Clamor over Chilean Copper

U.S. business has been having more than its share of difficulties with Latin America lately. Peru expropriated the U.S.-owned International Petroleum Co., Mexico forced subsidiaries of U.S. mining companies to admit local partners, and 21 Latin American governments complained to President Nixon that U.S. business repatriates more in profits from their continent than it invests. Now Chileans are demanding majority ownership and a larger share of the profits from their huge copper industry, which is dominated by two U.S. companies—Anaconda and Kennecott. Chilean mines produced 741,000 tons of copper last year, about a sixth of the non-Communist world's total. Last week Anaconda Co., the world's biggest copper producer, started to negotiate privately in Santiago with emissaries of President Eduardo Frei. Both sides seemed likely to compromise.

Debate over Morality. Nearly five years ago, Frei was elected on a moderate platform that promised to "Chileanize" the country's copper industry, then largely U.S.-owned, and double production to move it from third place to first place in the non-Communist world. His government offered tax cuts in return for production increases and a share of the ownership. Kennecott in 1967 sold Chile 51% of its El Teniente mine and promised a large expansion of operations by 1971. Chile paid the company $80 million and cut its taxes in half—down to 44% of revenues. Chile also obtained a 30% interest in a company that Cerro Corp. formed to develop a new Chilean mine, which will start producing in 1971.

Anaconda, however, refused to sell a share of its Chuquicamata and El Salvador mines. The government settled for one-fourth of the company's new Exotica mine, which next year is expected to add 112,500 tons to Anaconda's annual 407,000-ton production, and 49% of an exploration company. Unlike Kennecott, Anaconda depends on Chile for most (61%) of its production and half of its earnings. The company reports that its profits from Chile totaled $99 million last year, about a 17% return on its investment; the Chilean government, using different base figures, calculates that Anaconda earns 30%.

Frei seemed to have made everybody more or less happy, but he had not reckoned on price increases that resulted from rising world demand for copper. When Frei worked out his plan, copper had been averaging about 290 a pound; last week on the London Metal Exchange it sold for 690. Although the rise benefits both Chile and its U.S. partners, many Chileans are displeased.

Charging that fatter U.S. profits from Chilean copper are "immoral," leftists renewed their demand for outright nationalization. Other Chileans complained that Anaconda is paying for the Exotica mine out of its windfall profits rather than by investing more U.S. dollars. Although Frei is trying to strengthen his fellow Christian Democrats before the 1970 elections, he is sticking to a moderate position. This month, he demanded a 51% share of Anaconda's Chuquicamata and El Salvador mines and an increase in the company's taxes. Later, he will also seek a larger share of profits from Kennecott and Cerro.