Tags: chile | moves | copper | wealth

Chile Moves to Redistribute Copper Wealth With Union Power

Tuesday, 30 December 2014 10:03 AM

President Michelle Bachelet is boosting union power to help redistribute the copper riches that have made Chile the wealthiest country in Latin America. Mining companies say the move risks further investment delays in an industry already reeling from higher costs and lower prices.

Seeking to redress the balance of industrial relations power three decades after Augusto Pinochet introduced a new labor code, Bachelet presented a bill yesterday that would make union leaders the sole authorized negotiators in wage bargaining and outlaw a company’s right to replace striking workers.

The labor proposals, along with raising corporate taxes to fund free education, are part of a campaign to narrow the worst income inequality among the 34 members of the Organization for Economic Co-operation and Development. Business leaders say it’s part of a campaign to end the economic model of low spending and taxes, limited regulations and high saving rates that has helped propel growth. Miners are particularly concerned as copper reaches the lowest in more than four years.

“This industry has taken a beating and all of these reforms are starting to pose challenges,” Cesar Perez, head of research at the Santiago-based unit of investment bank BTG Pactual, said by telephone.

More than half of a $110 billion pipeline of copper and gold mines have been postponed or scrapped because of the commodity slump and higher costs in Chile, which provides a third of the world’s copper, according to the country’s mining association, known as Sonami.

China Slowdown

Anglo American Plc and Glencore Plc have delayed a $1 billion expansion at their Collahuasi copper venture, Teck Resources Ltd. held back its Quebrada Blanca expansion on lower copper prices and Antofagasta Plc has said it will sit out the slowdown in commodities demand before embarking on an expansion to its flagship Los Pelambres mine.

“We hope we don’t have a radical labor reform because there have been too many changes,” Antofagasta Chief Executive Officer Diego Hernandez said at a conference earlier this month. He didn’t respond to a request to comment yesterday.

Mining profits have slumped along with prices. Copper traded near a four-year low today before the release of data projected to show manufacturing shrank in China, the world’s biggest consumer of the metal used to make electrical wire.

Chile’s gross domestic product expanded 0.8 percent in the third quarter from the year earlier, the slowest pace since the 2009 recession, with investment slumping 9.9 percent. Chile’s mining workforce shrank 5.6 percent to 231,280 in the third quarter, according to the National Statistics Institute.

Commodity Boom

The slowdown is a sharp contrast to the previous decade that was characterized by surging prices and protracted stoppages at the country’s largest copper mines as unions claimed a greater share of record profits.

Workers at BHP Billiton Ltd.’s Escondida mine, the world’s largest, earn one-time bonuses of more than $20,000 every time they sign a labor deal. Escondida unions carried out two days of strikes in September as they disputed lower bonus payments.

The reform will strengthen mining union leaders that are already the strongest in Chile, Juan Andres Perry, a lawyer at Ernst & Young LLC in Santiago said in a telephone interview.

While unions have often impeded production at some of the world’s largest copper mines, in Chile as a whole, only 11 percent of the 8.4 million workers are members of a trade union. When unionized workers win a pay increase, it is automatically granted to non-unionized workers, while those same unionized workers risk being replaced if they strike.

Income Inequality

Bachelet says that more balanced negotiation will improve industrial relations and result in greater productivity. Unions say it will help defend wages.

The difference in income between the rich and the poor in Chile, measured by the Gini coefficient, reached 0.503 in 2011, little changed from 0.511 in 2007, according to a report released on June 19 by the OECD. Chile was followed by Mexico, Turkey and the U.S., with Gini coefficients of 0.482, 0.412 and 0.389, respectively.

Chile’s income per capita, based on purchasing power parity, was $23,165 this year, compared with $15,153 in Brazil and $22,101 in Argentina, according to the International Monetary Fund.

Yesterday’s bill will be the first major change to labor laws since the military regime of Pinochet, who ruled the country between 1973 and 1990, Barbara Figueroa, head of the Central Workers Union, told Radio Cooperativa yesterday.

Long Wait

“We’ve waited more than 20 years for this small step,” Figueroa said. “We have started to dismantle the labor plan of the military regime.”

Sonami, which has represented the interests of the industry for more than a century, will study the reform in detail and propose enhancements when it is debated in congress, director Alberto Salas said in e-mailed comments today.

“We don’t oppose changes that boost our economic and social development, but we are worried about legal changes that can affect our country’s labor climate especially in the current context characterized by economic slowdown,” Salas said.

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President Michelle Bachelet is boosting union power to help redistribute the copper riches that have made Chile the wealthiest country in Latin America. Mining companies say the move risks further investment delays in an industry already reeling from higher costs and lower...
chile, moves, copper, wealth
Tuesday, 30 December 2014 10:03 AM
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