Canadian Business in Chile

By Asad Ismi

At a shareholders' meeting in Toronto on May 9, 1996, Peter Munk, Chairman of Barrick Gold corporation, praised General Augusto Pinochet for "transforming Chile from a wealth-destroying socialist state to a capital-friendly model that is being copied around the world." Regarding Pinochet's human rights record Munk said, "they can put people in jail, I have no comment on that, I think that may be true...I think [the end justifies the means] because it brought wealth to an enormous number of people. If you ask somebody who is in jail, he'll say no. But that's the wonderful thing about our world; we can have the freedom to disagree."

Freedom to disagree?

Pinochet's neo-liberalism in Chile was based on violence that extinguished the "freedom to disagree" for Chileans. The General launched a CIA-backed military coup in September 1973, which overthrew the elected government of Salvador Allende, and killed Allende in the process. The Chilean upper class and U.S. multinationals, International Telephone and Telegraph (ITT) and Anaconda and Kennecott (copper companies whose Chilean properties Allende had nationalized) supported the CIA campaign to overthrow the socialist president.1 Allende was redistributing income, reforming agriculture, and nationalizing important industries, steps which U.S. policy makers saw as making Chile "independent of the priorities of U.S. foreign policy and the multinationals."2

Pinochet's Chile, 1973-1990

In the year after the coup, the armed forces and police murdered 5,000 - 30,000 Chileans for their beliefs and associations. A quarter of the organized work force were dismissed for political reasons. Every labor right was suspended and most labor federations were dissolved. The regime's opponents were tortured, kidnapped, exiled, jailed and sent to concentration camps. During 1975-79, between 1,600 and 2,500 Chileans disappeared after detention by Pinochet's secret police.

With his opponents killed, jailed, or in exile and the union movement crushed, the General reversed 35 years of economic development. Pinochet's monetarist model was supervised by Chilean economists trained at the University of Chicago. Starting in 1975, the "Chicago Boys" reduced import duties, deregulated industry, eliminated limits on foreign investment, sold public enterprises at low prices, freed the prices of basic necessities and privatized such government services as parks, prisons, utilities, schools, health care, and pensions.

These policies created the Chilean "miracle" celebrated as a model for the rest of the Third World by the IMF, the World Bank, the U.S. government, and mainstream media. In 1990, the Chilean economy was growing at an annual rate of 8%, exports were booming, inflation was low, and foreign investment levels high. The miracle, however, was largely illusory. The growth of the late eighties was preceded by severe recessions. Only by 1989 did per capita output return to the 1970 level. Between 1973-89 the economy grew a mere one per cent.

Pinochet's policies decimated Chile's manufacturing base and dramatically stratified wealth. Whereas 20% of the population had been poor in 1970, fully 41% were poor in 1990. In one decade the richest 10% of Chileans increased their share of the national wealth from 37 to 47%. Chile gained the dubious distinction of having the second most unequal income distribution in Latin America, after Brazil. The Labor Code of 1979 banned union confederations and scuttled industry-wide collective bargaining rights. Employers no longer had to negotiate with unions representing workers in more than one firm and strikes were limited to 60 days. Even within the same firm, the formation of competing unions was encouraged. Pinochet's policies pushed wages below the level of 1970.

Under Pinochet, government spending on health was reduced from $28 per person to $11. Seventy per cent of Chileans cannot afford private health care. The national education system was municipalized, greatly magnifying the differences in opportunity. Chile's external debt increased from $5 billion to $21 billion and its rich forestry and fishery resources were plundered. By 1989 the military budget outstripped by $432 million the combined housing, health and education budgets. Unlike those of other state employees, military salaries are indexed to the cost of living and the armed forces' budget remains guaranteed at 1989 levels.

According to Americas Watch, the military has been "corrupted by new wealth, favoritism, and their extraordinary status in the society while Pinochet has enriched himself and his family in a style unprecedented for a Chilean official." He also enriched multinationals to whom his regime sold government assets at about half their value.

Politics after Pinochet: The Concertación

The first election in 17 years was held in 1990. Patricio Aylwin won after assuring businessmen that there would be no change in the basic structure of the economy. Aylwin and his successor, Eduardo Frei, elected in 1993, represent the Concertación, a coalition dominated by the centrist Christian Democrats which includes the Socialist Party and the centre-left Party for Democracy.

