Compensating the Multinationals: and the Copper Companies

Carlos Fortin In 1967 the Chilean government purchased 51 per centofKennecott'sinterestinthe Teniente In 1971 the government of Chile under President company, as part of a global agreement that Salvador Allende nationalized the partly Ameri- included a significant tax reduction for the new can-owned copper companies that made up the joint venture and an expansion programme cost- so-called Large Copper Mining sector (Gran ing approximately $230 million. The price offered MineriadelCobre),namely thoseexploiting for the 51 per cent equity was $80 million, which mines with a production capacity of at least was $13 million more than the total book value 75,000 metric tons a year.' of Teniente. Kennecott had argued that the book value under-estimated the real worth of the fixed The gave rise to a sharp conflict assets of the company, and requested an outside between Chile and the American companies which appraisal to determine their current value. The resulted in legal and commercial reprisals being Chilean government agreed and an appraisal undertaken by the companies both in the United carried out by a US firm produced a figure of States and in Western Europe, and was by all over $244 million, raising the total book value to accounts an important factor in determining the $286 million. As it was politically difficult for the policy of economic isolation of Allende pursued government to pay more than $100 million, by the American government and by international further tax concessions were offered to persuade organizations with strong American influence. Kennecott to accept that only $160 million be entered ascapital, the rest being imputed as That conflict is now ended following the comple- tion of compensation agreements between the reserves.2 American companies and the present Chilean military regime according to which the firms The sum of $80 million was paid by Chile in cash involved stand to receive far more than under the between 1967 and 1970. However, an additional terms of the 1971 nationalization, the orders of agreement established that Kennecott would lend magnitude being, in fact, comparable to those back to the new joint venture the instalments paid discussed with the companies ten years before. by the Chilean government, plusinterest,to This article will attempt to describe and tenta- contributetotheexpansionplan.This loan tively evaluate the agreements, placing them in amounted to $92 million and was repayable over the context of those previous instances in which a period of 15 years starting in 1971 with an issues regarding paymentfornationalized annual interest of 5+ per cent per year. As far as property were raised between the Chilean govern- Kennecott was concerned, this was in fact the ment and the American companies, and suggesting payment for the 51 per cent interest acquired by factors that may account for the high repayment Chile;Chile, however, had had effectively to terms agreed upon. transfer that amount from its own resources to the new company in the preceding four years. The Frei agreements: valuation and compensation Other featuresoftheagreement includeda The question of the compensation for the acquisi- reductiôn in Kennecott's tax burden as minority tion of American copper interests in Chile arose shareholder from over 80 per cent to 44 per cent for the first time as a major political issue in of gross profits, a level that was furthermore connectionwiththepartialnationalizations guaranteed by the government for a period of effected by the government oftheChristian 20 years. Additional contracts gave Kennecott the Democratic President, Eduardo Frei (1964-70). 2 This valuation has been thesubjectof considerablecon- troversy. The point has been made that if the book value was I The companies included were those operating the mines of less than thereal worth of the assets, this could only be ChuquicamataandSalvador,inwhichTheAnaconda due to accelerated depreciation or to imputing to operational Company was a 49 per cent shareholder; , with costs expenditures that were really ofa flaturC. In a 49 per cent equity belonging to Kennecott Copper Cor- both cases there isavoidance of taxes by means of artifi- poration; and Exotica, with a 75 per c2nt Anaconda interest. cially inflatingcosts. In the first case taxes are postponed, Also nationalized was the Andina company, in which Cerro and hence the procedure amounts toan interest-free loan Corporation had a 70per centinterest and which was ofthe government tothe company; in thesecondcase contemplating expanding above the 75,000 metric tons mark capitalizationtaxesare avoided altogether.See K.Griffin, within the next few years. Together the five mines accounted Underdevelepment in Spanish America, (George Allen and in 1970 for 78 per cent of thetotal copper production in Unwin, London),1969,p.154.E. Novoa. La batalla por Chile and for59 per cent ofthetotal valueof Chilean elcobre (Editorial Quimantu,),1972, providesa exports. general description and critique of the Frei agreements.

