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Chile: Mining Strike Ends But Struggle Continues

Council On Hemispheric Affairs
Friday, September 1st, 2006
Press Releases, Chile

Chile’s Mining Strike at La Escondida has Ended, but the Nation’s Labor Struggle Continues

• The strike has been called off, but at a considerable cost for the Chilean copper industry.
• Ruling Concertación coalition still has not eliminated anti-union legacy of Pinochet era, when Chile’s “economic miracle” was achieved on the backs of the poorest stratum of society.
• Santiago must take a more proactive role as the copper mining industry dominates Chile’s economic output and therefore, influences the country’s welfare and prosperity.

After a twenty-five day strike, the 2,052-member union of the world’s largest copper mine, La Escondida of Chile, and the Anglo-Australian owners BHP Billiton mining company finally reached a settlement on August 31 for a five percent wage increase along with a $17,000 (USD) bonus for its workers. The drawn-out strike began when the union movement demanded increased wages and a share in the substantial profit amassed by the mining company, and was prolonged by frustration with the limited role that government officials had played in the negotiation process. The union also criticized the Bachelet administration’s resistance to modifying archaic labor laws, some of which date back to the Pinochet dictatorship. The La Escondida strike and the relatively small gains the union has achieved demonstrate that Chile’s unions still operate at a much less successful level than they are capable of. This occurs at the precise time that Chilean labor is trying to define its role in the new, heavily globalized post-Pinochet economy.

Development and Stagnation of the Trade union movements

The current momentum gathered by the Chilean labor movement stems from labor actions in the 1970s. In 1971, workers at the Yarur textile mill seized the then state-owned factory, marking a significant change in the manner in which Chilean workers were mobilized to action. Although the mill workers and the socialist Allende government backed the leftist faction of the Chilean labor movement, La Moneda stymied the workers’ efforts because officials felt offended that it was not consulted and preferred that any serious social change be implemented from above rather than below. Despite the government’s reaction, the solidarity of the mill workers awakened the nation’s laborers to the many class struggles taking place around the country at that time. This also then led to a significant increase in labor agitation.

Following General Augusto Pinochet’s violent golpe de estado in 1973, the labor union movement was all but crushed. Perceived as a major enemy of the state, its leadership was brutally and systematically hunted down. Furthermore, Pinochet quickly implemented a harsh neo-liberal economic model, privatizing most of the country’s industrial sectors. During this period, trde unions faced considerable hardships as a result of the government’s radical market liberalization reforms and repression of social movements. Considering the complex history of Chile’s trade union movement, the strike at the La Escondida mine represents one of the nation’s most democratic manifestations of labor.

Mining for Excuses

Considering the current record-high price of copper, at $3.50 per pound, the workers’ demands for increased wages were legitimate. Nonetheless, BHP Billiton had written them off as too expensive, claiming that an increase in pay would cost $640 million. However, a consultant firm hired by the La Escondida union stated that such an increase in wages would only cost about half of what the company claimed. The Boston Globe reported that since the union signed its current contract in 2003, the per pound price of copper had increased $2.03. This profits bonanza, however, had been enjoyed by the senior managements and stockholders of the several partner corporations holding equity in La Escondida. The 25-day strike ensued when its organized miners demanded their share.

Dancing Around Demand

During the strike, BHP Billiton, owner of the largest mine in Chile, obstinately stuck to its four percent offer, claiming that the workers’ demands were not only excessive, but economically unfeasible since the price of copper is expected to decrease. However, many analysts have disputed this claim, arguing that the demand from the Chinese market alone will sustain current international price levels. Moreover, if China’s current level of industrial production continues, a dramatic dip in the international price of copper is not likely. As such, while the company argued that Chinese economic activity could pose a direct threat to its profits, it is probable that Chile will be able to remain at the forefront of copper’s world position even if Beijing develops a sustainable mining infrastructure that someday could challenge Chile’s copper hegemony.

Another challenge to BHP’s claims of preeminence came last May from the Chilean-based Lomas Bayas copper mine, owned by Canada’s Falconbridge Ltd. The company agreed to a three-year contract which stipulated a reasonable 8 percent salary increase over three years and a $4,400 per year annual bonus over the same period, demands similar to those sought after by the La Escondida union. Therefore, it is evident that BHP Billiton’s alleged financial fears were merely rhetorical gambits used to legitimize a typical profit- maximizing strategy.

