Saturday, July 27, 2019

Chile's Military Surrenders its Prized Treasure as 'Copper Law' Ends

Chile's government struck down the principal funding mechanism for weapons systems, which for decades provided billions of dollars and made it possible to acquire top fighter jets, armor and warships. The legislature, where the plan had stalled for nine years, finally voted to end the so-called copper law July 24, and President Sebastian PiƱera will sign the bill Aug. 6. For more than 60 years, the state-owned Codelco copper mining company passed on 10% of export sales to the armed forces for weapons purchases. (In 2018 alone, Codelco's total sales were $14.3 billion, most of it in exports.) Now, the military will compete for funds along with all other government agencies. Here are the key points of the new law:
  • Each year, minimum spending floors will be set for maintenance and updates of weapons systems. Those will be based roughly on the average costs over the preceding six-year period. By some estimates, that could be $500 million a year.
  • An eight-year strategic spending policy will guide major acquisitions, and those will be budgeted in four-year increments.
  • All funds that had accumulated from Codelco are being turned over to the national treasury. But the government will create a strategic contingency fund to replace equipment that suffers major damage. It may also be used for acquisitions under the strategic plans.
  • Codelco's annual contributions are not going away anytime soon. It will continue to provide 10% of sales for nine years. After that, its payments will phase out over three additional years.
  • The new law includes steps that shift spending oversight away from the military and into the hands of the elected government. For example, the government's comptroller will review each four-year spending plan, and legislative committees will have an oversight role. In general, defense procurement will become more transparent.


Anonymous said...

That sounds like a lot of money, obviously that much hasn't been spent. So we can expect a large sum going to the national treasury?

Anonymous said...

Another thing that has always bugged me about the Chilean right is why have they never tried to establish a significant military industrial complex? If they're so keen on having a modern military and good economy why not improve scientific and technological output? Why just buy weapons? It seems to me if there is a will there is a way. So why doesn't this money find it's way to scientific and business initiatives? They could hold contests for contracts, even modest space and aviation programs would be better than hoarding liquidity.

Unknown said...

Cause by law that money needs to be spent for weapon acquisition only. Besides, the cost of research and development is too high for a country of only 18mil people. Their money and efforts go to their mining industry which is pretty modern.

Anonymous said...

They could work with mostly 'off the shelf' technologies. Not expecting miracles, or from scratch work. I mean other nations do these things, why not give it a try?