23 management of the mine and control over the the amount of about $175 million corresponding sales of copper and the purchase of inputs for to 24 six-monthly instalments beginning June periods of between 10 and 20 years. 1970 with an annual interest of six per cent. Anaconda retained the management of the new Taken as a whole, the terms of the agreement companies and the sales of copper and procuring with Kennecott offered quite generous compensa- of inputs for a period of eight years, and was to tion for the transfer of ownership of 51 per cent be paid for these services a fee of one per cent of of itsinterest in Chilean copper. In the end the total value of sales per year. KennecQtt had written off its books assets for As for the remaining 49 per cent of the shares $34 million (51 per cent of the 1966 book value) Chile undertook to purchase them by 1982, at a but had added a credit for $80 million and price based on the annual averageprofit of retained a 49 per cent interestin a company Anaconda as minority shareholder from January which was now worth $286 million. At the same 1970 to the time of the purchase, multiplied by a time it had secured for its Chilean subsidiary a factor of eight.4 It was also agreed that a pref er- twenty year tax regime that cut its tax liabilities ential dividend be established in favour of Chile inhalf,and had retainedcontroloverthe on the profits of the joint ventures whenever the operation of the company for a similar period. price of copper rose above 40 US cents per pound. This agreement was conditional upon The reason for this generosity on the Chilean side Kennecott accepting a similar arrangement, which is probably two-fold: on the one hand, the Frei it eventually did. government badly needed to be able to show a concrete result ofits much emphasized copper In some respects the agreement with Anaconda policy, particularly in the face of hostility both in 1969 was more favourable to Chile than the from the parties of the left, that were pressin.g for agreement with Kennecott in 1967, and no doubt complete nationalization, and from right-wing this is at least partially due to a political climate sectors, that were strongly against Frei's other generally hostiletothe companies mentioned main policy, the agrarian reform programme; on above. Thus book value was used to determine the other hand, the world copper price level and the price of the 51 per cent; the preferential its future prospects appeared good. In fact, the dividend in favour of Chile was established from actual level of prices far exceeded the expectations the outset; and no down payment was contem- of the government negotiators, and as a result plated. In other respects,the two were quite Kennecott enjoyed extraordinarily high profits in similar:again control over management, sales 1967-69. The same was the case with Anaconda, and purchases remained inthe hands of the which in 1967 had refused to accept joint owner- American company. In fact, here Anaconda fared ship with Chile and had offered instead, in ex- better than Kennecott, asit was to be paid a change for tax reductions, an investment pro- handsome fee for the services. gramme of about $126 million to be financed from its own resources.3 In one main respect, the Anaconda agreement was more favourable to the company than the Kerinecott one, particularly considering Anacon- lt was precisely the political furore prompted by da's corporate policy of rejecting partial divesti- the windfall profits of the companies that forced ture as a more or less permanent solution, and the government in ¡969 to introduce changes in that is in the price to be paid for the 49 per cent the companies' regime. This time it was. agreed of the equity. Even though Anaconda did not that Anaconda would sell to Chile 100 per cent challenge book value as a true reflection of the of itsinterestin and Salvador. worth of theassets, the system agreed upon This would bdone in two stages. In the first, could have easily yielded figures more than twice following the Kermecott model, joint ventures as high as book value, depending on the price of were constituted and Chile bought 51 per cent of copper and the time of the purchase. the shares. The price paid was based on the book value of Anaconda's subsidiaries at the end of The 1971 nationalization: compensation and 1969. Promissory noies were issued by Chile in excess profits Salvador Allende took office on 4 November, 3 The last element of the 1967 agreements was the establish- ment ofajointventure with Cerro Corporation for the 1970; the bill proposing the nationalization of the exploitationofthe RíoBlanco mine. The new company called Compañía Minera Andhia was 70 pr cent owned by Cerro (30 per centby theChileanState) and an initiai 4 If the purchase were to be made in 1974; beginning 1974, investment of ¶89 million was agreed, to bfinanced with thefactor would decrease by 0.5yearlyuntil1977 and external credits. remain constant thereafter.

