By Francisco Marin
The Treaty supposed the creation of an Operations Area of 340,835 km2 contributed by Chile and Argentina. It could also grant exploitation concessions and resolve disputes that arise between “the parties”, that is: The States.
Promulgated almost nine years ago, the Mining Treaty between Chile and Argentina was the instrument built by the mining transnationals to exploit the Andes Mountains. They had the backing of governments and parliaments of both countries. However, much of what its promoters are pursuing has not materialized: An injunction presented to the Constitutional Court of Chile, and its subsequent ruling, ended up diluting it.
Despite its significance, this story has remained hidden ... until now.
The Mining Complementation Treaty between Chile and Argentina, promulgated on December 20, 2000, provided the legal framework in which the Pascua Lama gold project is inserted and many others that are to be built in the high peaks of the Andes.
According to the Chilean economist, Julián Alcayaga (see box), in his book The Virtual Country: The Hidden Side of the Chilean-Argentine Mining Treaty, the corporations that promoted this agreement sought three fundamental objectives. First, that Argentine minerals could leave through Chilean ports, given that the distance between the Andean deposits and the Atlantic made it unfeasible to take them out there.
They also sought to transform the Andes Mountains into a "virtual country", defined in the Treaty as an "Area of Operations", which, in their understanding, would be at the service of transnational mining companies. The third objective was to lift restrictions on foreign ownership in border areas.
El Ciudadano discloses - with the author's authorization and exclusively for Chile - relevant aspects of this recently concluded and unpublished book, which reveal the hidden details of the gestation of this Treaty, as well as its objectives and the reason for its failure partial.
Genesis of a spoliation treaty
“By 1989, there were only four foreign mining companies in Argentina. But the following year, coinciding with the so-called reestablishment of democracy in Chile, multinational mining companies began to buy almost all of the deposits in that country, which at that time had a low commercial value, since it was not profitable to extract those minerals through the Atlantic ports, more than a thousand kilometers away, ”says Alcayaga in El País Virtual.
And he adds: “Despite this difficulty, the transnationals began to acquire the mines, with the certainty that in the near future they could export the minerals through Chile. Thus, in 1993, when almost all of the Argentine deposits had passed into the hands of foreign mining companies, they set out to create a treaty between both countries that would give them the widest facilities to extract trans-Andean copper through the Pacific. "
Starting in 1994, binational commissions were formed on the mining issue with a public-private composition. This will to work together was embodied in the Presidential Declaration of Olivos, signed on April 26, 1996, and which had the impulse of then-President Menem, as well as ministers and parliamentarians from both countries, and prominent businessmen. They were the bases of the Mining Treaty.
On December 29, 1997, in Antofagasta and San Juan, Presidents Eduardo Frei and Carlos Saúl Menem signed the agreement. Its ratification was in the hands of both national parliaments, which could approve or reject, but not modify what was established by the leaders.
The Treaty supposed the creation of an Operations Area of 340,835 km2. Of this area, 180,165 km2 would be contributed by Chile -which represents 25% of its territory- and Argentina would add 160,670 km2 (6% of its land). The pact contemplated that this territory would be governed by an Administrative Commission - executive power - that would be financed by mining corporations. It could also grant exploitation concessions and resolve disputes that arise between “the parties”, that is: The States.
Another very relevant aspect of this agreement is that it allowed the constitution of mining easements in Chile for deposits located in Argentina, and vice versa. This means that the Chilean courts were empowered - almost obliged - to grant construction permits for roads and pipelines in favor of mines located in Argentina.
Regarding the radical resignation that this agreement supposed to the sovereignty of the countries involved, Alcayaga asks in El País Virtual: "Who were the jurists who wrote those pages?" The answer would come in mid-2000, at a dinner at the La Maison de France restaurant. This appointment was requested by Barrick from Senator Jorge Lavandero, who was then president of the Senate Mining Commission. He was also the main opponent in Chile to the agreement.
Barrick executives Sergio Jarpa and José Antonio Urrutia attended. Also the prominent Christian Democrat politician Marcelo Trivelli and Pilar Velasco, who lobbied in favor of the transnational through the communications company Extend. Lavandero attended accompanied by Carlos Tomic, Hugo Latorre and Alcayaga.
“Little by little we got into the central issue - Alcayaga relates in his book - which was the Mining Treaty. At one point in the discussion, when defending the importance of the agreement, Urrutia - perhaps by inadvertent or enthusiasm - stated that it was Barrick Gold that drafted the Mining Treaty between Chile and Argentina. Lavandero and his advisers withdrew in outrage after receiving this information.
