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18/7/18, 1'18 pmPinochet, Kissinger & BHP — Global Mining Observer
Page 1 of 4http://www.globalminingobserver.com/pinochet-kissinger-escondida-199
MOST POPULAR: Inside Formula E • Paul Gait • Fracking for copper • The Guggenheims • ICMM'sTom Butler • Star-crossed: Rio & Alcoa
199 (15.07.18)
HISTORY
General Pinochet's Car Bomb & BHP'sDeal in ChileHow Henry Kissinger, General Pinochet and a small group of bankers inLondon turned Chile into the world’s largest copper producer. “The time to buystraw hats is in winter.”
On Embassy Row inWashington, an explosionripped through the undersideof a large, sky-blue Chevroletjust after 9.30 in the
seized power by shelling thepresidential palace only threeweeks after being promotedto Commander-in-Chief ofthe army. Ruthless,
than making a full-faithcommitment to investment inthe country”, and Chile'snewspapers started printingcartoons of a kangaroo in a
18/7/18, 1'18 pmPinochet, Kissinger & BHP — Global Mining Observer
Page 2 of 4http://www.globalminingobserver.com/pinochet-kissinger-escondida-199
morning. It was 1976 andinside was Chile's formerforeign minister, OrlandoLetelier. He died almostimmediately, his lower bodyblown off. Letelier, 44, had been oneof the key figures in Chile'sdecision in 1970 tonationalize its copper mines,undoing decades of Americaninvestment. The move was a“serious infraction tointernational practice”,America had warned, puttingChile under sanctions. Letelier and Chile's Marxistpresident of the time,Salvador Allende, were closefriends, and Letelier had beencharged with defending thepolicy of “Chilenization”. Butafter food shortages, strikesand a coup, Allende hadallegedly shot himself with anAK-47 and Letelier fled to theUS, where he was posturingas a leader-in-exile. Now bothmen were dead. America was outraged bythe car bomb, which went offless than a mile from theWhite House. Butdecommissioned papers showthat its intelligence serviceswere at least complicit. Henry Kissinger, America'sSecretary of State, who hadlittle time for what he called“human rightsy” criticism,was aware of a plan by Chile'ssecret police to hit targets onUS soil. Kissinger had honedthe art of traffic lightdiplomacy, using ambiguouslanguage to flash red andgreen signals at anti-communist governments,
intelligence and crafty, he hadviolently ended Chile'sMarxist experiment, breaking150 years of Chileandemocracy, but the day afterhis coup, Chile'ssupermarkets were full offood. Pinochet's 17-yeardictatorship remains bitterlydivisive: obsessed withpristine military uniforms, hekept the country in a state ofemergency, rounded-uppolitical opponents and'disappeared' thousands ofpeople. Dissidents wereroutinely thrown out ofhelicopters, bodies dumpedin disused mines. Pinochet also used armsdeals to embezzle funds,stuffing money into US bankaccounts under a fake name,“Daniel Lopez”. But heassuaged foreign interestswith free-market reforms:Chile dropped tariffs, bannedunions and stabilised itscurrency, promoting a newbreed of monetarism that wasonly later taken up byMargaret Thatcher in Britainand Ronald Reagan in the US.Pinochet privatised Chile'spension pot, foreign banksmoved in and exports and thestock market boomed. From fisheries to wine andtimber, Pinochet privatisedalmost every industry, yet hekept hold of Chile's coppermines, using them to tightenhis grip on power: themilitary was guaranteed 10per cent of all copperrevenue. As a concession to big
cowboy hat, its pouch stuffedwith dollars and contracts. The huge new mine cameinto production in 1990,$300m below budget (thanksto a favourable poweragreement). It was also givena fixed 20-year tax deal andthe right to funnel revenueinto an offshore account.After two rapid expansions,Escondida was the biggestcopper mine on the planet. But Pinochet had trippedhimself up by rewriting theconstitution, triggering aplebiscite on his position aspresident. He was undermounting internationalpressure to resume electionsand the vote went againsthim. Having earmarkedhimself a lifetime seat in thesenate, Pinochet reluctantlystepped down two years later,just as Escondida came intoproduction. His legacy remains visible:by handing-out licenses andtax agreements, Pinochetturned Chile into the world'sdominant copper producer.Chile's output tripled duringthe 1990s, leaping ahead ofthe US. After nearly twodecades in abeyance, hispolitical opponents beefed-upChile's unions, but its state-owned mines now account foran ever-shrinking share ofproduction. Henry Kissinger meanwhilewatched Chile's remarkabletransformation from “theseventh floor” (codename forhis office in Washington). Asto who killed Letelier,Kissinger has remained
18/7/18, 1'18 pmPinochet, Kissinger & BHP — Global Mining Observer
Page 3 of 4http://www.globalminingobserver.com/pinochet-kissinger-escondida-199
encouraging drastic action,without committing to aposition, keeping the US onestep removed. “I understand theproblem... We understandyou must establishauthority... There are thingsthat have to be done,”Kissinger had told a group ofmilitary leaders in privatemeetings in Santiago. Among them was GeneralAugusto Pinochet, Chile'shardline dictator, who had
business, Pinochet redraftedthe constitution, opening-upthe country to exploration:private companies couldbuild whatever they found.American multinationals,including General Electricand Getty Oil, moved back in,punching drill-holes intocopper porphyries that ran ina straight line across theAtacama desert. The biggest was Escondida:with half a billion tonnesgrading 2.16 per cent copper,it was the largest copperorebody ever discovered, butinvestors were nervous aboutfronting the $1bn build cost.They were less frightened ofPinochet than the socialistshe had shelled out of office:“The Allende years” and “thememories of theappropriation”, according toone geologist, “were stilluncomfortably close.” Escondida was bundled inwith a portfolio of coking coalmines and sold on toAustralian mining groupBHP, launching the companyonto the world stage. Priceswere depressed, but chairmanSir James McNeill justifiedthe $2.4bn deal, then thelargest in Australia's history:“The time to buy straw hats isin winter.” Advised by banks inLondon, BHP structured aningenious financing package:it sold stakes in Escondida torival Rio Tinto, Japanesetrading group Mitsubishi andthe IFC, a Washington-basedoffshoot of the World Bank,before selling forward the
typically cryptic. “I knew him,I liked him personally.”
CONTENTS
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60 Seconds with:Joe Mazumdar
Geologist JoeMazumdar, editor ofExploration Insights,only really wanted tobe a big game vet, hetells Global MiningObserver
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An elaborateespionage ordealinvolving Rio Tintoand the governmentof China cost thecompany £800m inlost iron ore revenue
18/7/18, 1'18 pmPinochet, Kissinger & BHP — Global Mining Observer
Page 4 of 4http://www.globalminingobserver.com/pinochet-kissinger-escondida-199
concentrate to refineries inFinland, Germany and Japan,which funded constructionwith government-backedloans. The risk (andownership) was spread wellbeyond BHP's board, andmultiple governments weregiven an interest inEscondida's success. BHP was accused of“mortgaging the mine'sfuture” for political reasons,“rather
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