24 copper companies, in the form of an amendment The Presidentfinallydecidedto consider as to the Chilean constitution, was submitted to normal a profit of 12 per cent on book value and Congress on 21 December that year. After seven ordered a deduction of all profits exceeding that months of debate, the nationalization bill was percentage. passedunanimouslybyCongress,including The final calculations of compensation done by members ofallChileanpoliticalparties.It the Comptroller General of Chile are as follows: nationalized the companies of Gran Minería and Andina as whole legal and economic entities, that table 2 is,includingbothassetsandliabilities,and Chile, 1971: calculation of compensation to the provided that they had a right to compensation at nationalized copper companies book value as of 31 December, 1970, less: ($ million) Chu qui- Salva- Exo- Ten- any revaluations done by the companies after tioa iente Andina 31 December, 1964. This applies specifically to camatador the Teniente revaluation of 1967; book value 242 68 15 319 20 deductions for: the value of rights to mining deposits that mining rights may appear in the books of the companies, and defective since according to Chilean law mining deposits assets 18 6 5 21 2 are the property of the State; and revaluation O 0 0 198 0 the value of assets that the State receives in defectiveoperationalconditionor without compensation 224 62 lO lOO 18 service rights, repairs and spare parts. deduction for excessprofits 300 64 0 410 0 In addition, the amendment also established that the could order a deduction of Source:ComptrollerGeneral'sResolution on all or part of the excess profits received by the Compensation, 11October 1972. Figures have companies since 1955 (i.e. the year in which the been rounded to the nearest million dollars. American subsidiaries were compelled by law to keep accounts in Chile). A judicial procedure was As suggested before, the decision on excess profits establishedto determine thefinal amount of precipitated a conflict with the American com- compensation, and the President was empowered panies. Chile did not honour the promissory notes to decide on the form, period and interest of held by Anaconda for the 51 per cent equity that payment of the compensation, which should be fell due on 31 . In February 1972 in cash within 30 years and with an interest of no Anaconda obtained in New York an order of less than three per cent per annum. The com- attachment of goods, assets and bank accounts pensation thus arrived at superseded any previous belonging to the Copper Corporation of Chile agreements for the purchase of shares. and the Chilean Development Corporation, to cover the value of the notes. Attempts by Chile In order to establish the criteria for normal to have the attachment vacated were unsuccessful profitability, a number of studies were carried and as a result Chile started experiencing diffi- out by Chilean technical agencies, the basic one culties in procuring spare parts for the mines, as being the comparison between the profitability of 95 per centof the imported inputs were of the American companies in their world operation American origin and many could not be obtained and in their Chilean operation as a percentage of elsewhere. It would also appear that Anaconda the respective book values. The summary results exercised influence on the main suppliers of the are as follows: Chilean mines to induce them to stop selling to Chile, or to harden their commercial terms. table I Anaconda and Kennecott: annual average profits Kennecott, for its part, first tried to obtain a as percentage of book value, 1955-70 judicialreview in Chile of the excessprofits world exc!. decision. When this failed in September 1972, the world Chile Chile company launched a legal offensive in Europe, Anaconda 7.2 3.5 20.2* whichwasinitiallysuccessfulinattaching Kennecott 11.6 10.0 34.8 Teniente copper or the proceeds of itssale in * Chuquicamata France, Holland and . Although by early Source:P. Nudelman. La compensación a las 1973allattachments had been vacated,the compañíasdelcobrenacionalizadasporel ordinary proceedings to determine the ownership Gobierno de Chile Santiago, mimeograph, 1973. of the copper continued through that year, and