Barrick Gold desperately wanted Lavandero to desist from its fierce opposition, but it failed. If the Treaty were approved, the company would reap formidable benefits: it owned several fields in the Argentinean Cordillera, in addition to Pascua Lama, which is located on the border. To exploit them, it needed the lifting of restrictions on foreign ownership on both sides of the Chilean-Argentinean mountain range.
In the debate that took place in the Senate, another objective of this agreement became evident that had gone unnoticed. "In an instant, Senator Gabriel Valdés requested an explanation of why southern Chile was included in the Treaty Operations Area, if there are no mining deposits in that area." Although former president Frei Ruiz-Tagle and important authorities of the Ministry of Foreign Affairs and Mining were present at the session: nobody knew what to say. In an interview with El Ciudadano, Alcayaga said that the fact of including the south of both countries –which contain one of the largest freshwater reserves in the world-, “shows that with this treaty, the transnationals sought to have total control of the mountain range. Chilean-Argentine ”.
There was no serious debate in the Chamber of Deputies. “It seemed that the objective was immediate approval, skipping essential procedures for the proper approval of this Law, such as rejecting it from passing through the Finance Commission of the Lower House, a mandatory procedure, according to the Organic Law of the National Congress, when a draft law contemplates expenses in its application ”, as the aforementioned book maintains.
And he adds: “Existing an agreement in the Foreign Relations and Mining Commission to vote it on a good basis, it was finally approved economically in just… five minutes! (…) To avoid its study by the Finance Commission of the Chamber of Deputies, the Executive argued that the implementation of the Treaty did not involve expenses, which was not true and constitutes one of the most relevant defects of the Law approving the Treaty " .
In the little that was reached to discuss, the determined defense of the Treaty by the PPD deputy, Antonio Leal, stood out, drawing a promising panorama for the Chilean north in the event of signing this agreement. None of its omens have been fulfilled.
On August 8, 2000, the deputies approved this agreement. Only two parliamentarians, of the 120 that make up the Lower House, voted against: Jaime Mulet and María Rozas.
The Senate, for the analysis of the Treaty, had a United Mining and Foreign Relations Commission, which was chaired jointly by Senators Sergio Romero and Jorge Lavandero.
In the heat of the discussion, most of the senators became aware that the Mining Treaty would affect national economic interests, due to the increase in the supply of copper that it would entail and the consequent drop in price that this would cause. It became clear that the only beneficiaries would be the large mining companies that do not care that the price of copper falls because, although producers of the mineral, they are also consumers of it, as happens with Mitsubishi, Billiton and Xstrata. These conglomerates not only extract the copper, but also melt, refine and process it.
In the report signed by Magdalena Ossandón: Mining Treaty opens the Pacific to Argentine mining, which appeared in El Mercurio on November 1, 1998, it was stated: “… the Argentine Pachón mine, with no exit through Chile, is worth 25 million dollars. That was the price paid by the Canadians who bought it from the Argentines. With exit through the Pacific it rises to 600 million dollars. If the pass is worth so much, wouldn't it be convenient for Chile to collect the fair bill? "
If the big beneficiaries would be the transnationals, the losers would be, among others, the 80,000 small miners in Chile, for whom the low prices are unsustainable. Something similar happens with medium mining.
The arguments in favor of the convenience for Chile of the Treaty, which were given in the Chilean Parliament, were very weak and were related to the eventual gestation of new jobs -in the construction and operation of the mines-, and the supposed dynamism that it would acquire the Chilean economy (in transport, supplies and services) thanks to new mining ventures.
In Parliament the greatest promoter of the Treaty was the former Chancellor, Soledad Alvear. According to former senator Lavandero, she toured the senators' offices trying to get their support for the initiative.
In the Report of the United Commission, bulletin 2408-10, of October 6, 1999, of the Chamber of Deputies, SONAMI's lawyer, Cristián Letelier Aguilar, affirms that “this Treaty presents characteristics of such peculiarity that it constitutes the only work of Public International Law that contains application rules entirely of business and private interest ”.
A report by Joaquín Vial, Budget Director for the Frei government, argued that the mining agreement would lead to losses for Chile of several hundred million dollars as a result of the foreseeable overproduction. The successive governments of Chile kept this and other reports, such as that of the constitutionalist Jorge Ovalle, which showed the damages, weaknesses and unconstitutionalities that the approval of the Mining Treaty entailed.