The Concertación left Pinochet's policies largely intact. Chile's growth continues to depend on cheap labor and unregulated access to natural resources. The Concertación allowed unions to join confederations and removed the 60-day limit on strikes, but refused organized labor's main demand: that employers be legally required to negotiate with industry-level unions. As a result the union movement remains weak, and this is reflected in low wages.

By increasing social spending, the Aylwin government was able to reduce the number of people living in poverty from five to four million. But this still left a poverty rate of 34% as compared to 20% in 1970. Similarly, income distribution remains highly skewed with the richest 10% of Chileans receiving 45% of total income. Unemployment in Chile is 6% but official statistics consider those who work for a few hours as employed. Also, unemployment is rising: it was 5% in 1995. The government's economic policies have been unable to cope with this trend, given the neo-liberal model's low rate of job creation.

Chilean forest management techniques, called "primitive" by a U.N. study, consist of wholesale cutting and burning without reforestation. The study warned that in 25-30 years there may be no trees worth cutting. Americas Update called Chile's fisheries "virtually exhausted...as species after species has been overfished."

The Concertación also accepted the 1980 Constitution which gives the military the right to take over the government if they "feel Chile's institutionality is threatened as they did in 1973." The President does not have the power to remove Pinochet, the head of the army, or the other military commanders-in-chief who can retain their posts until 1998. The Constitution also lays down the rules that allow Pinochet's supporters, who are a minority, to control the Senate. These authoritarian features of the political system prevent reform and leave the Concertación unable to legally effect significant change. As a result the civilian governments have been unable to punish those responsible for the human rights crimes of the dictatorship. By getting away with mass murder, the military shows that the Chilean political system exists at its mercy.

The Dirty Fingers of Canadian Mining

Pinochet converted Chile into a low-wage haven for multinationals. Especially benefiting are the Canadian companies that have in recent years become the dominant foreign presence in Chile's crucial mining sector. Minerals make up 47% of Chile's total export income with copper accounting for most of this. Canada is its largest foreign investor, with $4 billion in mining projects.

The rush to Chile has been stimulated by "depleting North American reserves, burgeoning environmental costs, soaring taxes, and relatively high employee salaries and benefits."3 Chile has welcomed industry with favorable regulations and lower corporate taxes and labor costs. As Hernan Castaneda, Secretary of the Chilean Miners Confederation (CMC) puts it, "the work here is very cheap. That is why the transnational companies come here. The Labor Code does not help us. It works against us. The Chilean mining industry does not value people and that causes us great concern. You treat a man like an animal, you make him work cheap to produce and, well, I ask you: what kind of society will you have?" Castaneda was sent to jail under Pinochet for two years, where he was tortured.

At Barrick Gold's El Indio and Tambo mines, the workers are paid $500 to $1000 a month; Canadian miners get $5,000 for the same time. The cost of basic necessities in the two countries is comparable and work in Chile's mines can be more arduous. An estimated one-third of the workers at the El Indio and Tambo mines are chronically sick from silicosis, pneumonia, bronchitis, kidney failure, arsenic poisoning and lung and testicular cancer.

The miners claim that Barrick has failed to enforce safety conditions or improve communications and has made them work illegal night shifts. In 1994, 15 miners were killed in an avalanche at El Indio; workers who survive accidents are fired and given small pensions; they have to depend upon private clinics for treatment. As one observer put it, "in Chile...companies can get away with murder if they choose to do so. They hold all the aces. There's nothing like 17 years of dictatorship to get people in the right frame of mind."4 The dictatorship's labor code has ensured that the workers at the El Indio and Tambo mines are represented by not one but many unions which are so fragmented that they have no real power.

In Pinochet's era environmental regulation was absent. The Concertación set up the National Environment Commission (CONAMA) in 1990 and promulgated the Environment Framework Law in 1994. However, CONAMA lacks the budget, personnel, and power needed to set standards or enforce the Framework Law.