25 similar proceedings were instituted in Italy and The one American company with which there Sweden. Kennecott also put pressure on European was no open conflict following nationalization firms to get them to stop buying Teniente copper. was Cerro, whose subsidiary Andina was awarded a compensation of $19 million, of which Cerro was entitled to slightly over $13 million The The basiclegalargument of Anaconda and Allende government announced it was prepared Kennecott was that the nationalization was null to pay this amount in 29 six-monthly instalments and void according to international law and the beginning 31 December 1973, with a net interest legal system of the European countries involved of seven per cent. This settlement was termed because it was not followed by compensation. In 'reasonable'bythecompany whichfurther fact some compensation was being paid. Kenne- announced its intention to continue working with cott continued to receive payment from Chile for the Chilean government in the operation and the $92 million loan, which, as suggested, was development of the Rio Blanco mine. In addition, really the payment for the 51 per cent purchased Chile recognized a debt to Cerro for an $18 million by Frei. This sum was about $8 million less than loan to Andina and offered to pay in the same the total book value of Teniente in 1971 exclud- terms as the compensation. ing the revaluation. Anaconda had not been so fortunate,having received about $36 million The conflict with the companies became a major corresponding to the first three instalments for elementintheinternationalpositionof the the 51 per cent of Chuquicamata and Salvador Allendegovernment.Even thoughthelegal plus interest. In both cases the fact that Chile offensive of the companies had limited success in accepted responsibility for the outstanding debt disrupting the operation of the mines or the sales of the nationalized companies meant that there of Chilean copper on the world market, the was indirect compensation for the amount of the compensation issue was an important factor in debt. In the case of Teniente, the liabilities as of determining the interruption of grants and credits December 1971 amounted to about 75 per cent to Chile from the American government, and in of the gross value of assets excluding the revalua- particular the Export-Import Bank, that provided tion, and about 45 per cent of that value including financing and guarantees for the bulk of Chilean the revaluation. In the case of Chuquicamata and importsfromtheUnitedStates.6American Salvador the corresponding figure is about 43 per pressure was also a main factor in stopping the cent.Compensation was alsoto be paidto flow of credits from the Inter-American Develop- Anaconda for Exotica, and to Cerro for Andina ment Bank, that lent Allende a total of $11.6 at levels very close to their book value, since those million in three years while the yearly average of companies only started operation in1970 and loans in 1965-69 had been $40 million; and from thereforethere were no excessprofitsto be the World Bank, which did not extend any credit deducted. (See table 2) totheAllendegovernment.7 The American government further refused torenegotiate the This preceding argument was, of course, unaccept- Chilean debt. The effect of this blockade of able to the companies. Kennecott stated that a credits was to add considerably to the foreign satisfactorysettlemeñt wouldata minimum exchange difficulties that Allende had to face, entail payment of the revalued book value of the particularly in 1972 and early 1973 when low 49 per cent, i.e. about $176 million Anaconda on copper prices and an increase in the import of the one side started the legal fight for payment of agricultural products combined to put enormous the outstanding promissory notes for the 51 per pressure on the country's balance of payments. cent purchaseamounting in all to $153 million 6 Following the recent revelations about CIA interferencein and on the other took a write-off for tax Chilean politics with the purpose of 'destabilizing' the Allende government, there have been unchallenged reportsinthe purposes in the US for $303 million plus a claim US press to the effect that the American government exercised for $159 million against the Overseas Private systematic pressure on private banks to stop credit to Chile. In fact, the short-term lines of credit to Chile of the American Investment Corporation (OPIC), a US federal private banking system decreased from about $220 million in 1970 to about $30 million in1971. The timing of these agency that insures American investment against moves by the American government would suggest, however, political risk in underdeveloped countries. The that they were only partially caused by the copper issue, and that there was a more general rejection of the Allende total of its chrimed losses was $474 million includ- government, which not even a settlement with the companies would haveremoved.See The New YorkTimes, 15 ing $12 million corresponding to Exotica which September 1974. were later paid by OPIC.5 7 J. Collins, "Tighttning the Financial Knot", IDOC, no. 58, December 1973,pp.70-74;P. Sigmund, "The 'Invisible Blockade' and the Overthow ofAllende", Foreign Affairs, 5 For Kennecott, see Kennecott Copper Corporation Expro- vol. 52 no. 2, January 1974, pp. 322-340, accepts the point priation of El Teniente, New York, 1971; for Anaconda, with respect to 1DB while arguing generally that there was The Wall Street Journal, 25 July 1974. no 'invisible blockade'.

