The Nationalization of Copper
Speech in the Plaza de la Constitution
Santiago, 21 December 1970
I now wish to discuss copper. I want every man and woman listening to me to understand the importance of the fact that we are drawing up a bill to modify our political Constitution to enable Chile to own its basic wealth, to nationalize copper, unconditionally and definitively, so that copper shall belong to the Chilean people.
I wish to present a few statistics, as it is only by giving the people accurate information that they will be able to develop a true sense of their own responsibility.
The nationalization of copper, iron, saltpetre and our other natural resources is a step which will involve everybody concerned with Chile and its economic boundaries. I appeal to all who share neither our political position nor our opinions to stand together with us and to consider Chile and its future. The step which we are about to take, totally within the Emits of the law, will certainly be distorted in the eyes of the outside world and resisted by a small group of ill-intentioned Chileans. But the people of Chile and the Unidad Popular government, over which I preside, have accurately calculated the serious implications of the measure, which it is indispensable to take in order to strengthen the Chilean economy, to end its economic dependence, to fulfil the hopes and needs of those who gave us political freedom and to win our second independence, the economic independence of our country.
Let us look at some past experiences - experiences of profit gone forever, profit which has never come back to Chile during a long period of copper-mining.
Before 1930 there were no controls; there was no possibility of obtaining accurate statistics. Between 1930 and 1969, $3,700 million have left the country to increase the immense power of the international concerns which control copper deposits in five continents. In 1969, $166 million did not return. I must point out that $3,700 million is 40 per cent of the total wealth of Chile, of the cumulative efforts of 400 years on the part of all Chileans; 40 per cent of this wealth went in the years 1930 to 1969, and this is a fact we cannot forget.
Chile also knows that, more or less in the same years, there has been taken out of Chile, through channels other than copper - such as iron, saltpetre, electricity and telephones -something like $9,600 million, representing the total wealth of Chile. Another Chile appeared, due to irresponsibility or complicity on the part of the ruling caste, outside the frontiers of our country, while the inhabitants of the land were struggling with hunger, illiteracy and ignorance. This is why copper is to belong to Chile; as the initial step towards the recovery of our wealth.
I want the people to know that the net profits in Chuquicamata, Salvador and El Teniente between 1965 and 1970 reached $650 million; that is an average of $110 million per year. $110 million are enough, for example, to build and install three electrolytic refineries, each with a capacity of 100 million tons. $110 million would be enough to feed 250,000 Chilean families for about fifteen months, or to supply 2½ million Chileans each with a pair of shoes a year.
I want the people to know that investment in the Gran Mineria and in the Andina mine after 1965, according to the development plan, meant, or would mean, the investment of $690 million dollars in order to increase production to 412,000 tons per year. Of this, I140 million has already been invested, but Chile owes $530 million. In other words the development of the mining industry has proceeded at the cost of putting the country into debt.
I want the people to know that the El Teniente mine, or rather the Kennecott mine, before the agreements, owned 100 per cent of the shares in the ore known as El Teniente, and it drew 17.4 per cent of the profits - the profits, I repeat. After the agreement, having yielded 51 per cent of the shares, thus remaining in control of 49 per cent, and having received a considerable sum of millions of dollars, the Kennecott received 56 per cent of the profits made on the mine - in other words the Kennecott mine, now holding only 49 per cent of the shares, reaped three times the profits it had when it controlled 100 per cent of the shares in El Teniente
I want you to know what happens on a world scale with the Anaconda concern. Of the net consolidated profits of this firm - in 1969 the Anaconda obtained world-wide profits of 99 million dollars - 79 million, that is 80 per cent, came from Chile. However, in Chile they invest only 16 per cent of what they invest in the whole world: 16 per cent of their investment yields 80 per cent of their profits. It is certainly pretty good business for the Anaconda to invest their money in Chile.
