chile, by widening markets, by imposing customs duties on imports used in mining operations, by maintaining special exchange rates to gain more dollars from local operations of the corporations, and by increasing taxes on copper exports. The response of the copper monopolies to this was to hold back production in Chile and to increase their activities in other countries. As a consequence, Chile's share in the world production of the metal dropped from 21 per cent in 1948 to 11.6 per cent by 1953-54.

In 1955, "New Deal" copper legislation was enacted, which attempted to stimulate the corporations to increase production by lowering taxes and by authorizing a more favorable dollar exchange rate for pesos. Production did increase, but the benefits to Chile did not.

By 1964 an entirely new approach to copper was the principal issue in the presidential election, which pitted Salvador Allende, candidate of the socialist Left advocating nationalization of the mines, against Eduardo Frei, the Christian Democratic candidate with a program of "Chileanization." After Frei's victory, several mines were Chileanized through purchase of 51 per cent of Kennecott's El Teniente, 25 per cent of Anaconda's new La Exotica mine, and 25 per cent of Cerro's Rio Blanco mine. Anaconda at first refused to sell shares to its Chilean subsidiaries. Business Week magazine tells why: ". . . [Anaconda] refused to sell an interest in the Chuquicamata and El Salvador mines. The reason was obvious: A former Anaconda employee says that production costs at these mines amounted to about 180 per lb. for copper that was bringing 600 on the London Metal Exchange. In the U.S., copper costing 30¢ per lb. to produce sold at that time for 35¢." [3] In 1969—after wide recognition of the lack of benefits from Chileanization, Anaconda's failure to increase production as agreed and other activities of the corporation—the Frei government made a last, desperate attempt to remedy the situation through purchase of 51 per cent of Anaconda's Chuquicamata and El Salvador mines.

The principal aim of Chileanization was to increase benefits to Chile by increasing production. The companies were to double production by 1972 in return for decreased taxation and other advantages to the companies and new investment capital provided by Chilean stock purchases, government loans, and government-guaranteed loans negotiated with the Export-Import Bank and other U.S. financial institutions.

Incredible as it may seem, a new, $579-million investment of borrowed capital between 1966 and 1970 failed to increase production significantly. The corporations accumulated $632 million in debts without investing any of their own capital, in spite of the fact that Anaconda's and Kennecott's profits were increased substantially by Chileanization and rising copper prices.

President Allende has indicated that Chile will probably assume the debts incurred by the companies in the expansion program. Chile made the first installment, of $5.8 million, on a total of $92.7 million in notes to Kennecott. This occurred after Kennecott obtained a court order in New York blocking the bank accounts of fourteen Chilean agencies in the United States and after the Chilean Government discounted about $8 million of the total debt on the grounds that this amount was not "usefully invested" by Kennecott. Payments on the other debts incurred by the subsidiaries of Anaconda and Kennecott may depend upon whether the United States continues to exercise economic pressures against Chile. There is also increased questioning of the justice of assuming the debts in Chile as the full implications of the bad deal given to the country by the corporations are realized. The Controller General of Chile has also determined that Anaconda and Kennecott owe Chile $388.5 million, which the government will be unable to collect unless it refuses to assume the corporations' foreign debt obligations. Moreover, the suspension of U.S. aid and dollar credits, as well as the drastic decline in copper prices since 1970, may make it difficult if not impossible to repay these debts under the existing terms.

5) The mines have been left in a condition of general disrepair, creating production problems and the need for large expenditures to get the mines in shape.

In 1971 a team of ten engineers from a French technical consulting firm carefully surveyed the mines and prepared a report on their condition. The report, corroborated by a team of Soviet engineers, spelled out in detail an appalling picture of neglect, mismanagement, and corporate irresponsibility. The mines, especially Anaconda's Chuquicamata, exhibited glaring deficiencies. These include poor construction of new plants, involving use of inferior materials, badly planned roads, and failure to provide for adequate water; negligent installation and maintenance of equipment; widespread unsafe and unhygienic working conditions; sabotage of future production caused by such practices as bulldozing earth on top of deposits yet to be mined; and inferior or non-existent training of Chilean technicians.

Historic Justice and the Vested Interests

The five points indicated above are not a complete inventory of the means by which the copper monopolies, acting as imperialist corporations and enjoying the support of the U.S. Government, [4] have essentially sacked the national wealth of Chile for sixty years. Nevertheless the facts cited seem sufficient to justify nationalization of the mines. It is a matter of historic justice for a poor country long exploited and manipulated by monopolistic giants. Moreover, no compensation is due. In fact the finding of the Controller General that the copper corporations owe Chile $388. [5] million seems to be of reasonable magnitude in view of the facts of the case.

It is important for American readers to understand that both the nationalization and the absence of compensation by the Allende government were extremely popular acts among the Chilean people, including many who sharply opposed other policies of the nationalist and socialist government. The method of compensation proposed by Allende was modified and approved before incorporation into the constitutional amendment by opposition political forces traditionally friendly to the copper companies and the United States. Moreover, the Allende government was extremely careful to follow Chilean law and legal procedure to the letter. The nationalization also conformed to the United Nations' resolution on the "inalienable right of all countries to exercise permanent sovereignty over their natural resources in the interest of their national development." This resolution of the 21st Session of the General Assembly also "confirms that the exploitation of natural resources in each country shall always be conducted in accordance with its national laws and regulations."