26 In view of this situation, the Allende government therestill remains a sufficiently large uncom- requested from the American government the mitted tonnage to make itpossible toeffect application of the Treaty for the Peaceful Settle- repayment in a period of considerably less than ment of Disputes signed by the two countries in 17 years. Lastly, in December the Chilean Copper 1914andthesuspensionoftheeconomic Corporation announced thatit had appointed sanctions,while the Investigating Commission Cerro as the sole agent for the sale of Chilean called for by the Treaty issued a report. The copper in the US and Canada, a development United States government refused on the grounds that in all likelihood is not unconnected with the that the Investigating Commission's report was compensation agreement, as an agency contract not binding but only a recommendation, and of this kind has a definite value for the American pressed for a concrete settlement of the com- company. pensation question on bases different from those of the Chilean constitutional amendment that The second agreement was with Anaconda, with nationalized copper. A major concern of the which a Settlement Contract was signed in July American side in this connection was the need to 1974. Although the complete text has not been remove the precedent of the retroactive deduc- made public,the Decree-Law approving the tion of excess profits, lest American interests all Contract and the public announcement by the over the world could be endangered. This was not Minister of Mines of the Chilean junta9 disclosed acceptable to Chile and so the impasse continued the following features: until the military coup that deposed the Allende (j) the basis for compensation is the book value government in . of the companies as of 31 December 1970, less certain unspecified deductions. It seems The military regime and the American companies clear that there were no deductions for excess Shortly after the coup the new military rulers of profits. Chile announced their intention tosettlethe Chile will pay for the remainder of the compensation issue with the American companies. 51 per cent purchased in 1969 the sum of This was, of course, far from surprising consider- $194 million of which $6 million will be paid ing that the economic policies of the new regime in cash and the rest by means of 19 equal call for a substantial influxof direct foreign promissory notes due every six-months start- investment. Negotiations were started at the end ing 1 February 1975 with a net interest of of 1973 and by October 1974 agreement had six per cent per annum. been reached with respect to all operations except Anaconda is to receive a cash payment of Exotica, and all legal actions of the companies $44.4 million and $15 million respectively had been discontinued. for the 49 per cent of the shares of Chuqui- The agreement with Cerro was signed in March camata and Salvador. The Chilean announce- 1974.8 The total amount to be paid is$41.8 ment states that this figure takes into account million,includingthe $13.2millionthatthe the time elapsed between 31 December 1970 Allende government was prepared to pay for and 30 June 1974, and that deduction has compensation, the $18 million loan also recog- been made of taxes owed by the Anaconda nized by Allende and a sum of $10.6 million for subsidiaries in the amount of $34.7 million. what thepublishedreports term'unspecified commitments'. Payment is to be made with $3.2 The amount granted to Anaconda, then, is com- millionin cash and a17-year note bearing posed of the $253.4 million of the settlement, plus interest of 9.2 per cent net a year. The compensa- $21.8 million paid on the 51 per cent of the shares tion offered is, then, $10 million more than what in 1970/71,10 plus $34.7 million of taxes that were the Allende government would have paid; the offset against the compensation figure, for a total time period is two years longer but the interest is of $310 million. This is $24 million more than the considerably higher. Furthermore, the agreement Comptroller General's assessment of the book includes the possibility of much faster repayment value of the two companies in December 1970 through the sale to Cerro of concentrates and without any deduction for excess profits. The slags from the Rio Blanco mine whose proceeds $24 million figure is approximately equal to the would amortize the debt. Although Rio Blanco's interest on the amount outstanding of the 51 per production of about 55,000 tons of concentrates cent for the period -June 1974. The a year is mostly tied up in long-term contracts, Chilean announcement maintains that the agree-

8 Economic Report, London, 12 April 1974, 9 , Santiago, 25 July 1974. p. 59. 10 Including interest, the actual amount paid was $36 million.

