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Chile's Military Arms Purchases Alarm The Region

Analysis prepared by COHA Research Fellow Alex Sanchez

Chile's Aggressive Military Arms Purchases Are Ruffling the Region, Alarming in Particular Bolivia, Peru and Argentina

* Is the Chilean military preparing for a new computer game: War of the Pacific: Part II?

* Bachelet administration unwilling, or organically incapable of restraining unnecessary transactions

* Chile's neighbors turn to emphasizing social and economic reform as they face looming shortfalls and severe social unrest; meanwhile, Chile's near autonomous armed forces go on weapons shopping spree

* In recent years, Chile's military has purchased jets, ships and tanks, but for what aim?

Despite the fact that Chile has not engaged in a conflict with another state since the War of the Pacific in the late nineteenth century, the Chilean military has been carrying out aggressive weapons purchases in recent years. Long known for having an almost semi-autonomous military force, Chile, in recent years, has spent hundreds of millions of dollars to upgrade its armed forces, transforming them into the most consequential military establishment in the subcontinent.

From a practical point of view, the country is not facing any conceivable external military threat. The wide range of military purchases over the past few years demonstrates that the previous Socialist-led administrations of Ricardo Lagos as well as the current one of President Michelle Bachelet, for all their leftist rhetoric, are reluctant to confront the country's powerful military establishment over how it should spend its budget, and would far rather appease it. This customary appeasement only makes Chile's military aggressive and demanding, if not belligerent, as it faces its neighbors, but it also illuminates the inherent timorous nature of civilian rule in Santiago, vis-à-vis its voracious uniform services.

Charge It To This Copper Credit Card

Since around 2000, the Chilean military has gone on a buying spree, spending $2.8 billion for weapons, ostensibly to modernize its old and obsolete equipment. The purchases, which have led to expressions of alarm in neighboring Argentina, Peru and Bolivia, include 10 Lockheed Martin F-16 fighter planes acquired from the United States, 18 second-hand similar warplanes from the Netherlands, frigates, two submarines and 118 Leopard IIA4 tanks from Germany.

On January 31, 2006, it was reported that Chile had originally announced its intent regarding the F-16s in 2002 upon the conclusion of the 20-year ban on the U.S. export of high-tech weaponry to Latin America. The F-16s are not equipped with advanced air-to-air missiles in keeping with a U.S. policy against introducing new military technology to the region. Authorities did not say the type and manufacturer of the missiles the planes will eventually carry. Also, there have been rumors that Chile (in addition to the Philippines, Mexico and Paraguay), has shown interest in purchasing F-5E warplanes from Taiwan.

Regarding its navy, Chile has purchased eight frigates from Holland and Britain (four from each). On August 1st, there was a ceremony in Valparaiso where the Chilean navy officially took command of the former Dutch frigate now under the name of Almirante Riveros. In attendance at the ceremony were important dignitaries such as Chilean Defense Minister Jose Goñi Carrasco, the Commander of the Chilean Navy Admiral Rodolfo Codina Diaz and the Commander of the Royal Dutch Navy, Vice-Admiral Jan Willem Kelder. The three remaining Dutch-purchased, and now being refurbished, frigates are the Blanco Encalada, Almirante Latorre and Capitán Prat. According to reports, the Almirante Riveros, under Captain Ronald McIntyre Astorga, rumored to make 30 knots, is fueled by a mix of gas and diesel and is equipped with surface-to-surface Harpoon missiles and surface-to-air Sea Sparrows. The Chilean navy also purchased frigates from the British Royal Navy, the first of which- the former HMS Sheffield- has now been renamed Admiral Williams. Santiago is waiting for the delivery of three others, the future Cochrane, Lynch and Condell. In addition, it is expecting the delivery of two new Scorpene submarines built by a Spanish-French consortium.

In addition, Santiago announced its intentions to buy 118 German-made Leopard tanks. Former Defense Minister Jaime Ravinet said that the Chilean armed forces would soon be replacing "old units dating from the Korean War years." The ministry did not disclose the total value of the tank purchase, but the conservative Santiago newspaper El Mercurio reported the price at $100 million. After the new tanks arrive, the Chilean army will have a total of some 300 tanks, according to the newspaper. Finally, the Chilean army has purchased around 100 Humvee jeeps, which will be used for reconnaissance, utility and scouting functions.