On August 29, 2000 - a few hours before the Senate approved the Treaty that involved the privatization of the Cordillera for the benefit of transnational corporations - 13 Chilean senators presented a request to the Constitutional Court. These were: Evelyn Matthei, Jorge Lavandero, Fernando Cordero, Julio Canessa, Jorge Martínez, Ramón Vega, Enrique Zurita, Antonio Horvath, Rodolfo Stange, Beltrán Urenda, Jovino Novoa, Marco Cariola and Mario Ríos.
In an answering opinion, dated October 3 of that year, the Constitutional Court (TC) did not declare the Treaty unconstitutional but in its recitals, it strongly limited its scope: “The opinion established that the Chilean courts were prevented from granting mining easements to Argentine deposits and, perhaps more relevant than that, the Administrative Commission of the Treaty would no longer have jurisdictional powers, removing the character of "virtual country" from the Area of Operations of the Treaty. In other words, even though unconstitutionality was rejected in form and substance, we had achieved a large part of our objectives, ”said Alcayaga.
The Chilean courts' ban on granting easements was particularly serious for large mining companies: If a mineral located in Argentina, such as Pachón, wants to obtain them to build a pipeline to the sea, it must deal directly with the owners of the affected lands. They will be able to charge whatever they want to allow the easement. If someone objects: there will be no passage of minerals.
This single provision has meant that none of the nearly ten mining megaprojects that were intended to be exploited in the Argentinean mountain range from 2000 onwards have begun to operate. The construction of El Pachón was planned for the second semester of 1998. This mine alone would initially produce 180 thousand tons of copper per year, which constitutes 1% of world production of this mineral. The request and subsequent ruling of the TC ruined their plans.
The opinion of the Constitutional Court confirmed that the Treaty contains matters of a constitutional organic law and had to be processed and voted with the percentage of voting of this type of regulations. "But he considered the procedure to be clean, stating that thanks to the high quorum with which the Treaty was approved in the National Congress (only two votes against in the Lower House, and seven in the Senate), the procedural defect was purged"
In Alcayaga's understanding, the discussion of the Treaty had favorable and unexpected effects for Chile. He says that after the presidents of the two countries signed the Mining Treaty (1997), investment in the sector for this side of the Cordillera dropped drastically. This was due to the fact that investors considered that it was much better to move to Argentina, where there are huge deposits that could begin to be exploited by Chile after the Treaty. Furthermore, under Menem's mandate (1989-99), an extremely favorable legal framework was established for mining transnationals.
“That summer in San Juan, with three years of falling mining investment in Chile (between 1998 and 2000) and the non-materialization of the projected investment in Argentina, was ultimately essential for Chilean copper production to decrease and begin to decline the global overproduction of this mineral generated by the heavy investment of the area in Chile. But this would not have had any effect if the Chilean Constitutional Court had not definitively prevented the large projects programmed for copper mining in Argentina from materializing, ”says Alcayaga.
As a result of this lower three-year investment and the subsequent stagnation in the increase in supply, the current price of copper - 2.2 dollars a pound - is almost four times higher than that of ten years ago.
It should be noted that Chile, which is the world's leading producer of copper, dramatically increased its production of this mineral as of the arrival of the Concertación governments. From the 1.6 million tons produced in 1989, it rose to 4.6 million in 2000. However, this increase did not imply higher profits, but quite the opposite. With overproduction, the Chilean mineral saturated the markets, pushing its price downwards: its value fell by half in the 1990s. In 1999, with a production three times higher than that of ten years earlier, the country received eight times less net income.
There is one aspect of the Mining Treaty that was not touched by the Constitutional Court ruling: The one that allows foreigners to exploit border mines. Therefore, Pascua Lama is still possible. Barrick doesn't have it easy anyway. Alcayaga explains it like this: “After the ruling of the TC declared that the Administrative Commission did not have self-supervision or jurisdictional powers, it is prevented from managing private funds to finance the State.
Faced with this unexpected consequence of the ruling, the government (of Lagos) took more than two years to find a ‘legal’ solution to the way in which investors (Barrick) could finance the expenses of the Chilean state in cross-border mining businesses. This solution was the publication, just on February 9, 2003, of Supreme Decree No. 116 of the Ministry of Mining ”. Through this provision, Barrick and other mining transnationals that adhere to the Treaty are allowed to pay directly to the institutions involved in supervising them: that is, Carabineros, SAG, Customs, among others.