27 ment is advantageous for Chile since Anaconda the Comptroller General's estimate. The sum is, was in addition entitled to damages of about however, $130 million less than the revalued book $24.5 million for the non-payment of the promis- value as of December 1970 minus defective assets. sory notes due between December 1971 and June Again, the deduction for excess profits called for 1974. This estimate, however, seems to calculate by the constitution is eliminated. damages at the rather extraordinary rate of 12 per cent compound interest every six months, i.e. four Kennecott, then, seems to have agreed to a com- times the original rate of interest on the debt. pensation for the 49 per cent equity that is about Furthermore, it could be argued that the cash one-half ofitsstated claim of $176 million, paymentwhich is really composed of the $65 although it is close to twice what it would have million plus the setoff for $34.7 millioncan be received according to the 1971nationalization considered to be a higher present value than the bill even in the absence of deduction for excess same amount spread over ten years at six per cent profits. In effect, it has dropped its claim to the per annum. The discount rate for Anaconda is revalued book value as the fair assessment of the probably quite high, due to the abnormal political worth of the assets. situation in Chile and the fact that the immediate reaction of the Chilean opposition in exile was to That this was probably not an easy step is no state that the agreements violated the Constitution doubt shown by the fact that the Kennecott and were not to be recognized by any government agreement took a fullthree months more to that would succeed the military. All in all, the achieve than the Anaconda settlement. One can agreement seems to compensate fully the Ameri- only speculate as to the reasons for their evelitual can company for the nationalized assets, even willingness and one that immediately springs to though it falls short of the figure announced by mind is the possibility of US government pressure. Anaconda in 1972 as the value of write-off and The American government's eagerness to help the insurance claims. Anaconda has announced that Chilean junta was apparent at an early stage. In it will continue its legal action to obtain payment the two months following the coup, direct bilateral from OPIC, but in the event it is successful it will assistance was given in the form of pay a percentage of the $253 million to the credit loans for $52 million. Eximbank reopened agency." its credit and guarantee programme for Chile and the Inter-American Development Bank, clearly Finally, the agreement with Kennecott was signed reflecting a change in the American position, had in October 1974. According to the announcemtht granted credits for $201 million as of April 1974. by the Chilean Minister of Mines,'2 Kennecott is For fiscal year 1975, the US government proposed awarded a compensation equal to 49 per cent of to Congress about $85 million of aid to Chile, the book value of Teniente in December 1970, including $25 million in AID development loans lessunspecified deductions thatinclude $19.6 interrupted since 1967about $1million in million for outstanding taxation. The net com- grantassistance(compared with$330,000in pensation is then put at $44.8 million to which is 1973), $37 million in 'food for peace' grants and added a sum of $9.1 million corresponding to loansas against $2.5 million in 1973and some six per cent interest per year for the period $21.5 million in militiary aid, about twice as much January 1971-September 1974. Lastly, a sum of as in l973.'Furthermore, the Chilean military $14 million is awarded corresponding to dividends were quick to do away with what was the most and interests thereon for the 49 per cent equity politicallydangerous elementintheAllende up to 31 December 1970, of which $6.5 million nationalization, namely the deduction for excess are paid in cash. The remainder, as well as the profits. This in itself probably made the possibility main sum, is paid in 19 six-monthly instalments of an early settlement with the companies a starting 25 April 1975 with an annual net interest desirable objective in the view of the American of six per cent. government.

