Sunday, May 19, 2013

Military Sitting on Billions of Unspent Funds

For a couple of years, Chile's government has been moving to end a copper tax used to finance defense acquisitions. But while the lower house has approved the measure, the Senate still hasn't. So, state-owned mining company Codelco continues to feed the military piggy bank, to the tune of $1.27 billion in 2012 and $1.49 billion in 2011. With few major purchases those years, the money is piling up. A German news report quoted in said Chile's defense savings total $4.2 billion. The report added that Chile plans to spend $7 billion to $11 billion in defense projects through 2025. It's not clear if the savings include Chile's defense contingency fund, which is believed to total more than $3 billion. But politics have a way of frustrating defense spending, even when there's plenty to go around. The government faces pressure to spend more on education, and reconstruction from the massive 2010 earthquake remains a big project. That has forced President Sebastian PiƱera to rethink some defense acquisitions, according to an analysis by UPI. Public perception of the country's financial management might explain why there's been so few big-ticket weapons purchases since 2011. Chile's military greatly benefited from copper funds over the past decade as the metal's price surged. But there are risks with relying too much on the red metal. The price of copper has slid this year and Codelco's production fell for a second straight year in 2012. Today, copper is much about China's economy, making copper prices vulnerable to slowdowns in the Chinese economy. China accounts for about two-fifths of global demand for copper and Chile supplies about one-third of the world’s copper. There are domestic risks, too, such as mining-labor strikes.

1 comment:

Victorina said...
This comment has been removed by a blog administrator.