BHP Billiton’s Tactics: Substituting Workers

The company hastily declared a “force majeure” when the strike began. This measure is only evoked when an unexpected event occurs beyond the control of the involved parties, such as a natural disaster or strike. Under a force majeure, the company is immune from legal responsibility for temporary delays and shortages of products. Furthermore, the company recently hired 300 substitute workers to cover any loss of labor. The legislation allowing for such draconian measures by a company was introduced during the Pinochet era, when maintaining foreign investment took precedent over settling domestic disputes over issues of social welfare. Union secretary Pedro Marín furiously protested, “We are defenseless against this [tactic] because the law says it’s legal for the company to hire more sub-contractors and replace workers.” In an attempt to restrict new workers from entering the mine, the union members built blockades on the roads leading to the site. In response, BHP Billiton closed the mine stating, “We will not negotiate with the union while they are carrying out this illegal activity.” Many union workers condemned the company’s attitude, claiming that BHP Billiton “has transformed this action into a union-breaking fight by not negotiating with us.” These obstacles to fair negotiation were indirectly sanctioned by the inactivity of the Chilean government, and only led to revved-up hostilities between BHP Billiton and the union.

Government Failure: The Issue of Labor Law Reform

Although the government mediated a series of talks between BHP Billiton and the union, Santiago was passive in the ongoing crisis. Before the strike started, Chilean President Michelle Bachelet announced that “this is a negotiation between the company and its workers and the only thing I hope for is that this comes to a resolution as soon as possible, hopefully with good results for both sides.” Following the union’s blockade and the company’s withdrawal from the negotiations, President Bachelet declared, “undoubtedly the government, if there is room to help [the negotiations] reach fruition, will do it.” The added strength of governmental intervention was absent from the resolution of the strike, clearly Santiago should have taken a more vigorous role in the negotiations from the very beginning in order to prevent the crisis from further escalating.

Not only was Santiago passive in its attitude toward the labor contract negotiations, but the Bachelet government, like its post-Pinochet predecessors, failed to entirely address anti-labor edicts issued by the dictator, despite a more open political climate in Chile. Following the Pinochet era, there were several unsuccessful attempts to reform labor law legislation, particularly under Presidents Aylwin and Frei, two Christian Democrats. Both leaders were not prepared to do much about it, however, buckling to the interests of big business and failing to effectively represent a pro-labor agenda among its membership in Chile’s Congreso Nacional. Moreover, it was difficult to sway important leaders who had benefited from Pinochet’s so-called “economic miracle” of the 1980s. Even under President Lagos’ more socialist policies, no major changes to labor laws took place. In fact, Ricardo Solari, former labor minister during the Lagos regime, had given up on the matter, stating, “Chile had strikes and even though the law today allows for the replacement of strikers, this has actually never happened, so I am not going to enter into a theoretical discussion simply because a few employers represent that idea.” However, it is clear that BHP Billiton has capitalized on this legal loophole, forcing Santiago to confront the anti-union tradition of its predecessors. Unfortunately, the theoretical has become an uncomfortable reality.

La Escondida Agreement Could Dictate Future of Chile’s Mining Unions

Whether the La Escondida union workers won the strike is uncertain, considering the union had to significantly bend their demands to the wishes of the mining company, which clearly had the upper hand by the end of the negotiation. However, the strike at @La Escondida has set an important precedent for the future of Chilean labor, as it is likely that far more demands for more equitable contracts will expand beyond what was encountered at @La Escondida. Workers at other BHP mines in Chuiquicamata will soon renegotiate their contracts. Moreover, several mines owned by the state copper company Codelco are also waiting in the wings. However, the government’s almost evasive response to union demands indicates that several remnants from Pinochet’s measures, notorious for disregarding the rights of workers and preventing unions from engaging in joint action, persist. The struggle of union workers in Chile will not end and more disruptive strikes will inevitably continue to arise until the Chilean authorities seriously reform of its backward labor laws, one of the last vestiges of the Pinochet dictatorship. Chile as a nation has helped resolve the current labor conflict at considerable cost to the national copper industry, an integral part of the Chilean economy. President Bachelet must lead a reform effort to purge all lingering residue of the Pinochet-era edicts that were patently unfair to workers at the time and certainly enabling the growing Chilean labor movement a proportionate share in the economy.


This analysis was prepared by COHA Research Associate Makiko Kurosaki
September 1st, 2006
Word Count: 1600

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