Wednesday, June 13, 2012

Defense Budget Overhaul Clears Legislative Hurdle

The most sweeping revision of Chile's military budget passed unanimously in the lower chamber of congress Wednesday, June 13, clearing an important milestone. The proposal now moves to the Senate. For decades, 10% of export sales by the state-owned copper company, Codelco, have been earmarked for military acquisitions. The new law eliminates that lucrative mechanism, replacing it with a budget process similar to what other government agencies use. That is, lawmakers will get final say (really, a say for the first time) on the defense budget and there will be much greater transparency in acquisitions. The "copper law" yielded upwards of $1 billion a year for Chile's military, and no doubt the new financing system will reduce those sums. Yet, the revision establishes an annual spending floor of 70% of the average sum the copper law provided from 2001 through 2010. That works out to roughly $600 million. In general terms, the new mechanism sets up a broad strategic budget drawn up every 12 years, and more specific outlays approved every four years. A Strategic Contingency Fund will be set up to finance a potential conflict, or to take advantage of a noteworthy bargain in the international arms market. It will be initially funded with the copper law surplus, which is believed to be a few billion dollars.


Anonymous said...

Any guess as to how many billions? Wasn't it around 3 billion right before the recession?

J.C. Arancibia said...

Yes, it was a bit more than $3 billion that had been estimated. Hard to say if that has changed much, but definitely has not been reduced.