Nevertheless the copper corporations and the U. S. Government both demand that Chile conform to the only international law that private business and our government seem to recognize, namely, that "prompt, adequate, and effective" compensation be made for expropriated properties. This demand ignores the clear intent of the United Nations resolution on nationalizations and implies that the value of properties held abroad by American corporations is what the corporations say they are worth. Anaconda Copper stated, "In a clear violation of international law, the new Marxist government of Chile has stolen $1.2 billion worth of mines and properties from the Anaconda Company."5 (The book value of Anaconda's mines was $415 million, according to the company; other sources indicate $200 million. The $1.2 billion cited includes unexploited mineral deposits.) A "white paper" issued by Kennecott used more moderate language: "The right of a sovereign nation, in accordance with accepted principles of international law, to expropriate private property, is beyond dispute. However, the same principles which secure the right of a nation to expropriate, obligate it to make prompt, adequate and effective compensation for the property." [6] However, Kennecott had the audacity to claim that minerals of the subsoil of Chile belong to foreign corporations and to state that Chile's claim to sovereignty over these unexploited mineral deposits is in violation of international law:

The Chilean Constitution now specifically authorizes compensation for the related facilities of El Teniente.

While compensation for these facilities could be substantial, the maximum amount which might be paid for them cannot make up for the expropriation of the mineral resources of El Teniente, compensation for which is not authorized.

It is clear, therefore, that the expropriation contravenes accepted principles of international law. [7]

It is understandable, of course, that the corporations are upset. For many decades they have extracted enormous profits from their Chilean operations. Anaconda was particularly hard-hit, as the corporation had about 17 per cent of its total investment there and derived about 80 per cent of its profits from Chilean mines (1969 figures). The Rockefeller interests sent in one of their top men from Chase Manhattan Bank in an effort to put the corporation, which also had problems with its U.S. operations and management, back on firmer footing. Even more serious to the copper giants than the loss of their properties and future profits from Chilean mines is the threat of economic nationalism to the prevailing structure of the world copper industry. The industry is made up of about ten firms, mainly U.S. based, and has a highly integrated structure. What this means is that each corporation, in a sector where a handful of giants monopolize world markets, has a complex set of interrelated operations: different divisions of the same company mine and concentrate ore, smelt, refine, fabricate, and sell. The structure is highly monopolistic; of the ten multinationals in copper, half that number produce most of the copper, fabricate the bulk of copper products, and control the markets. Moreover, four (possibly others) of the giants of the industry are controlled by two corporate interest groups. Anaconda is under the wing of the Stillman-Rockefellers, of the First National City Bank group. The other wing of the Rockefeller family, working out of the Chase Manhattan Bank, seems to have some influence over Anaconda, as the new chief officer of Anaconda is from Chase Manhattan. The First National City interest group also influences Kennecott, which is more directly in the domain of the Morgans. The Morgans own a large bloc of stock in two more of the copper giants, Phelps Dodge and American Smelting & Refining. [8] Cerro Corporation was founded by J. P. Morgan in 1902.

The reaction of the U. S. Government to the Chilean nationalizations has been to back the corporations by word and deed. President Nixon issued a "tough" policy statement on nationalizations of corporate properties abroad, and severe economic sanctions—credit cutoffs and aid suspensions—have been employed against Chile (see our subsequent article on U.S. policy). Since such sanctions contravene United Nations and Organization of American States principles of non-intervention, it is the United States that stands in violation of international law. Such violations, of course, are nothing new for the United States, which has consistently flaunted practically every international law on the books for many years with unilateral international monetary and trade policies and economic pressures and military interventions throughout Latin America and Southeast Asia.

Foreign Dependence and National Development

Corporation executives, government officials, and many other Americans believe that foreign investment is indispensable for development in Third World countries. The nationalization of foreign enterprise is consequently viewed as an irrational political act that will have adverse economic effects. Although this is no more than a rationalization for the promotion of the interest of private foreign capital, it is adhered to as a rigid dogma.

Nationalists in Chile and other underdeveloped countries, on the other hand, contend that development requires national control of both natural resources and the decisions as to how and for whose benefit those resources are to be exploited. Proceeds from the exploitation of resources, they argue, should be retained within the economy and used to reduce the excessive dependence upon primary exports that historically has been the key structural element in the development of underdevelopment. These arguments bear considerable merit.

In the history of Chilean underdevelopment, copper has made the economy dependent upon primary production and has structurally thwarted development of other sectors of the economy. By controlling its own resources, Chile will be able to retain the substantial profits from copper production within the country for investment in other sectors, which will produce goods and services to meet the needs of the Chilean people.

