July 24, 2019 / 8:18 PM / 2 months ago

Chilean lawmakers abolish law requiring Codelco to finance military

FILE PHOTO: The logo of Codelco's El Teniente copper mine, the world's largest underground copper mine is shown on a vehicle near Machali, Chile, April 11, 2019. REUTERS/Ernest Scheyder

SANTIAGO (Reuters) - Chilean lawmakers passed a measure on Wednesday abolishing an antiquated, decades-old law under which state-run Codelco COBRE.UL, the world’s largest copper miner, helped foot the bill for the country’s military.

The bill establishes a dedicated fund to finance the Chilean armed forces, and beefs up congressional oversight of the use of those funds, according to a statement from Chile’s Congress. Codelco’s payments to Chilean state coffers will be phased out over a period lasting more than a decade.

The legislation replaces a 1958 law, strengthened during the dictatorship of Augusto Pinochet, that required Codelco to turn over 10 percent of its export sales to the military.

Center-right President Sebastian Pinera, who spearheaded the bill and is expected to sign it into law, had said it was “absurd” that the strategic spending of Chile’s armed forces was affected by a fluctuating copper price.

Codelco Chief Executive Nelson Pizarro has said the state miner would be better off without the military funding requirement.

The top copper producer, which turns over all its profits to the state, needs to invest nearly $40 billion over 10 years to keep output of the red metal flowing from its aging mines.

Codelco did not immediately comment on passage of the law.

The law requires the miner to continue paying the 10 percent tax to state coffers “for a period of nine years, gradually falling by 2.5 percent per year beginning year 10,” the congressional statement said.

Reporting by Dave Sherwood; Editing by Peter Cooney

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