The low wages and unregulated environment underlie Munk's celebration of "more profit per capita [in Chile]... than in any other country" at the shareholders' meeting. It is no surprise that Munk has declared that Barrick Gold's "future lies in South America" and that this region will be "the engine of growth for the next decade."5

Placer Dome, the largest gold producer in North America, already known for environmental destruction in the Philippines, has been linked to union-busting and mercury poisoning in Chile. According to the CMC, Placer Dome was able to break the workers' elected union at its La Coipa mine and replace it with a company one. The La Coipa mine is owned by Mantos de Oro (MDO) Mining Company, of which Placer Dome owns 50%. The conflict began in 1993 when workers replaced the leadership of their union because they felt it was collaborating with management. The leadership of the new union (known as union #1) asked for official intervention to deal with its complaints against the company. These included abusive work schedules and mercury poisoning of workers. MDO reacted against the union by compiling lists of workers willing to leave the union and denounce its leadership and offered to renew the workers' collective agreement with bonuses if they quit the union. Most of the workers, who feared losing their jobs, disassociated themselves from union #1 and accepted a new contract signed by the MDO-approved union #2, rendering union #1 ineffective by the end of 1995.

One of union #1's complaints against MDO was mercury contamination of workers. The company's own medical test records in 1995 show that out of 64 workers examined, 61 had mercury levels exceeding the safety limit of 50 micrograms per gram of creatinin. (Creatinin is a substance excreted from the body in urine.) The contamination levels reached a maximum of 938 micrograms per gram creatinin. Those of nine workers exceeded ten times the safety limit. Such extreme poisoning showed Placer Dome's disregard for worker health. The use of mercury in gold mining is banned in Canada.

Gas Andes

Gas Andes, a subsidiary of Nova Corporation (one of Canada's most powerful energy corporations), is building a $385 million gas pipeline from Argentina to Chile. Last June, Chilean "special forces" removed demonstrators blocking the highway by a small Andean town, near which the pipeline was supposed to pass. The police injured scores of people, three of them seriously, including a 13-year-old girl whose teeth were smashed and jaw fractured. There were 17 arrests.

A witness said that the police had hit "women and children who had been acting peacefully." Senator Marina Cristina Carrera accused Gas Andes of "taking actions which led to the use of these special police who are trained to repress the population through brutality." The community had asked Gas Andes to come to the blockade and negotiate an alternative pipeline route with them but the company refused and asked the government to clear the road for its trucks.

Senator Carrera believes "this Canadian multinational is trying to get away with something that they would never do in Canada. It is a feeling that we as a people, as a culture, are far away and therefore matter less."

Nova Corporation, under intense pressure from politicians, the media, and environmental groups in Canada, later agreed to put the pipeline 1300 metres north of the town. Residents wanted the pipeline to go south, but their representatives knew that Gas Andes was willing to use police force against community actions. The situation made residents question "the quality of Chilean democracy."6

Canada signed a trade deal with Chile in November, 1996. Considered a prelude to Chile's inclusion in NAFTA, the deal accepts Chilean anti-union laws and lax pollution regulation. This is not only problematic for Chile: it could force lower standards in Canada. In fact, Canadian federal officials have suggested that "regulatory harmonization is inevitable in the global marketplace."7 This fits the Canadian mining industry's demand that environmental standards in Canada be lowered.8 Canadian and Chilean workers and the two countries' environments are thus being pitted against each other in a race to the bottom for the benefit of multinational capital.

Asad Ismi is a Research Associate at the Jesuit Centre for Social Faith and Justice and a member of the Canada-Americas Policy Alternatives Working Group, affiliated with the Centre.1 Robinson Rojas Sandford, The Murder of Allende and the End of the Chilean Way to Socialism, New York, Harper and Row, 1976, p. 111; William Blum, The CIA: A Forgotten History, London, Zed Books, 1986, pp. 232-243; John Stockwell, The Praetorian Guard: The U.S. Role in the New World Order, Boston, South End Press, 1991, p. 77.
2 Blum, ibid., pp. 234-235.
3 "Chile's Copper Rush", Macleans, November 1, 1993, p.45.
4 Linda Diebel, "Golden Quest", Toronto Star, May 28, 1995.
5 Ibid.
6 Ken Traynor, [Canadian Environmental Law Association], "Briefing Note re Completion of Gas Andes Negotiations", June 25, 1996.
7 Shawn McCarthy, "Manufacturer Cheers Trade Deal With Chile", Toronto Star, November 16, 1996.
8 Martin Mittelstaedt, "Industries Urge Ontario to Ease Pollution Laws", The Globe and Mail, May 21, 1996.

Peace Magazine May-June 1997

Peace Magazine May-June 1997, page 24. Some rights reserved.

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