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WEEKLY NEWSLETTER
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Chile
Index
The armed forces have been entitled, under Law 18,948,
to a
level of funding out of the national budget at least equal
to their
1989 level, which was US$640 million. From 1990 to 1993,
the
defense budget amounted to US$1 billion annually,
according to
annual Military Balance surveys published by
London's
International Institute for Strategic Studies. Personnel
reportedly
account for more than 70 percent of the defense budget.
According to the Copper Law enacted in 1954 by the
government
of Carlos Ibáñez del Campo (1952-58), the armed forces are
entitled
by law to 10 percent of the total copper earnings of the
state-run
Copper Corporation (Corporación del Cobre--Codelco). The
purpose of
this legislation is to provide the armed forces with
stable funding
and hard currency for major purchases abroad. In 1987 the
military
government changed the law, applying the 10 percent figure
to all
Codelco export earnings, including the sale of gold and
molybdenum
(the sale of which is insignificant compared with the
copper
sales). Between 1989 and 1993, Codelco provided more than
US$1.2
billion to the armed forces, as follows: US$313 million in
1989,
US$287 million in 1990, US$223 million in 1991, US$204
million in
1992, and US$197 million in 1993. These figures correspond
to
approximately 20 percent to 30 percent of the military
budget.
Under the Codelco subsidy, the armed forces are
guaranteed a
minimum of US$189 million annually, plus accumulated
inflation
(with 1987 as the base year). In 1993 the guaranteed
minimum was
US$210 million, but 10 percent of all Codelco sales
totaled only
US$197 million, or US$13 million short of the guaranteed
minimum.
The 1993 shortfall in Codelco revenues resulted from the
drastic
fall in the price of copper. Codelco managers argued that
the
public treasury was responsible for making up the
shortfall, but
there was no mechanism for such a measure.
The 1993 shortfall in Codelco revenues intensified the
debate
between those supporting the 1954 law (the armed forces
and the
political right) and those opposed to such an arrangement
(Codelco,
the Ministry of Mining, and many within the center-left
CPD
governing coalition). Those opposed to the Codelco subsidy
to the
armed forces argued that it was an unacceptable burden for
Codelco,
making it unable to compete in the world market. Total
profits for
Codelco in 1992 were US$920 million; in 1993 they were
estimated at
US$480 million. This means that 22 percent of all Codelco
profit
earnings in 1992 went to the armed forces and that
approximately 41
percent went in 1993.
Those arguing for an end to the Codelco subsidy
maintain that
the armed forces should be funded through the general
budget. In
addition, there has been increasing pressure to privatize
Codelco
altogether, a measure that would probably include the
abolition of
the 10 percent subsidy. Those arguing against the Codelco
subsidies
for the armed forces have been careful to state that they
are not
trying to cut the resources of the armed forces but rather
are
giving them a more legitimate source.
The armed forces oppose an end to their Codelco funds,
fearing
that their budget would be politicized and reduced.
Furthermore,
virtually all of the resources that the armed forces
receive from
Codelco are already committed beyond the year 2000, mostly
through
the purchase of armaments on credit. Ironically, the
privatization
of state firms that was initiated by the military
government could
lead to the end of the Codelco revenues for the armed
forces.
Principal beneficiaries of the increased spending in
the early
1990s were the navy and air force. Their projected
acquisitions
include thirty British Harrier and twelve Sea-Harrier VTOL
(vertical take-off and landing) aircraft, which the
Chileans hope
to have in service by 1997. Up to 1992, however,
interservice
rivalries appeared to have permitted the civilian
administration,
which favored cuts in military purchases, to take minimal
action on
this procurement. Spending on the army, navy, and air
force
accounted for approximately 41 percent, 33 percent, and 21
percent,
respectively, of total defense expenditures; the remaining
5
percent was accounted for by costs under the general
heading of
national defense.
Accusations of corruption have been made against
several
leading figures of the military government and certain
members of
their families. As a result of these problems, public
attitudes
toward the armed forces have been adversely affected. An
October
1991 survey by CERC shows that 36.1 percent of respondents
picked
military spending as a target for budget cuts. However,
the
military government received an average score for its
overall
performance. The CERC's survey of March 1991 shows that
57.9
percent of respondents thought the military's performance
was
"neither good nor bad"; 29 percent thought it was "bad";
and 11.2
percent thought it was "good."
Data as of March 1994
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