Canada’s interests in the Chilean economy, which brought close relations with the Pinochet dictatorship, will have its government hoping that Gabriel Boric does not rock the boat around extractive investment.
The recent election of Gabriel Boric, a member of the leftwing electoral coalition Apruebo Dignidad, to the Chilean presidency is historic for many reasons. He will be the first leftist head of state in Chile since the election of Salvador Allende in 1970, and while Boric seems to lack the dogged Marxist principles of Allende, his success is nevertheless laudable given: one) the history of free market economics that have dominated the country since General Augusto Pinochet’s coup in September 1973, and two) the fact that Boric’s opponent, José Antonio Kast, was a hard-right politician who presented himself as a defender of Pinochet’s legacy and the inheritor of his neoliberal agenda. The fact that Chileans voted 56 per cent to reject that legacy and agenda is an important victory for progressives, socialists, and communists alike.
Boric’s general election victory came approximately one year after 78 per cent of Chilean voters demanded the drafting of a new constitution to replace the neoliberal Pinochet-era constitution that had remained in place since 1980, long after the unelected general’s removal. When Boric assumes the presidency in March 2022, his defining battles will be domestic: notably, he will be presiding over the final drafting of the new constitution that will decide Chile’s future political, economic, and social orientation. This will be a time-consuming process, and one that will pit his progressive coalition against the rightwing forces of reaction that still comprise much of the country’s political establishment, as well as a substantial portion of the electorate (it is worth remembering that 45 per cent of general election voters chose Kast, Pinochet’s defender, over the social democrat Boric).
Nevertheless, the historic significance of Boric’s domestic struggles does not mean one has to refrain from analysing – and criticising – the gradually clarifying contours of his government’s stance on transnational investment. And when one analyses transnational investments in Chile, one has to analyse the political economy of mining – and when one analyses the political economy of mining, one has to discuss the role of Canadian mining companies in Chile since 1973.
Timothy David Clark describes mining as ‘the motor of [Chile’s] development and party to its plunder.’ The country is endowed with plentiful stores of gold, silver, iron, selenium, iodine, lithium, nitrate and more, but since the early twentieth century, copper has been Chile’s most lucrative export, accounting for around 85 per cent of mining export value by the early 2000s. These mineral reserves have long been dominated by foreign capital. During the height of Chilean nitrate exploitation in the late 1800s and early 1900s, British capitalists controlled much of the industry. These powerful industrialists even financed a rebellion against President José Manuel Balmaceda, a nationalist who argued that Chile’s mineral wealth should be used for the country’s own industrial development.
During the early twentieth century, copper slowly supplanted nitrate as the country’s most profitable mineral. However, much of the industry remained in the hands of foreign companies. In an attempt to reverse the country’s dependency on transnational investment, President Salvador Allende of the Popular Unity coalition nationalised the large-scale copper mines in 1971, a day that was praised in Congress as the ‘Day of National Dignity.’
After the Chilean military seized power in a violent military coup that was supported and partially organised by the US government, General Pinochet flew in economic advisors from the University of Chicago and began implementing their suggestions to not only reopen Chile’s markets to foreign capital, but to open them further than ever before. The minerals, of course, were fair game. In 1976, the Pinochet government passed Decree Law 600 (‘the Foreign Investment Law’). Clark writes that this decree ‘provided a bevy of guarantees to foreign capital: remittances of profits after one year, national treatment, and locked-in tax schemes.’
The burgeoning neoliberal model that unelected US-trained economists were inaugurating in Chile was also assisted by the International Monetary Fund. The IMF’s engagement was particularly important in the nascent years of the military dictatorship, when some international investors were appalled by the brutality and blatantly anti-democratic nature of Pinochet’s coup. In short, the Fund served a legitimising role. As Robert Carry of the Latin America Bureau explains, ‘in 1974 and 1975, the Fund directly influenced the design of the Chilean economic system; at a later stage, the IMF supplied indirect but important support for the regime’s policies by endorsing them before donor governments, aid institutions, and private bankers.’
In 1980, the Pinochet government passed the Constitutional Organic Law of Mining Concessions (or simply ‘the Mining Law’). Under this law, mining companies paid one of the lowest tax rates in the world, while the 1979 Labour Plan essentially outlawed unionisation for entire sectors of the economy, collapsing real wages and providing foreign investors with a pool of cheap manual labour. Furthermore, the 1981 Water Code resulted in the effective privatisation of water supplies in large areas of the country, namely the Atacama desert, where 90 per cent of water supplies were privatised, mostly by mining companies. Since the passing of this law, mining companies have been able to claim the rights to water supplies that far exceed their industrial requirements and sell the surplus for a profit. For instance, when the Canadian-owned Placer Dome was criticised for acquiring 1200 litres of (totally free) water per second for a project that only required 400 litres per second, the company stated, ‘Water is a legitimate business, just like any other.’
These concessions drew in extractive capital from around the world, but especially from Canada, which by the 1970s was well on its way to becoming the mining capital of the world. Between 1974 and 2006, Canadian companies owned 61 per cent of Chile’s largest 23 mining projects. Some of the owners included Noranda, Falconbridge, Barrick Gold and Lac Minerals (later absorbed by Barrick). Clark writes that, after Pinochet’s coup, ‘Canadian mining companies were leaders in the stampede of foreign investment to Chile. Between 1974 and 2003, Canada was the third-largest single investor in the country, behind the United States and Spain, with Spain surpassing Canada only towards the end of the 1990s.’