According to Alcayaga, this violates numeral 20 of article 19 of the Fundamental Charter, which establishes: "The taxes collected, whatever their nature, will enter the patrimony of the Nation and may not be assigned to a specific destination" . Apart from this unconstitutionality, the author of País Virtual expresses that it would be "unpresentable" for the auditees in Chile to start paying the expenses of their auditors.
Box 1: Possible end of Pascua Lama pending
The Huasco Valley Defense Command, and other organizations, presented a Constitutional Action for the Nullity of Public Law of Supreme Decree 116, which has the role No. 4670-2008 in the 9th Civil Court of Santiago. This is in the testing stage. If it prospers, it would be the end of Pascua Lama.
Box 2: The opinion of the Chilean Constitutional Court
Its legal scope will be different in one country than in another, as if there were two treaties in one. This is due to the fact that in Argentina the constitutionality of this Treaty was not questioned, the Administrative Commission has all the powers that the Mining Treaty gives it. However, by virtue of the Opinion of the Chilean Constitutional Court, the most important of these powers do not apply in Chile.
Box 3: The author of the book
Alcayaga belongs to a family of Pirquineros. A socialist since he was a teenager, after the 1973 military coup he was arrested, tortured and sentenced to 10 years in prison. In September 1976, his prison was commuted for estrangement.
In the Soviet Union he studied Economics (Patricio Lumumba University). Later, in Paris, he would do postgraduate studies at the Sorbonne. In 1993, when he had been returning to Chile for almost a decade, he was able to establish that the mining transnational companies that operate in Chile do not pay taxes.
In the Black Book of Red Metal (1999) he described the mechanisms used for this purpose as well as the role that the Chilean governments have played, since September 11, 1973, to facilitate this task.
Box 4: How the request was created
Alcayaga tells in his book how it was that his decision to promote a requirement for unconstitutionality of the Mining Treaty was made. It says that in the last session of the United Commission - held on July 4, 2000 - Senator Augusto Parra, in basing his vote in favor of the Treaty, said: “Several constitutionality issues have been raised, of which the most powerful Some of those raised by the economist, Mr. Julián Alcayaga, have been made, but after carefully analyzing them, it has been concluded that they lack sufficient elements. This appears on page 182 of the Report of the aforementioned Commission.
Despite some criticisms, such as those expressed by Senators Gabriel Valdez and Jaime Gazmuri, all the Concertación senators, except Jorge Lavandero, voted in the United Commission in favor of the Treaty. The other vote against that was in the aforementioned Commission was contributed by the retired Admiral Jorge Martínez Busch. Parra's opinion, plus the Admiral's vote, fueled the Pirquinero's convictions. “For this reason, as soon as this last session ended (…) I approached Senator Martínez Busch to test the possibility that he would support (…) a requirement against the Treaty. He agreed in view of the danger that the Treaty involved for national sovereignty, and we arranged to meet the next day to begin preparing it. I arrived with a draft of the appeal (…) From that day on, and until August 29, we would meet at least two or three times a week to discuss the progress of the request and get the signatures of fellow senators. At the same time, Senator Jorge Lavandero's conversations with institutional senators became more frequent and cordial ”.
The lawyers Pedro Foncea Navarro, Juan Subercaseaux, Francisco Corona and Julio Stuardo González collaborated with the economist in drafting and correcting the request.
Getting the twelve signatures of senators necessary to validate this requirement was the most important thing. Alcayaga says that the greatest merit in this regard went to Martínez and the senator-designate Fernando Cordero. Laundress, for his part, though he tried, could not get a signature.
Alcayaga, in his eagerness to obtain the rubrics, had to go to Augusto Pinochet's house. Senator Martínez requested it since an important group of senators would gather there to greet the ill-fated tyrant. Almost half of the signatures of the requirement were signed there.
In the conclusions of his book, its author maintains that the experience with the Mining Treaty left him some lessons. The first is that, no matter how difficult a fight may seem: "you should never lower your arms."
“The second lesson,” says Julián, “is that the prejudices that may exist between opposing worlds or groups, such as leftist militants and the military world, can be set aside to achieve a common goal, in this case to stop the Mining Treaty, although the motivations for achieving it have been very different for each group. With open-mindedness, the common goal could be achieved, although at first just talking was a challenge ”.
Francisco Marin, published in El Ciudadano - Chile