Copper Mining in Chile

el teniente, underground copper mine in commune of machalí in cachapoal province (2005).

although relative importance of copper declined in 1970s , 1980s, still chilean economy s important product in 1992. mining sector represented 6.7 percent of gdp in 1992, compared 8.9 percent in 1985. in 1991, copper exports represented 30 percent of total value of exports, substantial decline respect 1960s, when represented 80 percent of total exports. mining exports in general accounted 48 percent of total exports in 1991.

two developments in copper sector noteworthy. first, in 1987-91 period, there substantial increase in output of refined copper, relative decline in production of blister copper. second, state-owned copper corporation (corporación del cobre—codelco), world s largest copper producer, still had overwhelmingly dominant role (accounting 60 percent of chile s copper output in 1991).

the so-called codelco law of april 1992 authorized codelco first time form joint ventures private sector work unexploited deposits. thus, in major step codelco, in 1995, invited domestic , foreign mining firms participate in 4 joint explorations in northern chile. foreign owned private firms become increasingly important new investment projects got underway.

chilean copper miners

the heightened importance of these foreign private firms in large-scale copper mining resulted international business community s improved perception of chile , mining law enacted during pinochet regime established compensation rules in case of nationalization , otherwise encouraged investment in sector.

given more favourable context, phelps dodge, united states mining company , sumitomo metal mining company, japanese firm, signed us$1.5 billion contract in 1992 chilean government develop la candelaria, copper , gold mine south of copiapó. mine s potential production of refined copper equivalent 10 percent of codelco s entire production.

copper stabilization fund

despite decline in copper s importance, chile continued affected vagaries of international copper market. fund received 0.2-0.5% of gdp, depending on size of budget surplus each year. in 2006, one-off sum of $600 million united states dollars added fund. fund replaced economic , social stabilization fund in 2007. new fund received fiscal surpluses in excess of 1% of gdp. high variability of copper prices affected chilean economy, particularly external accounts , availability of foreign exchange, in several ways. in 1987-91 period, international copper market favorable; example, copper prices in 1989 50 percent higher in 1980. may 1992, however, price of copper had declined 1980 level.

the government decided counteract effect of variability of copper prices creating copper stabilization fund, worked follows: whenever price of copper increased, government direct proportion of increased revenues fund; these resources used during years when price of copper fell below normal level. institutional development helped chile @ least partially free volatility of copper market. copper stabilization fund tapped if there major need more money. part of fund used pay reconstruction after devastating 2010 chile earthquake.