I want Chileans to know that you control neither the mining, the selling nor the financing of copper, which in 1969 reached $1,000 million. In past years this has meant that the country really has been bled white. For example, a selling price was fixed lower than the international selling price. To quote only three years' deficit, what we lost by selling at a rate lower than the international selling price in the years 1964-6 was $668 million. This was the companies' exclusive profit. I want to point out that on the basis of nationalization, according to the estimates of experts and to accessible precedents, we worked out that, at 45 centavos a pound and at the rate of present productivity, nationalization will bring Chile $70 million more than the revenue we have today, that is $70 million more in terms of profits alone.
Finally, I want to say to you that, according to experts, world copper reserves amount to 275 million metric tons, and that Chile has reserves representing 30 per cent of the total, that is 80 million tons. I want you to know that the universal average for copper wealth per ton is 1-5 and that Chile's average is 1-7 to 1-8, that is to say we are a country of nearly limitless reserves and possess copper of great value.
It is for these reasons that, taking such a step at this moment, we come face to face with a tremendous opportunity for the people and for the country. We shall carry it out by legal means, as a right of the people of Chile, as a duty of the Unidad Popular government you have elected. We shall make it possible by the material progress of our country to affirm our sovereignty, and to show that Chile's dignity and independence are beyond price, beyond pressure and beyond threat.
I wish it to be clearly understood that this is not an attack on the North American people, nor on the North American government. There is no aggression involved, in that we shall exercise the law and compensate in a fair manner, using the standard machinery of the state of Chile and the relevant firms. I wish to state publicly, in order to quell rumours and to prevent some international conspiracy from being launched against us, that frankly we are quite prepared to trade with the same clients in the United States or in Europe as have previously bought our copper. We do not refuse to deal with them any more than we refuse to deal with any other country in the world. Whoever pays us more and better, and whoever buys semi-treated copper from us, will bear away the greater part of Chile's product.
I emphasize that anyone who has previously bought copper from us, and who needs it, will not be deprived of it. What I am saying is that we alone are to be the masters of Chile's essential wealth. We are going to control its production. We shall intervene directly in the market and above all else we shall protect Chile's interests, since we ourselves are now the masters of our economic future.
I want to sum up very briefly the proposals which we shall bring to Congress tomorrow. That bill establishes definitively the absolute control of the state over the deposits and the mines, so that private individuals will enjoy only those rights obtained through concessions. Rules are established for assessing the sum and forms of payment of compensation in case of expropriation; for that, a law must be drawn up to define what the Gran Mineria is, which may be applied equally to copper, iron, saltpetre and to any other material. In this bill, a definite end is set to all possibility of the existence of contract laws. The state remains free to modify what it has contracted with private parties, if it is required to do so in the interest of the state, with no obligation other than to compensate the affected party.
The state is empowered to take actual possession of goods at the moment that the order for expropriation is made. This will proceed in the customary manner.
In the case of the nationalization of the existing copper mines, the Gran Mineria and the Andina company included, the general rules previously referred to will apply. Thus there will be no need for new laws. The minerals and the installations will remain under state control through the Ministry of Constitutional Reform, which nullifies the purchase of enterprises undertaken as a result of the Copper Convention. The existing mixed enterprises will be wound up. What may have been paid as the price for the purchase of shares will be deducted from the due compensation.
No compensation is to be paid for the deposits. Payment for expropriated assets will be in cash over a thirty-year period, by annual instalments, at a fixed interest rate of 3 per cent. Payment may be suspended if the expropriated parties interfere in the production of the minerals and will be reduced by the quantity that the companies would have received in profits above the annual average. These proposals lie within our rights. The bill is going to Congress, where it will be discussed and where the currents of public opinion which are represented there will be heard.
What we are doing is absolutely legal, and it is relevant to point out that the United Nations has recognized the right of a people to nationalize natural resources held in foreign hands. Chile will not renounce this right, because its exercise means the end of our economic dependence, and that in turn means full sovereignty and cultural independence. So, this afternoon, as I sign the decree which creates the National Council of Peasants and the bill on the modification of the Constitution, I believe that the people understand that the step we are taking is decisive in the history of our country.