Navy commander Admiral Rodolfo Codina said the frigates were necessary because the navy's old units "were obsolete and had logistical problems due to the lack of spare parts because of a very old technology." On June 29, the Commander-in-Chief of the Chilean Army, General Óscar Izurieta, left for Germany to oversee the transfer of the Leopards. Chilean authorities insist that the newly purchased warplanes, tanks, frigates and submarines were merely replacements for obsolete material, and should not be seen as representing any kind of military challenge.

There's Nothing Like Copper

Due to the famous Copper Law (Ley del Cobre Reservado) implemented in 1958 and later amended during the era of military rule under Augusto Pinochet, the armed forces are automatically granted a fixed ten percent of the nation's export earnings from the state-owned (and the nation's largest) copper company, the Corporación Nacional del Cobre de Chile (CODELCO). CODELCO is the world's largest copper producer, with an annual output of around 1.8 million metric tons (two million tons). As a result of the recent spectacular rise in copper prices, these earnings now have been translated into a huge amount of buying power for the Chilean armed forces.

The Copper Law statute has been on the books for decades, but it was revised during the Pinochet dictatorship and has not been amended since civilian rule was restored in 1990. A January 7, 2007, article in The New York Times explained that "record prices for copper, Chile's main export, have given the government a multibillion-dollar windfall, but it also has produced for Chile's economy unexpected side effects and has set off a sharp political debate about how to use the money." The article notes that driven largely by China's seemingly insatiable demand for metals of all kinds, the price of copper quadrupled from 2003 through 2006, reaching record levels at midyear before falling to just under $3 a pound at year's end. That increase has helped Chile build its foreign reserves and buttress its budget surplus, which in turn, have been key factors in the peso's rise in value against the dollar. The daily average copper price for the first half of 2007 was about US$3.06 per pound on the London Metal Exchange, 11.5 percent higher than the corresponding figure in 2006. Copper mining accounts for roughly 7 percent of Chile's total GDP, and in 2006 copper represented 57 percent of the country's total exports and 32 percent of its total fiscal revenues. According to a June 1 briefing in Global Insights, data from the Chilean Budget Office (DIPRES) reveals that the Chilean central government achieved a 3.56-trillion-pesos (US$6.63-billion) overall surplus during January-April 2007. Copper mining continues to drive the expansion in fiscal revenue: mining taxes and copper earnings from the operation of state-owned CODELCO accounted for 27.5 percent of total fiscal income for the period. The latter alone reached 7.88 trillion pesos (up by 20.7 percent year-on-year in real terms).

The issue at hand is that, regardless of how much CODELCO produces and how high the price of copper rises on the international market, the law requires ten percent of the total value of CODELCO's revenue must be reverted to Chile's armed forces. As a consequence, not only is CODELCO deprived of funds needed to fully expand its production, but also President Bachelet's ambitious social programs risk going underfinanced. A further and more serious result is La Moneda's controversial purchase of combat aircraft, tanks, missiles, frigates and submarines for seemingly no rational strategic defense purpose. This has contributed to creating growing tensions in the region, and has forced countries that should be devoting the bulk of their resources to the internal development, to instead embark on a costly arms race.

Chile: Streets Filled With Copper

Santiago also has embarked on a program to expand some of the country's producing copper mines, which would have the eventual effect of increasing national revenues. For example, copper production at Chile's Collahuasi mine will more than double by 2014, in order to produce over one million additional tons of the red metal per year. This will make the facility into the world's second-largest copper mine. According to a Reuters filing, in the first phase of the expansion at Collahuasi, which is located in copper-rich northern Chile, the mine will boost the capacity of its concentrator to 170,000 tons per day from its current production of 130,000 tons per day. Collahuasi is located in the heart of Chilean copper country, high in the mountains, and in what is considered one of the world's driest regions.

The vitality of Chile's extant copper law demonstrates that the country, almost two decades after the end of the Pinochet regime, is served by a nearly autonomous military, which is largely exempt from legislative oversight, leaving Chile more a guided democracy than a wholly free democratic society. The high command of the armed forces essentially has been granted a blank check to carry out whatever impulse military purchases they desire, with the Bachelet administration has proving incapable, or unwilling, to take a firm stand against the status quo. The fact that the military still receives ten percent of copper revenue is an example of an antediluvian tradition which does not legitimately belong to the purviews of a constitutional society under civilian rule, especially when reflecting upon how such funds could be so beneficently earmarked for a range of social justice projects.

