COPPER NATIONALIZATION: CONTEXT, CAUSES, CONSEQUENCES - HISTORY - 2025

The nationalization of copper in Chile is the name by which the nationalization process of a group of copper mines is known, until then owned by three important foreign companies.

The group of companies that were the object of the nationalization measure was known as “La gran minería”. This conglomerate was represented by the companies Anaconda, Kennecott and Cerro, all of them American.

Salvador Allende in Rancagua (1971)

The dream of nationalizing this industry was already ancient. Members of left-wing groups in Congress had been putting forward nationalization bills since the early 1950s.

For their part, the Chilean labor confederations and unions were also pressing. They argued that if two-thirds of Chile's external economy was copper, then whoever controlled those two-thirds controlled the country.

After nationalization, the infrastructure and mining rights of foreign companies became the property of the state and collective societies were created to take charge of operations.

At the head of the companies created, a coordinating state company called CODELCO (Copper Corporation) was appointed. This was in charge of the exploration, development, extraction, production and commercialization of copper.

Historic context

On July 11, 1971, under the presidency of Salvador Allende, the Chilean Congress unanimously voted an amendment to the constitution that authorized the government to nationalize the three largest US-origin copper companies in Chile. Law 17450 of constitutional reform was published and the nationalization of the metal culminated.

It was the outcome of a chain of previous events that began with the 1964 elections. From that date on, public opinion began to pressure the Chilean political class for the nationalization of copper.

Some time ago, in 1953, the Chilean Ministry of Mining had been created. This would be responsible for the measures that prepared the way for the nationalization of copper.

This was accomplished in two phases. The Chileanization of copper, phase I, began in the presidency of Eduardo Frei Montalva (1964-1970). In this phase, the State shared operations and profits from the activity with foreign mining companies.

After the 1971 decision, the companies were required by law to cede the mines to the nation. As compensation, they would be paid an indemnity consisting of the book value of each of the expropriated companies.

Causes

Unequal enjoy the benefit

Until the mid-1960s, most of the copper industry in Chile was operated by North American mining companies.

Therefore, the profits from this activity were repatriated to the United States of America instead of being invested in the country.

It was estimated that by the time of nationalization, the three largest mines had sent some 10.8 trillion dollars to their country of origin.

However, in the same period, the income from all Chilean economic activity was about 10.5 billion dollars.

Political electoral campaign promise

In the presidential elections of 1964, Eduardo Frei and Salvador Allende, the two main candidates, promised to nationalize the Chilean copper industry. The candidate Frei obtained 56% of the votes, and Allende obtained 39%.

Thus, in that election, the first two places received 95% of the electoral support. It was then interpreted that the nationalization of copper was a demand of the whole country.

Consequently, this promise was renewed for the 1970 elections where Salvador Allende was the winner.

Social pressure for economic improvements

At the time, some political and social groups affirmed that the existence of Gran Mining in foreign hands was the basic cause of Chilean underdevelopment. They blamed it, among other things, for the low industrial activity.

They also thought that it prevented reducing unemployment, improving agriculture, increasing wages and, in general, eliminating backwardness. They claimed that the government's social plans were not being fully complied with due to insufficient funds.

In the same way, they argued that, since copper was the resource that provided 70% of the country's foreign exchange, it should contribute to its development.

At that time, it was estimated that the income from copper exploitation was about 120 million dollars per year.

Consequences

International impact

The nationalization of Chilean copper led to a bitter legal process and international trade confrontation between the Chilean government and the US mining companies. The dispute also affected binational relations.

The source of the dispute was the discount made to the indemnities to be paid of amounts called “excessive profits”. According to the government, the mining companies had obtained profits above what was declared.

Thus, they discounted these amounts at the time of settlement of the compensation. As a result, some of the companies did not receive any compensation for some of the mines after the expropriation.

International boycott

The companies involved protested the conditions under which the copper nationalization was carried out. Also, the US government considered that international trade standards were violated in the process.

Consequently, together with its commercial allies. imposed a commercial boycott of Chile. This measure negatively affected the Chilean economy.

On the other hand, there are sources that assure that the US Central Intelligence Agency (CIA) acted to destabilize the Allende government.

Production drop

The nationalization of copper did not bring the immediate abundance promised. Production and profits plummeted. Among others, the boycott made it difficult to obtain spare parts for machinery.

There was also a labor shortage. After the nationalization, some specialized technicians left the mines.

A group of them resigned in protest against the new administration and others because they no longer received payment in dollars. This was one of the benefits that private companies offered to a group of key workers.

Whatever the reason, the departure of these skilled workers hampered production, particularly in highly technical areas such as refining.

Coup

Allende's supporters called the nationalization of copper an "act of sovereignty." However, in the opinion of analysts, it was the catalyst for worsening the political polarization that was being experienced in the country.

In the end, this polarization led to the coup led by General Augusto Pinochet in 1973.

References

1. Coz Léniz, F. (s / f). Histories of nationalization and privatization: the cases of the Chilean and Zambian Copper Industries. Taken from eisourcebook.org.
2. Boorstein, E. (1977). Allende's Chile: An Inside View. New York: International Publishers Co.
3. Gedicks, A. (1973, October 01). The Nationalization of Copper in Chile: Antecedents and Consequences. Taken from journals.sagepub.com.
4. Fleming, J. (1973). The Nationalization of Chile's Large Copper Companies in Contemporary Interstate Relations. Taken from digitalcommons.law.villanova.edu.
5. Collier, S. and Sater, WF (2004). A History of Chile, 1808-2002. New York: Cambridge University Press.
6. Fortin C. (1979) Nationalization of Copper in Chile and Its International Repercussions. Taken from link.springer.com.