In all, Kennecott is awarded $68 million plus Despite thereductioninKennecott's original $19.6 million of tax setoff. Added to the $80 claim, the settlements represent a quite onerous million of the 51 per cent equity this amounts to about $70 million more than the unrevalued book 13 The AID proposaltoCongressisjustifiedasfollows: value in 1970 less defective assets according to "Given the willingness of Chilean authorities to co-operate in the resolution of outstanding bilateral problems of debt and compensation, the efforts underway to regularize Chile's internationalfinancialobligations, and . theserious Chilean 11 "News from Anaconda", 24 July 1974. stabilization effort, reactivation of the AID loan programme 12 El Mercurio, 25 October 1974.Partial English translation isproposedfor FY1975".QuotedinInter-American in Metal Bulletin, no. 5936, 29 October 1974, p. 20. Economic Affairs, vol. 28 no. 1, Summer 1974, p. 89.

2S burden on the Chilean balance of payments. For Chilean military regime than they first anticipated. 1974 total payments amount to $74.7 million plus But then that seems to be the price they are pre- about $11 million of the Kennecott debt of $92 pared to pay to placate the American multi- million. nationals and, they hope, reopen the flow, of direct foreign investment to the country. In 1975, payments of principal and interest to Anaconda willtotal about $30 million14; the corresponding figure for Kennecott will be about $10million'5;andforCerro,assuming no acceleration of the repayment, it will add to little less than $6 million'6. If one allows for some payment for Exotica, about which no agreement has yet been announced, but which is a much less POSTSCRIPT cor,flictive issue, the annual payments beginning in 1975 may amount to over $55 million. On 5 December 1974 the Chilean junta and the Overseas Private Investment Corporation of the United States agreed on the compensation to be The decision to assume this heavy financial obli- paid for the nationalization of the Exotica mine. gation was probably eased for the Chilean military It amounts to $12 million payable over a period by the fact that the sum of the direct US govern- of five years with a net interest of 6 per cent per ment aid given to them after September 1973 plus year. This completed the settlement of all out- the proposed amount of aid for fiscal year 1975 standing claims deriving from the nationalization is approximately equal to the payments to the of Gran Mineria. companiesfor1974-75;anotherfactorwas probably the record levels reached by copper According to a report in the Financial Time of prices in early 1974 and the general expectation 6 March 1975 the junta has further announced that they would stay at comparatively high levels that it will allow international mining corpora- forthe remainder of1974 and 1975. Asit tions to wholly own new copper mines producing happened, however, the recession in the Western economies caused a considerable drop in the level 100,000 tons or more a year. This reverses a of prices in the second half of 1974: the average policy announced in 1974 according to which the for July-December was £660 per ton as compared Chilean State would maintain at least a 51 per to £1,100 per ton in January-June. Despite the cent interest in new mines of this size to be attempt by producers belonging to the Inter- developed by foreign investors. governmentalCouncilofCopperExporting Countries (Chile, Peru, Zaire and Zambia) to raise the price by cutting down sales by 10 per cent, all indications seem now to be that the price in 1975 will not greatly exceed the levels of late 1974. On the other hand, the US government has had seriousdifficulties ingettingCongressional approval for the proposed aid to the military junta, due tothe concern about violation of human rightsin Chile. In December 1974 a Senate-House Conference voted to suspend all military aid to the Chilean , and it seemed very likely that the decision would be confirmed when itreached the floor of both Houses. The cost of the compensation agreements, there- fore, may well end up more burdensome to the

14 Two promissory flotesfor $99 million each plus interest for $56 million and $S.4 million. 15 Two promissory flotes for $3.2 million each plus interests for $1.8 million and $1.75 million. One should, again, add the $10 million of the old debt. 16 One payment on theprincipalfor$2.3 million plus $3.5 million interest.

29