The Chilean economy had been essentially stagnant for seventeen years preceding the assumption of power by the Popular Unity government. The nationalization of copper is certainly no guarantee of economic development, but it is a necessary condition for development. Controlling its prime national resource, Chile will have the opportunity to create additional economic activity, increase employment, and earn greater foreign exchange by fabricating and exporting copper bars, wire, and other products rather than semi-refined copper. Moreover, Chile will be able to market its copper wherever the best price is offered.

All these benefits to Chile assume, of course, that the multinational copper monopolies are not able to squeeze Chile out of world markets. Certainly Chilean copper will no longer find its way to U.S. markets. American corporations will probably now expand production and open new mines in areas "secure" from the threats of economic nationalism. [9] World production of copper already exceeds demand, and markets will not expand very fast over the next few years, so if production is increased sufficiently in secure areas, the corporations may be able to win back their Western European customers, which Chile assumed from Anaconda and Kennecott upon take-over of sales operations. Ominous words have already been sounded in the innermost sanctuary of American corporate power, the Council on Foreign Relations. The following frank comment in the organization's closed meeting of December 14, 1970, was recorded in the minutes and attributed to William E. Butler of Chase Manhattan Bank: "Mr. Butler took exception to the example of Chile's copper obviating a boycott by the United States. He said that Chile will soon become a residual supplier of copper." [10]

We interpret Mr. Butler's statement to mean that the strategy of Rockefeller and/or other copper interests may be to deprive Chile of its copper markets. This strategy appears to fit Harvard economist Theodore Moran's theory of the behavior of oligopolistic producers of primary materials when they are faced with economic nationalism. Moran notes:

One can predict, then, how multinational corporations will react when faced by the growing wave of economic nationalism. The corporations will try to shift the bulk of the profits generated within the system to a stage over which they still have firm control (processing, fabricating), and they will try to shift the burden of the uncertainties and risk in the industry onto the new "independents." [11]

Moran comments specifically on copper:

As the international copper oligopoly becomes more diluted, more and more of the "regular" sales or long-term arrangements will be covered between the large corporate producers and their major fabricators or industrial consumers while the nationalists' share will be treated as a spill-over market—subject to great fluctuations in volume and price. Onto the nationalistic independents will be shifted the burden of risk and instability for the international industry as a whole. [12]

But the Chileans see their copper as a key element in overcoming underdevelopment, and they are resolutely determined to protect and promote their markets. The needs and aspirations of the Chilean people, as of the peoples in all of Latin America, have long been denied and thwarted by their inability to break out of the structure of foreign dependence and underdevelopment and by their inability to make their own development decisions. In Chile these decisions will no longer be made in the board rooms of corporations based in the United States. They will now be made by people who know what underdevelopment means because they experience it, by Chileans with a vision of a better future, by Chileans who are determined to develop along lines of their own choosing.


Notes:

1. "Expropriation of the El Teniente Copper Mine by the Chilean Government," Kennecott Copper Corp., 1971, pp. 3-4.

2. Unless otherwise noted, the statistics cited are from Chilean sources. Facts cited in the literature on copper are sometimes inconsistent and we have tried to use our best judgment to resolve such inconsistencies. Two sources of fairly reliable data and interpretation consistent with our own are North American Congress on Latin America, "They Took the Copper and Left Us the Holes," NACLA Newsletter V, September 1971, pp. 8-32, and Andre Gunder Frank and Gladys Díaz, "Los ladrones quieren indemnización," Punto Final Nº. 135, July 20, 1971.

3. "An Ex-Banker Treats Copper's Sickest Giant," Business Week, February 19, 1972, p. 54.

4. The generous government support of these private corporations continues: the Internal Revenue Service has authorized Anaconda to write off its Chilean properties as an "extra-ordinary loss." Business Week noted that ". . . the company will not be paying U.S. income taxes for up to ten years." (Feb. 19, 1972, p. 53)

5. "Confiscation of Anaconda Properties by the Chilean Gov ernment," Anaconda Company, 1971, p. 1.

6. Kennecott, op. cit., p. 8.

7. Kennecott, op. cit, p. 8.

8. The Corporate Information Center of the National Council of Churches has provided an informative study of Kennecott: Curt Danforth and Bob Huie, "A Preliminary Profile on Kennecott, Inc.," Corporate Information Center, 1971.

9. Considered "secure areas" are the United States, Canada, Australia, Puerto Rico, and perhaps Mexico. However, U.S. interests are pursuing "technical discussions" with the governments of the U.S.S.R. and Eastern European countries with respect to joint operations with U.S. investors.

10. "Liberated Documents: New Imperial Strategy for Latin America," NACLA's Latin America and Empire Report VII, November 1971, p. 15. The Council on Foreign Relations, made up mainly of top corporate officers, high government officials, and academic experts is highly influential in the formation of U.S. foreign policy. The significance of the CFR is treated in our article "The Low Profile Swings a Big Stick," in Chapter 2.

11. Theodore H. Moran, "New Deal or Raw Deal in Raw Materials," Foreign Policy, Winter 1971-72, p. 126.

12. Ibid., pp. 131-32.


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