Between the Soldiers and the People

Bachelet's election, in the minds of many Chileans, was a vote for change. However, some of the Pinochet-era's "way of doing things" has not been substantially changed, including tolerating an essentially autonomous military characterized more by arrogance than by deferring to any civilian-lead chain of command. The military exists as almost a separate entity, outside of government control, with its own guaranteed permanent source of income in the form of a fixed percentage of copper revenues. In June 2006 there were massive protests in the country by university students over the deep flaws in the country's educational system. According to a June 8, 2006 article in the Los Angeles Times, there were banners at the protest which proclaimed: "prices for copper go through the roof, education falls through the floor." This manifestation captured the anger of students enduring what they called second-rate schooling, while an export-driven economic boom had methodically equipped the military with barrel full of cash. The article further divulged that while Chile does not suffer the 50 percent-plus poverty rates and political instability of neighboring Peru and Bolivia, the billions of dollars in surpluses it reaps from mining revenue have not yet been translated into significant improvements of the public education system, which is in urgent need of a dramatic overhaul.

Most recently there have been protests by CODELCO workers against the mine's management. The strike lasted a total of 36 days, sporadically halting production at three of the company's five units. CODELCO officials placed the losses attributed to the strike at more than $90 million, as a result of stalled production and damage to company property caused by erratic violence at the hands of the workers. According to the mine's management, perhaps a self serving explanation of what went awry, one reason behind these protests is the presence of Chile's Communist Party (Partido Comunista) within the local trade union's leadership, which, according to this claim, has been stirring up the workers. It has been reported that the Confederación de Trabajadores del Cobre (Copper's Worker's Confederation - CTC), which was created in early June, is certainly marked by the presence of Communist Party activities. The flimsy linkage behind these charges is that Cristian Cuervas, an official of the country's Communist Party, is also president of the CTC, as are some other high ranking officials of the union.

Parallel to these issues, on July 1, the army's Commander-in-Chief, General Óscar Izurieta, warned that the armed forces must be apolitical for the sake of Chile's internal stability. In an interview with El Mercurio, General Izurieta maintained that, "living in peace is a tremendous effort for the army." He added that his job is complicated by "themes that take me away from my role and that oblige me practically to enter the political arena." Regardless of the obvious ominous innuendos behind Uzurieta's words and the Chilean military's well established brutal reputation and supercilious attitudes that do not well serve democracy's cause, one must wonder how many non-publicized meetings have taken place among the Chilean military's high command, Bachelet, or her representatives, and CODELCO's management. Without a fully-thriving copper industry, not impaired by chronic work stoppages, the military would not have the huge budget at its disposal to annually spend on new hardware that may be far from being necessary for the nation's survival.

Who Art Thine Enemies?

As a Peruvian intelligence officer explained in a COHA interview, "the Chilean military has the money and the influence, so they will buy whatever weapons they want, even if they do not really need them." Peru and Bolivia already have smaller, far less-equipped air forces than Chile. Moreover, tensions still persist as a result of the bitter legacy of the 19th century War of the Pacific, which made Bolivia into a landlocked country by stripping it of its coastline. Peru and Chile vehemently disagree over their territorial and maritime border, while many Peruvians and Bolivians still hold a grudge over the immense amount of Bolivian territory lost to Chile during that war.

Peru's Foreign Minister Jose Garcia Belaunde has acknowledged that Peru is concerned about Chile buying sophisticated U.S. F-16 warplanes, stating "the purchase of this fleet affects the region's strategic and military balance." He added that two F-16s are based in the Chilean military establishment at Iquique, near the Peruvian border. Furthermore, the Peruvian military has made only minor, military purchases in recent years. During the Alejandro Toledo administration, Lima purchased 2 Lupo-class frigates from Italy. Most recently, under the Alan Garcia presidency, plans have been formulated, according to the daily La Republica, to upgrade the air force's fleet of 12 Mirage-2000 fighter jets. However, as significant as these purchases and upgrades may be, they fall woefully short when compared to Chile's high-flying arms acquisitions. In addition, Peru today faces the possible revival of the terrorist Shining Path movement, which could mean that Lima might have to focus on internal security (i.e. creating a counterinsurgency strategy), rather than concentrating on external threats (i.e. Chile) in the immediate future.

Bolivia as a Threat?

Meanwhile, under the rule of Evo Morales, Bolivia let it be known last year that it would begin building military outposts along its borders, prompting a perturbed reaction from Bolivia's traditionally uneasy neighbors, Chile and Paraguay. A military border outpost is also said to be in La Paz's plans for the Chile-Bolivia border. La Paz and Santiago still do not have normal diplomatic relations (harking back to the War of the Pacific) as Bolivia continues to vocalize its demands for access to the sea through Chilean (former Bolivian) territory. However, in spite of the historical demands and the proposed border garrisons, it is surreal to believe that Bolivia, unless in alliance with other area countries, can pose anything like a major military threat to Chile.