Canadian government officials quietly welcomed the coup, viewing the suppression of leftwing politics in Chile as a favourable development for Canada-based transnational capital. In late September 1973 – by which point the Pinochet government had rounded up thousands of citizens and forced them into prisons, such as the National Stadium in Santiago, where many were tortured and killed – Canada’s ambassador to Chile, Andrew Ross, wrote to the Department of External Affairs to praise the new direction of the Chilean government. He labelled the prisoners ‘the riff-raff of the Latin American left’ and asserted that the military was undertaking ‘the thankless task of sobering Chile up.’
Prime Minister Pierre Trudeau never said anything so crass in public, but his actions reflect general agreement with Ross’s assessment. For example, the Trudeau government initially refused to allow Chilean refugees to enter Canada, worried that they harboured leftwing sympathies that they may transfer to the Canadian working class. ‘Aware of American support for the new Pinochet government and uncertain about the political affiliation of the aforementioned refugees,’ writes Jan Raska, ‘the Canadian government acted slowly for nearly a year before implementing rigid security screening to prevent communist sympathizers from entering Canada.’ It was only after years of lobbying from the United Nations High Commissioner for Refugees, Amnesty International, Canadian churches and activist organisations that Trudeau reluctantly admitted 7,000 refugees from Pinochet’s Chile.
Raska summarises: ‘Due in part to Canadian Cold War ideology, economic interests, and Canada’s own trade agreements, the Canadian government was reluctant to intercede’ in Chile following the military coup. Some scholars, including Peter McFarlane, view Trudeau’s famous 1976 visit to Cuba through the lens of the Pinochet coup three years prior: in brief, it was an attempt to repair the damages done to Canada’s image in Latin America following its tacit support for Pinochet’s seizure of power and his undemocratic economic agenda. While Trudeau’s feeble show of support for the sovereignty of Latin American nations was weaponised by Canadian conservatives, it falls flat when one learns that ‘in the decades after the military coup Canada invested more than $8 billion, over $5.5 billion of which was concentrated in the mining sector. Between the boom years of 1993 and 2003, moreover, Canadian mining companies invested over $4.4 billion … making Canada the largest mining investor of the decade.’ Furthermore, former minister of mines Alfonso Dulanto stated that, during the whole of the 1990s, not a single Canadian mining company paid any income taxes in Chile.
During the 1990s and 2000s, Canada signed a number of favourable free trade agreements (FTAs) with countries throughout Latin America, including Chile, to ensure the protection of Canadian investments. By 2016, Canada had C$16.6 billion invested in Chile, mostly in mining, utilities, infrastructure and banking, making Canada one of the largest foreign investors in the country. Barrick Gold’s extremely controversial Pascua Lama project (closed in 2020) was valued at C$8.5 billion. It is investments such as these that Prime Minister Justin Trudeau sought to secure when, while voicing his support for protestors in Venezuela, Cuba and Nicaragua (and, in the case of Venezuela, providing active material backing), he remained completely silent about the nationwide anti-neoliberal protests that rocked Chile and totally reshaped the country’s political climate, paving the way for Boric.
A Canadian Press story from October 2019 noted that ‘a summary from the Prime Minister’s Office of Trudeau’s phone call with [President] Piñera made no direct mention of ongoing turmoil in Chile, a thriving country with which Canada has negotiated a free trade agreement.’ Similarly, Trudeau remained silent during nationwide resistance in Colombia in 2021. He did not condemn the brutality with which the Iván Duque government assaulted these protests, and has never once mentioned the bone-chilling proliferation of paramilitary assassinations of journalists, social activists and former FARC combatants in the country. Nor has he criticised the government of Jair Bolsonaro – a man whose egregious actions are too numerous to list here, although it must be noted that he is currently being sued at the International Criminal Court for ‘genocide’ against Brazil’s Indigenous peoples. Unsurprisingly, Canadian mining investments are well-served by the rightwing establishments in both Colombia and Brazil.
On 20 December 2021, Canada’s Minister of Foreign Affairs, Mélanie Joly, congratulated Gabriel Boric for his victory in Chile’s general election and claimed that she looked forward to ‘building on 80 years of diplomatic relations’ between the countries. Likewise, mining companies do not seem worried by Boric’s victory, although it is a guarantee that they will oppose his proposal to raise taxes on mining projects. David Harquail, board chair of Canada’s Franco-Nevada Corp, was publicly unfazed by Boric’s win, stating that ‘Like metal prices, governments are cyclical and it’s all relative.’ This may be because, during the election, Boric’s mining programme coordinator Willy Kracht was careful to convey the then-candidate’s support for the mining industry as it is currently organised in the country.
‘There’s no intention to change the rules of the game,’ said Kracht, ‘just to strengthen institutionality so that things function better.’ He described Boric’s ideal mining sector as a ‘mixed structure’ with ‘progressive components,’ namely ‘a royalty on sales and a sliding levy on profit’ – in brief, nothing like Allende’s nationalisation programme in the early 1970s. It is worth noting that Boric’s choice to head the Ministry of Mining, Marcela Hernando, is a member of the Radical Party of Chile, which despite its name is a rather moderate social democratic organisation. In a cabinet that contains open socialists and communists, it is clear that Boric has chosen a more measured approach in the mining sector.
While Boric’s priorities going forward will understandably be domestic, early indications suggest that the president-elect will not rock the boat when it comes to extractive investment in Chile. This could be a practical consideration or a genuine belief that foreign investment should drive Chile’s mining sector. Either way, Canadian mining companies and the Canadian state are likely relieved for the time being.