China’s economic tumble threatens Chile’s embattled copper-centric economy
The global market crash that began in China and spread across the world this week has far-reaching consequences, especially when it comes to economies based on commodities like oil and minerals. In Chile, the world’s largest copper producer, the commodities crash could further exacerbate already contentious labor disputes in the mining sector. Joshua Tucker has more from Santiago.
The Chilean economy runs on copper. It makes up 60 percent of the country’s exports and CODELCO, the state-run copper mining company, is the Chilean government’s biggest source of revenue, helping pay for everything from schools to health care.
In 2014, China was the world’s largest single purchaser of copper, buying 40 percent of the international market share. When Chinese stock markets took a dive on Monday, it set off a chain reaction. By the time markets opened in Europe, mining stock was declining faster than any other sector of the economy. Five billion dollars in mining capital disappeared over the course of a few hours.
Before global markets cast an economic shadow over Chile, CODELCO was already in the midst of volatile labor negotiations with the union representing 70 percent of its contract workers, the Confederación de Trabajadores de Cobre, or CTC. The union has been mobilizing miners for more than ten years to fight for a living wage and benefits like health care coverage for same-sex partners.
On July 20th, the CTC began a national strike that affected production at seven CODELCO mines, including Chuquicamata — the world’s biggest open pit copper mine by excavated volume. Striking miners completely took over two CODELCO open pit mines, barricading the entrances of the El Salvador mine and later the Hales mine.
Before dawn on July 24th, police special forces attacked the CTC’s flaming barricades at the entrance to the El Salvador Mine. CTC spokesman Miguel Santana describes what happened: “A unit trained in urban warfare arrived at the El Salvador Mine to corral the workers and when they saw they were outnumbered, they begin to fire indiscriminately. The workers had a bulldozer there that they were using to build barricades along the road with dirt. The mine is in the desert so they can’t make barricades with things like tree trunks – the only way is to dump loads of dirt and burn tires to block the road. The bulldozers are armored to protect workers from falling rocks inside the mine. And when you look at the photos of the bulldozer, you can see they were shooting directly at the workers. The bullets were aimed not at their legs, but at their heads, at the workers’ torsos. You can tell from the height of the bullet marks left on the bulldozer. It was a shoot-to-kill operation.”
According to the police report, special forces fired at least 33 shots, killing one striking worker named Nelson Quichillao López and injuring several more.
At their own marches in Santiago, members of other unions spoke out against the killing of Nelson Quichillao Lopez. The 45,000 members of the CTC continued their strike for a total of 22 days before voting to conditionally suspend the strike and enter negotiations with CODELCO. Those talks began last week. CODELCO Vice President for Production and Cost Jose Robles spoke for the company outside the negotiations.
“What we want to do with all the incentive mechanisms associated with worker pay is peg them to productivity,” Robles stated. “This is what we’ve put forth as central to our disposition to continue facilitating this dialogue and stay on as a facilitator between the contracting companies and their workers.”
Robles estimates the strike has cost CODELCO about $80 million; $60 million in lost production and $20 million in damage to equipment and facilities. Falling copper prices will not only make it hard for the company to quickly recover from the losses, but could also affect the country’s longer term budget plans.
The labor dispute and low copper prices round out a challenging season for mining in Chile. A deputy mining minister was jailed and is now under house arrest awaiting trial on bribery and money laundering charges, after allegedly taking funds from private mining companies. A member of the president’s cabinet resigned after revealing mining companies had given him honorariums. And in March, in the mining industry-dominated city of Antofagasta, a historic crowd of more than 10,000 people protested the environmental contamination caused by mining.
The regional mining minister, Reinaldo Leiva, recently responded to ongoing environmental protests on the Atacama area’s Maray Radio.
“There are a group of people that oppose these mining projects no matter what, even though they benefit our region,” Leiva said. “And what they are saying is they want to eat cake, but they don’t want to break any eggs.”
As representatives of the CTC and CODELCO met in Santiago last week, raised voices could be heard coming from inside the closed-door negotiations. The outcome of the talks is uncertain, but the economic signs are not promising. Falling oil prices have already led to currency devaluations in countries dependent on oil exports, which could hint at what’s on the horizon for Chile.
As Chinese markets fell Monday, the Chilean Peso hit it’s second lowest point in history against the U.S. dollar. And if copper prices continue to fall, the economic shock waves in Chile will likely travel beyond the bottom lines of mine owners and the paychecks of mine workers.