A military base, or outpost, may be a good place to organize and train troops, however the Bolivian military still lacks the hardware (like tanks or artillery pieces) to pose a significant challenge to Chile. Moreover, because it is a landlocked country, should the Bolivian military wish to make significant upgrades by buying additional hardware, this equipment would logically have to be transported through Peruvian territory one way or another, as Lima remains La Paz' historical ally. Transportation through another country would make it obvious what Bolivia is doing and why. Therefore, Bolivia's proposed military outposts along the Chilean border could best be regarded as Morales exhibiting either "bark or bite," but Chile would be sure to get the message. Morales would want to show his people that he is not afraid of Chile, but that he will not go as far as openly threatening his increasingly formidable neighbor to the west.

The Argentine Prong

Another neighboy of Chile is Argentina, whose military, to put it mildly, has had major equipment problems of its own. In March 2006, the Argentine Air Force lost a Lear Jet with its six-man crew, which had been deployed on a humanitarian mission to Bolivia. This year, on April 11, its icebreaker, Almirante Irízar, caught fire in South Atlantic waters off Patagonia (apparently due to a malfunctioning generator), forcing the crew to abandon ship and resulting in the additional loss of two Sea King helicopters. On May 1, a Mirage M3 fell out of the sky during an air display, killing the pilot. After the last accident, Argentine Defense Minister Nilda Garré (who is, ironically, now under investigation for possible tax evasion resulting from government military purchases) revealed that following the 2006 crash in Bolivia, she had ordered an audit on the operational safety of the aircraft in the inventories of all three armed services. One immediate result was the allocation of additional budgetary funds to renovate the fleet of 13 Hercules transporters, of which only three were considered to be "relatively available." Garré said, "we have very old aerial material, as a result of more than 20 years of disinvestment in the sector and a 50 percent budget reduction in that period." On May 18, she announced that Argentina had taken up a U.S. offer of four Sea King helicopters (two of them to replace those lost in the Almirante Irízar fire), and that more funds would be made available to the navy to increase the number of hours its assets can spend at sea, and to locally develop a light utility vehicle for use by the Argentine marine corps. Officials said that the government was also looking at the possibility of buying Chinese helicopters for army use.

In recent years, the Argentine armed forces have not engaged in any major military purchases, perhaps as a consequence of its repugnant reputation derived after a decade of brutal military rule during the 1970s and 1980s. Even though its armed forces seem to be fairly quiet these days after killing almost 30,000 innocent civilians during the aforementioned period, there is still a traditional animosity for the Chilean military by their Argentine counterparts, which should not be discounted. During the Falkland War in 1982, the Pinochet regime gave vital intelligence information to British forces, which aided the U.K. in defeating the Argentine military. Such an "afrenta" has certainly not been forgotten by the Argentines; Chile's current flea-market weapons procurement extravaganza can only continue to exacerbate ancient animosities among the military high command in Buenos Aires.

Chile's Militarized Democracy

Chile's current military expenditures have very little to do with the simplistic apologia that this is only about the "replacement of ancient equipment," and that it has much more to do with strengthening the ego of the Chilean military high command and allowing it to cast a longer shadow, both regionally and within the internal power structure of Chilean society. The country's armed forces, due to high copper revenues, have wealth to waste, and are in a rush to purchase more tanks and fighter planes, instead of investing their surplus funds in better nutrition and equipment for rank-and-file troops, let alone trying to improve the standard of living of the poor.

Contrary to what its military senior command may want to believe, Chile today faces no external military threats (even though it is also necessary to say that it has few friends in the area, that feel that it is worthy of anything more than a cold handshake). If anything, its own military has become the country's most problematic foe, expending scarce resources in order to buy weapons of destruction, instead of focusing on badly needed social and educational programs. These purchases demonstrate that, ultimately, the military remains largely an autonomous entity in Chile, a separate entity from Bachelet's civilian government and not operating under any predictable bona fides. The Chilean military has, largely on it own, engaged in a one-sided arms race in the Andean sub-continent, with the nation's civilian government lacking the political will or strategic interests to put an end to the hypertrophy of vital institutions that stems from the Pinochet dictatorship's ghastly legacy and Santiago's tolerance of such a skewed definition of democracy.


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